Parent PLUS Loan vs. Private Student Loan

Federal student loans can help pay for school, but there are limits to how much you can borrow. If you’ve exhausted your Direct Subsidized and Unsubsidized Loan limits, you may consider taking out a Parent PLUS loan vs. a private student loan to fill in any financial gaps. 

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. 

In this guide:

• Differences between Parent PLUS and private student loans
• Parent PLUS loans vs. private student loans
• Eligibility requirements
• Application process
• Loan repayment
• Parent PLUS vs. private student loans: Which makes sense for me? 
• What private lenders offer parent loans?
• Recap: Parent PLUS loan vs. private loan

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 vs. private student loans

Deciding between a private student loan and Parent PLUS loan can depend on your financial needs. 

You may choose to pursue both types of loans to pay for college if the need is great. 

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. 

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. 

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.

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. 

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 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 of the best private student loan lenders for parents. 

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: 

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