Parent PLUS Loan vs. Private Student Loan

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. 

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 or parent loans
Borrower	Parent	Parent or student
Credit	No adverse credit history	Good credit score
Lender	Federal government	Private lenders
Rate type	Fixed	Fixed or variable
Rate	7.54%	Varies
Discount	0.25% autopay	Varies
Terms	10 – 25 years	Varies
Loan limit	Up to the cost of attendance after other financial aid	Up to the cost of attendance
Fees	4.228%	Varies
Cosigner?	Only if parent has an adverse credit history	An option on most student loans; parent loans are cosigning alternative

There are a few other considerations to know:

• For Parent PLUS loans: Parents must be the biological or adoptive parent of a dependent undergraduate who is enrolled at least half-time
• For private student loans: Some private lenders offer loans for borrowers with special situations, such as DACA recipients or international students
• For private parent student loans: Payments for parent loans often begin 30 – 45 days after loan funds are disbursed, unless the lender allows for in-school deferments

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 parent student loans
Who can apply?	Biological or adoptive parents; sometimes stepparents	Biological or adoptive parents, stepparent, foster parents, legal guardians, grandparents, other relatives
Credit	No adverse credit history	Lender’s min. credit score
Financial need	Not required	Not required
Income	Not considered	Lender’s min. income
Debt-to-income ratio (DTI)	Not considered	Lenders may review

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.

In addition:

• For Parent PLUS loans: 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.
• For private parent student loans: Most private lenders require borrowers to be U.S. citizens or permanent residents. A Social Security number may be required to apply.

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 school	Name of school and program
	Requested loan amount	Requested loan amount
	Personal information	Personal information
	Parent Social Security number and date of birth	Parent Social Security number and date of birth
	Student Social Security number and date of birth	Student Social Security number and date of birth
	Citizenship	Citizenship
	Job information	Job and income information
Preapproval?	No	Often yes
Important items	Student must complete the FAFSA before you apply	A hard credit check may be required

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	Standard, Graduated, or Extended repayment	Often deferred, interest-only, or flat monthly while in school, then 5 – 15 post grad.
When do payments begin?	After disbursement	Depends on chosen plan
Grace period	None	Varies
Income-driven repayment?	Parents may enroll in an Income-Contingent Repayment	Not typical
Deferment/forbearance?	Yes, if parents qualify	Varies
Loan forgiveness?	Yes, if parents qualify	No

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 private student loan lenders for parents. 

Loan	Rates (APR)	Terms
College Ave	3.99%% – 14.91%%	5 – 15 years
ELFI	1.30% – 11.52%	5, 7, or 10 years
Earnest	0.94% – 11.44%	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)	Terms
Parent PLUS	7.54% fixed	10 – 25 years
Private loan	Varies	5 –15 years.

For more specific information about which private parent student loans are the best, please see the table in the previous section.