- Parent loans may help your child afford the cost of a college they couldn't pay for alone.
- Choose between a federal and a private parent loan, both of which have pros and cons.
- Make sure you have enough money to repay your debt — don't bank on loan forgiveness.
The basics of Parent PLUS loans
If the financial aid your child receives for college isn't enough to make it affordable, a parent PLUS loan is one way to bridge the gap.
As a parent or guardian, you can borrow money on a student's behalf to help pay for their education. You're able to take out a government or private parent loan and will be fully responsible for repaying it.
Here's a quick overview of Parent PLUS Loans:
- Federal loans for parents: To help pay for their dependent child's undergraduate education.
- Credit check required: Unlike some federal student loans, Parent PLUS loans require a credit check.
- Higher interest rates: Typically higher than regular Direct Subsidized/Unsubsidized student loans.
- Less flexible repayment: Fewer options compared to student loans.
What is a Parent PLUS Loan?
A Parent PLUS Loan, also known as a Direct PLUS Loan, is the federal option for parents to take out unsubsidized student loans for their dependent undergraduate student. PLUS stands for Parent Loan for Undergraduate Students. You can use them to pay for expenses not covered by other financial aid offered by your child's school.
You won't be able to get one if you have a poor credit history. The cost of attendance minus any other financial aid your child receives will determine the total amount available to you.
Parent PLUS Loans can be a helpful tool for families facing gaps in their college funding plan. It's essential to weigh the long-term financial impact and explore all alternatives carefully before taking on this debt.
These loans have fixed interest rates with payment terms as long as 25 years. You'll begin making monthly payments after the loan has been fully paid out unless you put in a request for student loan deferment.
"Taking out a Parent PLUS Loan can make sense if your credit history is free from negative items and you want a borrowing option that offers flexible repayment terms," says Leslie Tayne, a financial attorney who specializes in student loan debt. "You should also be sure that you don't compromise your ability to retire by taking on this debt for your child."
What is a private parent loan?
A private parent loan is money you borrow from a lender such as a bank, credit union, or online institution to finance your child's education. Interest rates and term lengths vary depending on the lender.
Interest rates on private loans may be more competitive than federal loans, but private loans often come with fewer protections. For example, they were excluded from the Biden administration's pause on student loan payments. They also wouldn't qualify for any large-scale loan student forgiveness.
"I'm not a fan of private loans," says Kate Mielitz, formerly a special groups manager at the Association for Financial Counseling & Planning Education. "Often they have variable interest rates. But even when they don't, the repayment period starts almost immediately. There is no deferment period. Parent PLUS Loans at least offer a deferment option."
Parent PLUS loan vs. private parent loan: key differences
There are several factors to consider when comparing the two parent loan options. Lyle Solomon, a consumer finance expert and principal attorney at Oak View Law Group, says there are five key items to review when making a decision:
1. Type of interest rate. Direct PLUS loans have fixed interest rates. You're able to choose between a fixed and variable loan with a private company.
2. Interest rate. Direct PLUS loans have an interest rate of 9.08%. Private companies may start their rates significantly lower, though the rate you receive will depend on your credit score.
3. Origination fee. The origination fee on a Direct PLUS loan is 4.228%. The origination fee on private loans varies by lender, and some charge none at all.
4. Term length. Private student loans typically have term lengths between five to 20 years. Direct PLUS loans have term lengths between 10 to 25 years.
5. FAFSA needed? You need to fill out the Free Application for Federal Student Aid for a Direct PLUS loan. Private loans do not require this.
Both types of loans require a credit check, allow you to borrow up to the cost of attendance, and may allow you to deduct interest payments from your taxable income.
Are Parent PLUS loans right for you?
Before deciding to take on a Parent PLUS Loan, there are a few questions you should be asking yourself:
- Have you exhausted other options? Scholarships, grants, and student loans in your child's name should be explored first.
- Can you afford the payments? Factor the loan into your own budget, not just your child's post-college finances.
- Your credit history: A good credit score is needed to qualify and to get the best interest rate.
- Impact on your retirement savings: Could delay your own financial goals.
Alternatives to consider before Parent PLUS loans
- Encourage your child to take the maximum in their own name: Subsidized/unsubsidized loans first.
- Refinance your own debt (if possible): If you can get a lower interest rate elsewhere, use that for educational costs.
- Your child gets a part-time job: Even a small contribution helps reduce borrowing needs.
Key considerations before taking out a loan for your child
This may seem obvious, but remember that any debt you take on through a parent loan must be repaid. Be absolutely sure you have the means to pay back any debt you take on — even if it's to help your child go to their dream school.
Also, know that regardless of whatever agreement you make with your child — for instance, perhaps they pay back a portion of the parent loan themselves — you're the only one on the hook with the lender.
"A new plan may be necessary if you or your student cannot afford to take on enough debt to cover the total cost of attendance," Solomon says. "Earning more money throughout school terms and during breaks can help your student pay for college fees as they arise."
To save on the cost of a loan, you're also able to make payments while your child is still in school, reducing the overall interest you'll pay.
Mielitz says you should make sure you're able to fit a parent loan into your monthly budget.
"As a former college professor, I definitely want students in college," Mielitz says. "But college isn't for everyone. Parent loans aren't for everyone. Before you sign on the dotted line, consider the costs, especially your costs, because it is your parent loan. Community college or junior college is a great way to start the college experience with a smaller price tag."
How to apply for a Parent PLUS loan
The application for a Parent PLUS Loan takes around 20 minutes to complete. Here are the steps to apply for a Parent PLUS Loan online:
- Visit the official Federal Student Aid website and log in with your parent FSA ID. It's important to make sure you are not logged into your student's FSA ID account and that your student has completed their FAFSA before you begin a Parent PLUS Loan application.
- You'll begin filling out your application by inputting the award year you're applying for, information about the student you're taking out a loan for, the school you wish to notify of your application, and the reason you're submitting a Parent PLUS Loan application.
- Fill out information about how much you wish to borrow, including the loan period and if you'd like to request payment deferment.
- Answer questions regarding your relationship to the student and your citizenship status. You'll also need to provide your address, contact information, and employer information.
- Agree to a formal credit check.
- Review the information you've provided and submit your application.
Compare student loan rates
4.44% - 17.99% variable and 3.47% - 17.99% fixed (with AutoPay discount)
late payment of 5% of the amount due, capped at $25
mid-600s
Minimum of $1,000
- No prepayment or origination fees
- International students eligible with an eligible cosigner
- Low APR
- Multiple options for repayment term length
- Many ways to contact customer support
- Credit check required
- Late payment fee
College Ave is a great lender for borrowers who want multiple options for repayment term lengths and are after a low APR. College Ave also offers many options for contacting customer support.
College Ave- Apply through your computer or mobile device
- Customer service available via phone, text, email, and live chat
- Five, eight, 10, or 15 year repayment terms available
- Loan minimum of $1,000, maximum up to 100% cost of attendance
- Repayment options available:
- Deferred: No payments for up to six months after leaving school
- Interest only: Only make payments on the loan's interest while in school
- Partial payments: Pay $25 per month while in school
- Full repayment immediately: Start making full payments while still in school
- Loans made through Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC
4.64% - 15.99% variable and 3.54% - 15.99% fixed (with AutoPay discount)
N/A
Undisclosed
Minimum of $1,000
- No origination fees, prepayment penalties, or late fees
- Solid APR
- Several options for repayment term length
- Quick application process
- Credit check required
SoFi is an excellent lender for borrowers who want a competitive APRs. It's also a great lender for those who don't want to worry about fees.
SoFi Undergraduate Student Loans- Apply through your computer or mobile device
- Customer service available via phone, mail, and social media
- Five, seven, 10, or 15 year repayment terms available
- Loan minimum of $1,000, maximum up to 100% cost of attendance
- Loans are originated by SoFi Lending Corp. or an affiliate
5.01% - 14.67% variable and 3.39% - 14.85% fixed (with AutoPay discount, varies by plan)
None
Fair to Excellent
$2,001 - $200,000 ($200,000 aggregate total)
- N/A
- N/A
Ascent provides a variety of repayment term lengths on its student loans and low minimum interest rates on fixed-rate loans. You may also qualify for a 1% cash-back reward that will be paid to you after graduation.
Ascent- Loan amounts available: $2,001* minimum, up to $200,000 for undergraduates, and $400,000 for graduates
- *The minimum amount is $2,001 except for the state of Massachusetts. Minimum loan amount for borrowers with a Massachusetts permanent address is $6,001.
- Repayment options available:
- Deferred: No payments for up to nine months after leaving school
- Interest only: Only make payments on the loan's interest while in school
- Partial payments: Pay $25 per month while in school
- Immediate Repayment:Begin making full payments (principal + interest) on the loan right away
FAQs
Do Parent PLUS Loans have to be repaid right away?
Parent PLUS Loans do not need to be repaid right away. Options include deferment while the student is in school or starting payments after a grace period.
What if I can't get approved for a Parent PLUS Loan?
If you aren't approved for a Parent PLUS Loan, your child may become eligible for additional unsubsidized federal student loans.
Can Parent PLUS Loans be forgiven?
There are certain programs like Public Service Loan Forgiveness that may grant you loan forgiveness, but qualifications are strict and often require you to consolidate your loans beforehand.
Where can I learn more and apply for a Parent PLUS Loan?
To learn more and to apply for a Parent PLUS loan, the Federal Student Aid website has detailed information, as well as the application.
Are Parent PLUS Loans worth it?
Parent PLUS Loans are worth it if you can completely repay the loans without sacrificing your ability to retire or your financial health and security.
** SoFi Private Undergraduate Student Loans Disclosure: Interest Rates: Eligibility and Important Details. Fixed rates range from 3.54% APR to 15.99% APR with 0.25% autopay discount. Variable rates range from 4.64% APR to 15.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates are capped at 17.95%. SoFi rate ranges are current as of 1/7/2024 and are subject to change at any time. Your actual rate will be within the range of rates listed above and will depend on the term and type of repayment option you select, evaluation of your creditworthiness, income, presence of a co-signer (if applicable) and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. Check out our eligibility criteria at https://www.sofi.com/eligibility-criteria/. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
** SoFi Private Graduate Student Loans Disclosure: Interest Rates: Eligibility and Important Details. Fixed rates range from 3.54% APR to 15.99% APR with 0.25% autopay discount. Variable rates range from 4.64% APR to 15.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates are capped at 17.95%. SoFi rate ranges are current as of 1/7/2025 and are subject to change at any time. Your actual rate will be within the range of rates listed above and will depend on the term and type of repayment option you select, evaluation of your creditworthiness, income, presence of a co-signer (if applicable) and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. Check out our eligibility criteria at https://www.sofi.com/eligibility-criteria/. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi's underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 8/5/24 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
* The SoFi 0.25% autopay interest rate reduction requires payments by an automatic monthly deduction from a savings or checking account. This benefit is suspended during periods of non-payment through ACH, deferment and forbearance. Autopay is not required to receive a loan from SoFi.
* 0.125% Continuing Scholar Discount: Terms and conditions apply. Offer good for private student loan customers who have previously borrowed a private student loan from SoFi and are taking out a subsequent loan only, select a term and repayment type that is eligible for the discount, and is subject to lender approval. To receive the offer, you must: (1) complete a loan application with SoFi; and (2) meet SoFi's underwriting criteria. Once conditions are met and the loan has been disbursed, the interest rate shown in the Final Disclosure Statement will include an additional 0.125% rate discount because you have borrowed a private student loan from SoFi in the past. Offer good for existing private student loan borrowers only. Offer cannot be combined with other rate discounts, with the exception of the 0.25% autopay rate discount. SoFi reserves the right to change or terminate the Rate Discount Program to unenrolled participants at any time with or without notice.
