Best Parent Student Loans: Choosing Private or PLUS Loans

The cost of higher education continues to rise, and many students need help meeting education expenses. Since 1980, the price for tuition, fees, and room and board at four-year colleges has increased by nearly 175%, according to the National Center for Education Statistics. In the 2020-21 school year, students paid an average of $29,033 for their education.

If your child’s scholarship and grants aren’t enough to cover their full college costs, you may consider parent student loans.

Most students turn to federal student loans first, as they offer stable interest rates and unique benefits. But most federal student loans have borrowing limits, and your child may still face a funding shortfall. At that point, you may consider taking out a loan in your own name to help them out.

What are parent student loans?

A parent student loan is a loan for which a parent is the primary borrower, and the borrower uses the funds to help pay for their child’s education. You can choose from two types of parent student loans:

• Federal Parent PLUS Loans
• Private student loans

Cosigning a loan for your child may also be an option, especially if you have good credit. With a cosigned loan, your child is the primary borrower. You only become responsible for making payments if your child fails to do so.

What is a federal Parent PLUS Loan?

A Parent PLUS Loan is a type of federal student loan available to parents who want to help pay for their child’s education expenses. PLUS Loans have higher interest rates in comparison to other federal loans.

Unlike other federal loans that come with lower student loan limits, you can borrow up to your child’s certified cost of attendance (minus any other financial aid they’ve received) with a PLUS Loan.

Here are several important points to note if you’re considering a Parent PLUS Loan:

2 of the best parent student loans

These two Credible partner lenders offer private student loans for parents:

7 of the best parent cosigner student loans

Parent borrowers have a few options to help pay for their child’s college education, including both federal and private student loans. You might also be able to get a private student loan by cosigning a loan taken out by your child.

strong>Tip: It’s usually a good idea to take out federal student loans before private student loans. This is mainly because federal loans offer federal protections, including access to income-driven repayment plans and student loan forgiveness programs.

However, depending on your credit, you might get a lower interest rate on a private student loan compared to a federal Parent PLUS Loan. Just keep in mind that a private loan won’t offer the same benefits of a PLUS Loan.

If you decide to take out a private student loan, it’s important to consider as many lenders as you can to find a loan that suits the needs of both you and your child. Here are Credible’s partner lenders that offer private student loans to parents — either directly or through cosigning:

Ascent

While parents can’t borrow directly through Ascent, they can cosign a loan taken out by an undergraduate student. Ascent cosigned loans are available from $2,001* to $400,000 (aggregate limit).

Potential discounts include a 0.25% autopay discount and a 1% cashback graduation reward.

Pros

• 1% cashback graduation reward
• 0.25% autopay discount
• Cosigner release offered after 12 months of on-time consecutive payments

Cons

• Doesn’t offer student loans directly to parents (only cosigned loans)
• Lower autopay discount compared to non-cosigned loans
• 15-year term not available for fixed-rate loans

Citizens

Citizens offers parent student loans from $1,000 to $350,000 with five- or 10-year terms. You also have the option to cosign a student loan for your child.

If you already have an account with Citizens, you might qualify for a 0.25% loyalty discount — and you could get another 0.25% off your rate by signing up for automatic payments.

Pros

• 0.25% autopay discount
• 0.25% loyalty discount
• No application, origination, or disbursement fees

Cons

• 15-year term not available for parent loans
• Might be hard to qualify if you don’t have good credit
• Doesn’t disclose minimum income requirements

College Ave

College Ave offers student loans from $1,000 up to your child’s school-certified cost of attendance (minus other financial aid your child has received). Parents can also choose to have $2,500 of the loan sent to them so they can control spending for additional expenses like textbooks or electronics.

Pros

• Can borrow up to 100% of your child’s school-certified cost of attendance
• Can have up to $2,500 of parent loan sent directly to you
• 0.25% autopay discount

Cons

• Doesn’t disclose minimum income or credit requirements
• If you cosign your child’s loan, you can’t apply for cosigner release until more than half of the repayment period has elapsed
• Might not qualify if you’ve previously filed for bankruptcy

INvestEd

If you live in Indiana, then you might qualify for a parent student loan from INvestEd. You also have the option to cosign on a student loan from INvestEd if your child lives or attends school in Indiana.

INvestEd loans range from $1,001 up to 100% of your child’s cost of attendance (minus any other aid they’ve received).

Pros

• 0.25% autopay discount
• Can get a 2% principal discount if child graduates within six years (not available on parent loans)
• Up to 24 months of forbearance during the life of the loan (one to three months duration per forbearance)

Cons

• Must be an Indiana resident (or have a child attending school in Indiana)
• Can’t have debt-to-income ratio higher than 30%
• Long cosigner release period (48 months)

MEFA

With MEFA, parents can cosign on student loans. MEFA loans range from $1,500 for public schools or $2,000 for private schools up to 100% of your child’s cost of attendance (minus any other financial aid they’ve received).

Pros

• Can borrow up to 100% of school’s cost of attendance (minus any other financial aid your child has received)
• Can defer payments for up to five years
• No application, origination, or disbursement fees

Cons

• Doesn’t offer student loans directly to parents (only cosigned loans)
• No discounts offered
• Long cosigner release period (48 months)

Methodology

To find the “best companies,” Credible looked at loan and lender data points from 10 categories to give you a well-rounded perspective on each of our partner lenders. Here’s what we considered:

• Interest rates
• Repayment terms
• Repayment options
• Fees
• Discounts
• Customer service availability
• Eligibility criteria
• Cosigner release options
• Whether the minimum credit score is available publicly
• Whether consumers could request rates with a soft credit check

Our hope is that this will be a win-win situation for you and us — we only want to get paid if you find a loan that works for you, not by selling your data. This means Credible will only get paid by the lender if you finish the loan process and a loan is disbursed. Additionally, Credible charges you no fees of any kind to compare your loan options.

Also see: 7 Student Loans with Cosigner Release

Parent PLUS Loans vs. private parent loans vs. cosigned loans

Here are a few factors to keep in mind while comparing Parent PLUS Loans, private parent loans, and cosigned loans.

You can apply for a Parent PLUS Loan on the StudentAid.gov website. Before you apply, make sure your child has already completed the Free Application for Federal Student Aid (FAFSA). For private parent loans, you can apply online with the lender you choose.

Tip: No matter which type of student loan you choose, it’s important to consider how much that loan will cost you in the future. This way, you can prepare for any added expenses. You can find out how much you’ll owe over the life of your federal or private student loans using our student loan calculator.

Should a parent or a student take out a private student loan?

This depends on your individual circumstances. In some cases, it could be a good idea for the student to apply for a loan with you as a cosigner — though keep in mind that you’re equally responsible for the loan if they can’t make payments.

In other situations, taking out a parent loan yourself might be the better choice. In this scenario, you could ask your child to help make payments — but if they can’t afford to do so or stop for any reason, you’ll have no recourse.

Here are several reasons why a parent student loan could be the better option:

• The student isn’t responsible for payments. If the parent plans on paying the entire loan balance, a parent loan could be more convenient. You can work directly with the lender to choose a repayment plan that suits your needs.
• The student avoids debt. Taking out a parent loan could help prevent the student from going into debt as well as help them focus on other goals.
• Parents might qualify for better rates. Parents are generally able to meet credit and income requirements more easily than students. This could help you qualify for a good interest rate.

And here are a few advantages for a student to take out a loan with a parent cosigner:

• The student might qualify for more discounts. Some lenders provide exclusive rate discounts to students. For example, Ascent offers a 1% cash back graduation reward.
• The student is responsible for loan payments. Because the student is responsible for making monthly loan payments, parents can focus on saving for retirement and other financial priorities. However, remember that if your child can’t keep up with payments, the cosigner will be on the hook.
• More repayment options available to student borrowers. Student borrowers sometimes have more repayment options, such as longer repayment terms or deferred payments while in school.

How to qualify for a private student loan

Eligibility criteria for private student loans vary by lender. But there are a few common requirements you’ll likely come across, including:

• Good credit: You’ll typically need good to excellent credit to qualify for a private student loan. Having good credit could also help you secure a better interest rate. While some lenders offer student loans for bad credit, these typically come with higher interest rates compared to good-credit loans.
• Verifiable income: Lenders want to see that you’ll be able to repay the loan. Some lenders have specific minimum income requirements while others don’t — but in either case, the lender will generally ask to see proof of income.
• Low debt-to-income ratio: Your debt-to-income (DTI) ratio is the amount of debt you owe compared to your income. You’ll generally need a DTI ratio lower than 50% — though some lenders might require lower percentages.

How to apply for a private student loan to cover school and living expenses

If you’re ready to apply for a private student loan, follow these four steps:

1. Complete the FAFSA. Your first step should be filling out the Free Application for Federal Student Aid (FAFSA). The school will use the student’s FAFSA results to determine what federal student loans and other federal financial aid they qualify for.
2. Apply for grants and scholarships. Unlike student loans, grants and scholarships don’t have to be repaid — which essentially makes them free money for school. There’s no limit on how many college grants and scholarships you can get, so it’s a good idea for students to apply for as many as they possibly can.
3. Accept federal student loans. If you need to borrow for school, it’s usually a good idea to start with federal student loans so you’ll have access to federal benefits and protections. There are several types of federal student loans that students might qualify for. Additionally, parents can apply for Parent PLUS Loans to fund their child’s education.
4. Use private student loans to fill any gaps. After exhausting grant, scholarship, and federal student loan options, private student loans could fill any financial gaps left over. For example, private student loans could help cover education costs like tuition, textbooks, or living expenses.

If you decide to take out a private student loan, be sure to consider as many lenders as possible to find the right loan for you — whether it’s a parent loan or a cosigned loan. This is easy with Credible. You can compare your prequalified rates from multiple lenders in two minutes.

How to get the best parent student loan rate

Congress sets federal student loan rates each year. Here are the rates you can expect for the current academic year:

• Parent PLUS Loans: 8.05%

On the other hand, individual lenders set private student loan rates based on market conditions. Also keep in mind that other factors will affect the actual rates you’re offered, such as your credit score and the repayment term you choose.

Here are the starting rates on private student loans from Credible’s partner lenders:

• Fixed rates starting at: 4.07%+
• Variable rates starting at: 4.98%+

A couple strategies might help you qualify for a better rate on a private loan, including:

• Apply with a cosigner. If you have poor or fair credit, applying with a cosigner with good credit could improve your chances of getting approved. Even if you don’t need a cosigner to qualify, having one might get you a lower rate than you’d get on your own.
• Compare lenders. Shopping around and comparing your options from as many lenders as possible can help you find a loan with the most optimal rate for your needs.

FAQ

Here are answers to some frequently asked questions about student loans for parents:

Can you claim a parent PLUS loan on taxes?

If you’re a parent PLUS loan borrower, you can claim your student loan interest payments on your taxes. The student loan interest tax deduction lets you claim up to $2,500 per year, but only borrowers who earn a modified adjusted gross income of $85,000 or less are eligible. If filing taxes jointly, only families with an income of $175,000 or less qualify.

Any interest payments you made on qualifying federal or private student loans you borrowed on behalf of a dependent are eligible for this deduction. However, you can’t claim deductions for interest paid on loans in the student’s name.

Does cosigning a student loan hurt my credit?

Cosigning a student loan can impact your credit, but the impact doesn’t have to be harmful. Late or missed payments will hurt your credit, but on-time payments could boost your credit score over time.

You may see a temporary dip in your score at first, since the lender will run a hard credit inquiry to check your credit. This decrease may be five points or less, and you should see your score bounce back within a few months.

Can a student take over a parent PLUS loan?

A student can’t take over a parent PLUS loan, since the parent borrower is legally obligated to manage the loan and make payments.

However, some private lenders let students refinance parent PLUS loans in their own name if they can meet credit and income requirements. Refinancing a PLUS loan makes it private, meaning the loan would no longer be eligible for federal repayment plans, forgiveness programs, or other protections.

Are both parents responsible for Parent PLUS loans?

Both parents are not responsible for the parent PLUS loan unless both parents’ names are on the loan agreement. If one parent can qualify for the loan on their own, then that parent is solely responsible for paying the loan back.

However, if the first parent has adverse credit and needs the other parent to sign onto the loan as an endorser (similar to a cosigner), then both parents are responsible for the loan.

Do I have to be the student’s parent to take out a parent student loan for them?

Whether or not you must be the student’s parent to take out a student loan on their behalf depends on the type of loan. For federal parent PLUS loans, you must be the biological parent, adoptive parent, or in some cases, stepparent of the student to borrow. A student’s legal guardian, grandparent, or other family member cannot borrow a parent PLUS loan unless they formally adopted the student.

Private lenders, however, tend to be more flexible. Each lender sets its own rules, but many don’t require you to be the parent or guardian to borrow a student loan on behalf of a student. It’s worth checking with each individual lender about its specific guidelines.

What is the maximum amount parents can borrow for their student?

The maximum amount parents can borrow for their student depends on the type of loan they choose. With federal parent PLUS loans, the maximum amount is the student’s school-certified cost of attendance, minus any other financial aid they’ve already received. 

With private parent loans, the maximum amount will vary by lender. Many lenders let you borrow up to the school’s cost of attendance, while others set lower limits. 

Can parent PLUS loans be forgiven?

Parent PLUS loans are eligible for some federal forgiveness programs, but generally have fewer options than students with their own debt.

For example, parent PLUS loans can be forgiven through the Public Service Loan Forgiveness (PSLF) Program, which requires 10 years of public service and 120 qualifying loan payments. You might also qualify for parent PLUS loan forgiveness if you still have a balance after 25 years on the Income-Contingent Repayment (ICR) Plan. However, you must consolidate your loans before they’re eligible for either of these options.

Parent PLUS loans were also included in President Joe Biden’s plan for student loan forgiveness of up to $20,000 per borrower who met income guidelines. However, that plan was stuck down by the Supreme Court.

See more: How to Get Parent Student Loan Forgiveness

What are the benefits of a parent PLUS loan?

Parent PLUS loans allow parents to help their children cover the costs of their undergraduate education. They have several benefits, such as:

• Lenient qualification requirements: While private lenders look for a good credit score and reliable income, PLUS loans only ask that you don’t have adverse credit. If you do, you could still qualify by applying with an endorser and completing credit counseling.
• Can borrow as much as you need: PLUS loans let you borrow up to the school’s cost of attendance, minus any other other financial aid your child has already received.
• Fixed interest rates: You won’t have to worry about your interest rate changing over the life of your loan.
• Eligible for federal programs: Parent PLUS loans qualify for a variety of federal repayment plans and protections, including Income-Contingent Repayment, PSLF, deferment, and forbearance.
• Option to defer payments: If you’re not ready to make payments on your parent PLUS loan right away, you can apply to defer them while your child is enrolled in school and for six months after they graduate.

What are the drawbacks of a parent PLUS loan?

Along with the benefits, parent PLUS loans also come with some potential drawbacks:

• Relatively high interest rates and fees: PLUS loans have the highest rates and fees among all federal student loans. Currently, there’s an interest rate of 8.05% and a loan fee of 4.228%.
• Only eligible for one income-driven repayment plan: Parent PLUS loans only qualify for Income-Contingent Repayment, which has the least borrower-friendly terms of all income-driven repayment plans. Plus, you have to consolidate your parent PLUS loan before you can apply for ICR.
• May require an endorser: If you have adverse credit, such as a recent default or bankruptcy, you’ll need to apply with an endorser who will become equally responsible for the debt. With this option, you’ll also have to complete online credit counseling.
• Accrue interest right away: Interest will start accruing on your parent PLUS loan from the date of disbursement, causing your balance to grow if you choose not to make payments while your child is in school.

Josh Patoka contributed to the reporting for this article.