Federal Parent PLUS Loan vs. Private Student Loan: Key Differences and Which You Should Choose

Parents looking to help their child pay for college often choose between federal Parent PLUS loans and private student loans. Parent PLUS loans offer fixed interest rates, flexible repayment options, and potential forgiveness but come with high fees and strict federal borrowing terms. Private loans may have lower rates and no fees but require good credit and lack federal protections.

Understanding the key differences between these loan types can help you decide which makes the most financial sense for your family. Here’s how Parent PLUS and private student loans compare—and what to consider before borrowing.

Table of Contents

1. Federal Parent PLUS loans vs. private student loans: key differences
2. Parent PLUS loans vs. private parent student loans pros and cons
3. Parent PLUS vs. private loan eligibility requirements
4. Applying for private parent loans vs. Parent PLUS loans
5. How loan repayment differs between federal Parent PLUS and private student loans
6. Which type of parent loan makes sense for you?
7. What private lenders offer parent loans?
8. Recap of a Parent PLUS loan vs. private loan

Federal Parent PLUS loans vs. private student loans: key differences

Parent PLUS loans are federal loans for parents of undergraduate students, while private student loans come from banks, credit unions, or other lenders. Private parent loans function similarly but are taken out in the parent’s name rather than the student’s.

The key differences lie in eligibility, interest rates, fees, and repayment options. Here’s how they compare:

Feature	Parent PLUS loans	Private student or parent loans
Borrower	Parent	Parent or student
Credit	No adverse credit history	Good credit score required
Lender	Federal government	Private lenders
Rate type	Fixed	Fixed or variable
Rate	9.08%	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 adverse credit history	Often required for student loans; parent loans are a cosigner alternative

There are a few other considerations to know:

• Parent PLUS loans are available only to biological or adoptive parents of dependent undergraduates enrolled at least half-time.
• Private student loans may be available to students with a cosigner and can also serve nontraditional borrowers, including DACA recipients and international students.
• Private parent loans typically require repayment to begin 30–45 days after disbursement, unless the lender offers in-school deferment.

Understanding these distinctions can help you choose the right loan option for your family.

Parent PLUS loans vs. private parent student loans pros and cons

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

Pros

• 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

• 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 and cons of private parent student loans

Pros

• 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

• 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.  

Parent PLUS vs. private loan 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.

Applying for private parent loans vs. Parent PLUS loans

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
Info 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
Preapprove	No	Often yes
Important items	Student must complete the FAFSA before you apply	A hard credit check may be required

How loan repayment differs between federal Parent PLUS and private student loans

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
Plans	Standard, Graduated, or Extended repayment	Often deferred, interest-only, or flat monthly while in school, then 5 – 15 post grad.
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 or forbearance	Yes, if parents qualify	Varies
Loan forgiveness	Yes, if parents qualify	No

Which type of parent loan makes sense for you?

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.

Choose…	Choose…
Your student has exhausted their Direct Subsidized and Unsubsidized loan limits.	Parent PLUS loan
You’ve compared rates and believe a Parent PLUS loan is the most affordable option.	Parent PLUS loan
You don’t mind paying the federal loan fee.	Parent PLUS loan
You want federal protections like forbearance and potential loan forgiveness.	Parent PLUS loan
You’re comfortable taking full financial and legal responsibility for the loan.	Parent PLUS loan
You have an adverse credit history and may be denied a Parent PLUS loan.	Private parent loan
Your student hasn’t completed the FAFSA, and you need fast funding.	Private parent loan
You’ve found a lender with low interest rates and no origination fees.	Private parent loan
You’re confident in making payments without needing forbearance or deferment.	Private parent loan
You’re open to refinancing a variable-rate loan if needed.	Private parent loan

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.