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Before you drain your retirement accounts to pay for your child’s college education, make sure you’ve considered all your options — including federal and private student loans for parents.
Both the federal government and many private lenders offer student loans for parents. Here are five leading options for parent student loans, along with tips on how to make the best borrowing decision for you and your family.
5 best parent loans for college
Here are five excellent options for parent student loans, both federal and private:
1. Parent PLUS loan
- Federal loan from the Department of Education
- Loan amount up to the cost of attendance of your child’s school, minus any other financial aid already received
- Interest rate of 5.3% (as of July 1, 2020) and origination fee of 4.228% (as of Oct. 1, 2020)
- Eligible for some federal repayment plans and forgiveness programs
- Borrowers with adverse credit have to apply with an endorser
2. Citizens Bank Student Loan for Parents
- Both fixed 3.99% – 11.80% and variable rates 1.18% – 11.50%available for Citizens Bank student loans for parents
- Rate discount of up to 0.50% offered for autopay and qualifying accounts
- No origination fees or prepayment penalties
- Parent student loan terms of 5, 10 years
- Loan amounts from $1,000 to $350,000
- Multi-year approval option, so you can secure funding for multiple years with one application
- In-school interest-only or immediate repayment options
3. College Ave Parent Loan
- Fixed 3.34% – 12.99% and variable rates 1.04% – 11.98% available on College Ave student loans for parents
- Rate discount of 0.25% after autopay enrollment
- No origination fees or prepayment penalties
- Student loan terms of 8,10,15 years
- Loan amounts from $1,000 up to certified cost of attendance
- Option to disburse up to $2,500 directly to the parent for additional out-of-pocket expenses
- Lower in-school payments or immediate repayment options
4. Sallie Mae Parent Loan
- Fixed 4.25% – 12.59% and variable rates 1.13% – 11.23% available
- 0.25% rate discount for autopay enrollment
- No origination fees or penalties for prepaying Sallie Mae student loans
- 5, 15 years term on student loans for parents
- Student loan amounts from $1,000 up to certified cost of attendance
- Option for interest-only payments while student is enrolled, for up to 48 months
- Available not just to parents, but also to other student benefactors
- Free quarterly FICO credit score updates
5. Education Loan Finance (ELFI) Parent Loan
- Fixed 2.79% – 5.99% and variable rates 2.39% – 6.01% on ELFI parent loans
- No origination, application or prepayment fees
- Loan amounts starting at $10,000
- Repayment terms of 20 years
- Option to make immediate, interest-only or fixed payments on the loan, or to defer loan payments while the child is in school and for six months after they graduate
Things to consider when choosing a parent loan
As a parent, you can choose a federal or private student loan. While federal loans are usually a better option for students, the federal PLUS loan might not have an advantage over private parent loans.
Since parent PLUS loans carry the highest interest rates of any federal student loan, you might be able to save money by applying for private parent loans instead, especially if you have strong credit.
As with any financial product, you’ll need to shop around to find a good deal for your student loans for parents. Here are the key features we looked for when choosing our picks for the best parent loans for college.
Low student loan rates
When you’re choosing student loans for parents, interest rates are key. In order to make sure you’ll incur the least amount of debt possible, compare interest rates for both private and federal loans.
Low or no loan fees
Student loans for parents can come with charges such as student loan origination fees. Watch out for these costs and make sure to compare annual percentage rates (APRs), which will reflect the full cost of the loan — including any fees.
Student loans designed for parents
Allowing parents to cosign their children’s student loans is common. However, if you’re looking for a loan that won’t add to your child’s student debt, you’ll want to find lenders that offer loans directly to parents.
Eligibility requirements you can meet
Lastly, you might want to consider your creditworthiness. You’ll need a good credit score, reflecting a solid credit history and a low debt-to-income ratio, to qualify for private student loans for parents. If you’re unlikely to qualify on your own, you might need to apply with a cosigner.
A similar rule applies to the parent PLUS loan. While you don’t need excellent credit, anyone with adverse credit won’t qualify unless they add an endorser to their application.
How to decide if a parent student loan is right for you
In addition to shopping around among private lenders, you should compare student loans for parents to other college financing options. Here are some questions to consider:
Is your credit good?
To figure out if you could benefit from private student loans for parents, consider your creditworthiness. The better your credit, the more likely it is that you’ll qualify for a parent loan — along with rates that are low enough to make them worth your while. If you don’t know your current credit score, you can quickly check it with free online credit check tools.
Typically, you’ll need good to excellent credit (a FICO score of around 700 or higher) to get your best rates on parent student loans.
If you qualify for low rates, you could save a lot in loan fees and interest, especially if you can beat the interest rate and loan fee on parent PLUS loans.
If your FICO score falls below that 700 benchmark, on the other hand, a parent PLUS Loan might be a better choice. Parent PLUS Loan eligibility requirements are easier to meet than most private lenders’ credit standards. While private student loans require good credit, PLUS Loans simply require that you don’t have “adverse credit.”
Even if you do have credit problems, it could be worth applying. If your parent PLUS Loan is denied, the Federal Student Aid Office will allow your child to borrow more direct unsubsidized loans to help cover any gap in funding.
Can you afford to repay parent student loans?
Some parents want to own a student loan to simplify the borrowing process and keep their child out of student debt.
Of parents who borrowed for their child’s college, two-thirds say they don’t regret it, according to our parent student loans survey, although over half of parents surveyed reported student debt balances of more than $40,000.
Still, you should borrow responsibly and take on parent student loans only if you’re confident you can afford to repay them. Limit loan amounts as much as possible, and choose a student loan term that will result in affordable monthly payments.
Also, make sure you can continue to prioritize other important financial goals, such as saving for your retirement, alongside repaying student loans and covering college costs.
Are you and your child repaying student loans together?
Some parents might view repaying student loans as a responsibility their child should share. If that’s you, then cosigning a private student loan, rather than borrowing a parent loan, might make more sense. This way, both you and your student share equal legal responsibility for repaying the debt.
Many lenders offer cosigner release, meaning your child eventually could assume full responsibility for managing and repaying the cosigned loan. Between cosigning a student loan and taking our parent loans on your own, consider which is the better fit for your financial future.
Ultimately, student loans for parents allow borrowers to pay for college costs and control future repayment if necessary. By exploring your options for parent loans, you’ll know how to choose the borrowing option that’s right for you and your family.
FAQ: Applying for parent loans
Before taking out a parent loan to pay for your child’s education, make sure you’re on top of the answers to these frequently asked questions:
How do I apply for a parent PLUS loan?
You can easily apply for a parent PLUS loan on the Federal Student Aid website. You’ll need to complete your online application in a single session, but the entire process usually only takes about 20 minutes.
On the first page of the application, you’ll provide information about the student for whom you’re borrowing, as well as details on their school and the loan you want to borrow. Next, you’ll provide your own personal details and consent to a credit check.
As explained above, you may have to apply with an endorser if you have adverse credit. If you’ve placed a freeze on your credit, you’ll also need to remove it before your application can be processed.
Once your loan is approved, Federal Student Aid will send it directly to the school to cover expenses. If there’s a remaining balance, you can choose to have it sent to you or to the student.
How do I apply for a private student loan?
To borrow a private parent loan, you’ll apply directly on the lender’s website. Before you submit your full application, however, we recommend checking your rates with a few lenders.
Many online lenders will let you prequalify for a loan, allowing you to browse offers with no impact on your credit. By comparing offers, you can find a loan with the best terms for you.
Once you’ve chosen your loan, you’ll fill out an online application, providing details about yourself, the student, the school and the loan amount. You’ll also need to consent to a hard credit inquiry and meet a lender’s criteria for credit and income.
Since each lender has its own process, check with yours to find out how the loan will be disbursed and what steps you’ll need to take to start repayment.
What are my repayment plan options?
Your repayment options will vary depending on the type of loan you borrowed.
Parent PLUS loans are eligible for a few different plans, including the standard 10-year plan, graduated repayment plan and extended repayment plan. You can also adjust payments on the income-contingent plan, but only if you consolidate your parent PLUS loan into a direct consolidation loan first.
If you opt for a private parent loan, you’ll typically choose your repayment plan when you initially borrow. Most lenders offer repayment terms between five and 10 or 15 years. Use a student loan payment calculator to estimate your monthly payments on each term.
What’s more, read your loan agreement carefully to find out when repayment begins. While some lenders let you defer payments while the student is in school, others expect you to start paying it back right away.
The information in this article is accurate as of the date of publishing.