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UpdatedFeb 01, 2024   |  11-min read
Written byRebecca Lake, CEPF®
Written byRebecca Lake, CEPF®
Reviewed byErin Kinkade, CFP®
Expertise:Insurance planning, education planning, retirement planning, investment planning, military benefits, behavioral finance
Erin Kinkade, CFP®, ChFC®, works as a financial planner at AAFMAA Wealth Management & Trust. Erin prepares comprehensive financial plans for military veterans and their families.
Learn more about Erin Kinkade, CFP®
Federal student loans can help pay for school, but there are limits to how much you can borrow. If you’ve exhausted your Direct Subsidized and Unsubsidized Loan limits, you may discuss taking out a Parent PLUS loan with your parent(s) versus a private student loan to fill any financial gaps.
Parent student loans can be taken out on behalf of an eligible student. Federal Parent PLUS loans are designed for undergraduate study, while private student loans can pay for undergraduate, graduate, and professional degrees. Parents can also take out private loans to cover certificate programs or career training.
If you’re on the fence about whether to get a private student loan or a Parent PLUS loan, understanding how both work can help you decide what type of funding is best.
In this guide:
- Differences between Parent PLUS and private student loans
- Parent PLUS loans vs. private student loans
- Eligibility requirements
- Application process
- Loan repayment
- Parent PLUS vs. private student loans: Which makes sense for me?
- What private lenders offer parent loans?
- Recap: Parent PLUS loan vs. private loan
Differences between Parent PLUS loans and private student loans
Parent PLUS loans are federal loans that parents of undergraduate students can use to pay for education costs.
Offered through the William D. Ford Direct Loan program, these loans are a popular option for college funding.
A private student loan is a student loan granted through a bank, credit union, or private lender rather than the U.S. Department of Education. Private parent student loans are private student loans granted to a parent on behalf of a student.
At first glance, it might sound like you’re talking about the same thing. However, we broke down the differences between federal Parent PLUS loans, private student loans, and private parent student loans.
Parent PLUS vs. private loans at a glance
The federal government establishes the guidelines for Parent PLUS loans, including who is eligible to borrow, how much they can borrow, and the applicable fees and interest rates. Individual lenders set terms for private loans to parents or students.
Here’s a side-by-side comparison of how each type of loan works.
| Parent PLUS loans | Private student loans | Private parent student loans | |
| Primary borrower | Parent of a dependent undergraduate student | Parent or student | Parent of a qualifying undergraduate or graduate student |
| Credit requirements | No adverse credit history | Most private lenders require a good credit score | Most private lenders require a good credit score |
| Lender | Federal government | Private lenders | Private lenders |
| Interest rate type | Fixed | Fixed or variable | Fixed or variable |
| Interest rate | 7.54% | Varies by lender | Varies by lender |
| Rate discount | 0.25% autopay discount | Varies by lender | Varies by lender |
| Repayment terms | 10 – 25 years | Varies by lender | Varies by lender |
| Loan limit | Up to the cost of attendance after applying other financial aid | Up to the cost of attendance | Up to the cost of attendance |
| Fees | 4.228% | Varies by lender | Varies by lender |
| Cosigner option | Only if parent has an adverse credit history | Varies by lender | Often an alternative to a cosigned private loan |
| Special considerations | Parents must be the biological or adoptive parent of a dependent undergraduate who is enrolled at least half-time | Some private lenders offer loans for borrowers with special situations, such as DACA recipients or international students | Payments for parent loans often begin 30 – 45 days after loan funds are disbursed, unless the lender allows for in-school deferments |
| Visit website | View rates | View rates | View rates |
Parent PLUS loans vs. private student loans
Deciding between a private student loan and Parent PLUS loan can depend on your financial needs.
You may pursue both types of loans to pay for college if you need a large amount.
It’s important to weigh the advantages and disadvantages of each type of loan before making a final decision.
Pros and cons of Parent PLUS loans vs. private student loans
When considering Parent PLUS loans vs. private student loans, it’s helpful to know what you can expect and where each may fall short.
We’ve compiled an overview of the main pros and cons of both.
Pros: Parent PLUS loan
Not income-dependent.
Low, fixed interest rates.
Parents can request deferment of payments while the student is enrolled in school at least half-time or during the six-month window after their child graduates, leaves school, or drops below half-time enrollment.
Parents have the option to enroll in an income-contingent repayment plan.
Parents can borrow up to the student’s cost of attendance, minus any other financial aid received.
Cons: Parent PLUS loan
Borrowers must not have adverse credit history.
Rates may be lower than private loan rates, but that’s not guaranteed.
Repayment begins once loan funds are fully disbursed unless parents request a deferment.
Loan fees apply.
Pros: Private parent student loans
Parents may be able to borrow up to 100% of the student’s cost of attendance for graduate or undergraduate study.
Lenders can offer fixed or variable interest rates.
Many private lenders charge no loan origination fees.
Stepparents, legal guardians, and other relatives may be able to apply.
Funds can be disbursed to the school to ensure education costs are paid in a timely manner.
Cons: Private parent student loans
Poor credit could result in less favorable loan rates, increasing the total payoff.
Borrowing a larger amount could mean a higher total repayment if the interest rate is higher.
Variable rates can fluctuate over time, which can also affect the loan’s monthly payment.
Income-driven repayment is not an option.
Eligibility requirements
Both federal and private parent student loan lenders have eligibility requirements that determine who can borrow. Your ability to qualify can hinge on your relationship to the student you’re borrowing for, their enrollment status, and your credit history. You may qualify for one type of loan but not the other.
Here’s an overview of the eligibility requirements for Parent PLUS loans vs. private student loans.
| Parent PLUS loans | Private student loans | |
| Who can apply? | Only biological or adoptive parents of a dependent undergraduate student. (Exceptions may be made for stepparents.) | Biological or adoptive parents, stepparents, foster parents, legal guardians, grandparents, and other relatives of undergraduate or graduate students. |
| Credit requirements | Borrowers must not have an adverse credit history. | Lenders may establish a minimum credit score to apply, but it’s possible to find private student loans for bad credit. |
| Financial need | Financial need is not a requirement. | Financial need is not a requirement. |
| Income requirements | Income is not considered. | Lenders may review your income as a requirement for approval. |
| Debt-to-income ratio (DTI) | DTI is not considered. | Lenders may review your DTI as a requirement for approval |
| Other requirements | Parents must meet the basic eligibility requirements for federal student loans. Students must complete the Free Application for Federal Student Aid (FAFSA) before parents can apply for PLUS loans. | Most private lenders require borrowers to be U.S. citizens or permanent residents. A Social Security number may be required to apply. |
Note: The U.S. Department of Education defines “adverse credit” as a credit history with one or more of the following problems:
- At least 90 days delinquent on outstanding debts exceeding a combined total of $2,085.
- A foreclosure, repossession, tax lien, wage garnishment, default determination, discharge of debts in bankruptcy, or write-off of a federal student debt within five years of submitting your loan application.
Applicants with adverse credit may still be eligible for the Parent PLUS loan if they add an endorser—such as a cosigner—to the loan application.
Application process
Applying for federal Parent PLUS loans isn’t much different from applying for private parent student loans.
You’ll need to fill out an application, provide the relevant information, and share any required supporting documentation.
However, you’ll find differences in terms of where you’ll submit your application and what you can expect once it’s been received.
| Parent PLUS loans | Private student loans | |
| Where to apply | Federal Student Aid website | Lender’s website |
| What information is required? | Name of the school your child will attend | Name of the school your child will attend and information about their degree program |
| Requested loan amount | Requested loan amount | |
| Personal information, such as your name and permanent address | Personal information, such as your name and permanent address | |
| Your Social Security number and date of birth | Your Social Security number and date of birth | |
| Information about the student, including Social Security number and date of birth | Information about the student, including Social Security number and date of birth | |
| Citizenship status | Citizenship status | |
| Your employment information | Your employment and income information | |
| Can you get preapproved? | No | Many private lenders offer preapproved rate quotes |
| Important considerations | Student must complete the FAFSA before you apply | A hard credit check may be required for preapproval |
Loan repayment
Parent student loans must be repaid with interest, but repayment options are not the same for all loans.
How you repay your loans and when repayment begins varies based on whether you have Parent PLUS loans or private parent student loans.
Parent PLUS loan and private student loan repayment
Repaying Parent PLUS loans or private student loans on time is important, as missing a payment could result in credit score damage. Defaulting on either type of loan can trigger even more damaging consequences, including a tax refund offset or civil lawsuit.
Here’s how repayment works for Parent PLUS loans and private student loans.
| Parent PLUS loans | Private student loans | |
| Repayment plans | Parents can choose from one of the following: Standard Repayment, which has a fixed monthly payment for up to 10 years. Graduated Repayment: Monthly payments that start off lower and increase over the life of the loan, with a repayment term of 10 years. Extended Repayment: Fixed or graduated monthly payments for up to 25 years.Only applicants with over $30,000 in federal Direct Loan debt are eligible. | Private lenders may offer one or all of the following while the student is enrolled in school: Deferred repayment. Interest-only payments. Interest-only payments. Flat monthly payments. Once the student graduates or leaves school, the regular repayment period begins, in which principal and interest payments are due. Repayment terms often extend from 5 to 15 years, though some lenders may offer longer terms. |
| When do payments begin? | When loans are fully disbursed. | Depends on the repayment plan parents choose. |
| Grace period | None. | Lenders may offer a grace period following the student’s graduation or separation from school. |
| Income-driven repayment | Parents may enroll in an Income-Contingent Repayment plan if they’re income-eligible. | Most private lenders don’t offer income-driven payment plans. |
| Deferment and forbearance | Parents may put loans in deferment or forbearance when there’s a qualifying condition, such as financial hardship or active-duty military service. | Lenders may offer deferment or forbearance programs but aren’t required to. |
| Loan forgiveness | Parent PLUS loan forgiveness is included in the Biden administration’s debt relief program, but at the time of writing (January 2023), a federal court has blocked the program. | Private loans are ineligible for federal loan forgiveness programs. |
Parent PLUS vs. private student loans: Which makes sense for me?
Parent PLUS loans and private student loans can cover expenses associated with your child’s college education.
Choosing the right type of loan often means considering both options and determining which suits your present and future needs.
You might consider Parent PLUS loans if:
- Your student has exhausted their Direct Subsidized and Unsubsidized loan limits.
- You’ve compared rates and believe a Parent PLUS loan is the most affordable option.
- You don’t have an issue paying the loan fee the Department of Education requires.
- You’d like to have built-in protections, such as the ability to place loans in forbearance and the potential to qualify for student loan forgiveness.
- You’re comfortable assuming the financial and legal responsibility of having a federal PLUS loan in your name.
You might choose private parent student loans if:
- You have an adverse credit history and are concerned you might be denied a Parent PLUS loan, or you’ve already been denied.
- Your student has not yet completed the FAFSA, and you need to secure fast funding for their education costs.
- You’ve found a lender that offers a good combination of low interest rates and no origination fees.
- You’re confident you’ll be able to make the payments for the loan term, without needing any type of forbearance or deferment.
- You’d be comfortable refinancing variable-rate loans down the line if the rate adjusts higher.
There is no right or wrong answer about whether a Parent PLUS loan is better than a private parent student loan. It comes down to how much you need to borrow, how much aid your student has already received, what kind of debt obligations you can handle, and what shape your credit is in.
What private lenders offer parent loans?
A number of lenders offer private student loans to parents. However, it’s important to find the lender that best aligns with your needs.
When comparing private student loan options, consider the following:
- The interest rates you may qualify for
- Any fees you might pay
- Credit score, income, and DTI requirements
- How much you can borrow
- Repayment terms
- Lenders’ special requirements to qualify
Also, consider whether a hard credit check is required to get preapproved or obtain a rate quote. Getting rates from multiple lenders can make it easier to gauge how much a particular loan might cost.
Here are some of the best private student loan lenders for parents.
| Loan | Variable rates (APR) | Fixed rates (APR) | Origination fee | Term lengths |
| College Ave | 3.99% – 14.91%% | 3.99%% – 14.96% | None | 5 – 15 years |
| ELFI | 1.30% – 11.52% | 3.20% – 11.99% | None | 5, 7, or 10 years |
| Earnest | 0.94% – 11.44% | 3.24% – 12.78% | None | 5 – 15 years |
| SoFi | 5.74% – 13.88% | 6.50% – 14.83% | None | 5 – 15 years |
Also, consider whether a private lender offers special incentives or perks for borrowers, such as autopay discounts or cash rewards when your student earns good grades.
Recap of a Parent PLUS loan vs. private loan
By now, you should have an understanding of the differences between private student loans and Parent PLUS loans.
To wrap it up, here’s a final look at what makes each loan unique:
| Parent loans | Rates (APR) | Maximum loan amount | Origination fee | Repayment terms |
| Parent PLUS | 7.54% fixed | Cost of attendance | 4.228% | You’ll have 10 to 25 years to repay your loans in most cases. |
| Private loan | Varies by lender; rates may be fixed or variable. | Cost of attendance | Varies by lender | Varies by lender; most range from 5 to 15 years. |
For more specific information about which private parent student loans are the best, please see the table in the previous section.
