11 Pros and Cons of Parent PLUS Loans (and Alternative Student Loans to Consider Instead)

Seeing your child graduate from high school and move on to the next big stage of their life is exciting, at least until you remember just how expensive college has become. Scholarships and grants might be able to soften the blow, but chances are good, your child will still have to take on some kind of debt to cover the full cost.

As a parent, you can help lighten the student loan debt your child faces by taking out a Parent PLUS loan, a federal student loan in your name, rather than your child’s. Parent PLUS loans offer a few notable advantages, but there are far more drawbacks to consider. Impending changes to Parent PLUS loans as a result of the One Big Beautiful Bill Act (OBBBA) will make them even less appealing in mid-2026 and beyond.

Below, we’ll weigh the pros and cons of Parent PLUS loans, then look at some viable alternatives to consider.

Table of Contents

1. 1. Pro: Debt not taken on by student
2. 2. Eligible for student loan forgiveness
3. 3. Pro: Fixed interest rate
4. 4. Pro: Tax deductions for interest
5. 5. Con: Higher interest rates than undergrad loans and some private loans
6. 6. Con: Loan fee deducted from disbursement
7. 7. Con: New per-year and lifetime caps coming soon
8. 8. Con: Limited repayment options
9. 9. Con: No transfer to student without refinancing
10. 10. Con: Limited to undergraduate programs
11. 11. Con: Payments 60 days after disbursement
12. Alternatives to Parent PLUS loans

1. Pro: Debt not taken on by student

The biggest draw of a Parent PLUS loan is that it’s entirely in the parent’s or guardian’s name. When your child graduates from college, they won’t be on the hook for this debt, and that can be a game-changer. According to the Education Data Initiative, the average student loan debt is $42,673, so every dollar you can take off your kid’s plate helps.

Of course, there’s a major downside to this: You take on the debt instead. And this can be a tremendous financial burden for the average family. The Education Data Initiative reports that Parent PLUS loans average $31,750.

2. Eligible for student loan forgiveness

Technically, Parent PLUS loans are eligible for public service loan forgiveness (PSLF), with a couple of caveats:

1. Eligibility for loan forgiveness depends on your employment, not your child’s.
2. You first have to consolidate your PLUS loan to be eligible for forgiveness.

Both federal loan consolidation and federal student loan forgiveness are complex processes, and there are even more question marks around these topics as we await imminent changes due to the OBBBA.

3. Pro: Fixed interest rate

Like all other federal student loans, Parent PLUS loans have fixed interest rates, so payments are predictable and thus easier to budget for over the life of the repayment term. Given that Parent PLUS loan repayment can happen over 10 to 25 years, having a fixed rate can be a huge plus.

Variable rates can look much different today than they will in two decades, and there’s no telling if their changes will be in your favor.

4. Pro: Tax deductions for interest

Repaying a Parent PLUS loan can save you a little money with Uncle Sam come tax time. Current IRS rules allow you to deduct either $2,500 or the amount of interest you paid on student loans in a given year, whichever is lower.

That’s not directly $2,500 in savings, but rather up to $2,500 of income that you don’t have to pay taxes on. And yes, you can claim this student loan deduction even if you take the standard deduction when you file.

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Now for the downsides.

5. Con: Higher interest rates than undergrad loans and some private loans

Interest rates for Parent PLUS loans may be fixed, but they’re notably higher than what your undergraduate student can get with a Direct Subsidized or Unsubsidized Loan of their own. Here’s how those rates compare:

• Direct Subsidized and Unsubsidized Loans for undergrads: 6.39%
• Parent PLUS loans: 8.94%

Many of the best private student loan lenders offer rates starting far lower than Parent Plus loans, but the rate you’re quoted with private lenders depends on factors such as credit score and income. Federal rates, on the other hand, are standard for all borrowers.

6. Con: Loan fee deducted from disbursement

You’ll pay more than interest for a Parent PLUS loan. These loans also carry a loan fee equal to 4.228% of the total loan. This amount is deducted proportionally from each loan disbursement, meaning you’ll actually receive less money than you’ve agreed to borrow, but you’ll need to repay the full borrowed amount.

For instance, if you borrow $15,000 via a Parent PLUS loan, you’ll only receive $14,365.80. The other $634.20 is deducted to cover the fee.

7. Con: New per-year and lifetime caps coming soon

Currently, Parent PLUS loans don’t have any true borrowing limits. Parents can borrow up to the full cost of attendance, minus any other federal aid their child qualifies for on their own. That’s set to change on July 1, 2026.

At that point, the OBBBA’s new provisions go into effect. Included in those provisions are:

• An annual cap of $20,000
• A lifetime cap of $65,000

Notably, if your child is enrolled in a traditional four-year program and depends on that $20,000 a year in assistance, you won’t be able to take out the full $20,000 their senior year, as you’ll reach your lifetime cap of $65,000. That would mean you could only borrow $5,000 to apply toward their final year of undergrad.

8. Con: Limited repayment options

At press time, Parent PLUS loans are eligible for standard, extended, or graduated repayment plans; they can also qualify for an income-contingent repayment plan by consolidating their loan into a Direct Consolidation Loan.

But the OBBBA changes coming on July 1, 2026, mean parents will be limited to the standard repayment plan only. The standard repayment plan is notably getting some revisions, so it’s possible parents could have up to 25 years to repay their loans. But the lack of flexibility makes these loans less appealing.

9. Con: No transfer to student without refinancing

Imagine taking out a Parent PLUS loan on behalf of your child, and soon after they graduate, they have a high-income job and have mostly paid off their own student loans. It could make sense to reallocate the Parent PLUS debt to them, if they’re willing to take ownership of it.

However, there’s no way to transfer the debt to your child while keeping it a federal loan. If you want to move the debt to your child (and they’re willing!), you’ll have to refinance the student loan with a private lender.

10. Con: Limited to undergraduate programs

Parent PLUS loans are only available if your child is in an undergraduate program. Once they move on to grad school, they’re on their own. You won’t be able to take out a federal loan to cover their tuition.

11. Con: Payments 60 days after disbursement

Your child may not have to worry about making loan payments while they’re still in school, but loan repayment for Parent PLUS loans begins just 60 days after disbursement. That means you must start budgeting for those payments soon after your kid heads off to college.

Alternatives to Parent PLUS loans

Parent PLUS loans may feel like the best way to help your child, but they are inflexible and expensive, and they can disrupt your own finances as you prepare for retirement.

Instead, consider these alternatives:

• Grants and scholarships: Encourage your child to apply for as many grants and scholarships as possible. You can find a wide range outside of the ones immediately offered by the school.
• Private student loans: Whenever possible, your child should take out federal loans over private loans. But if they’ve exhausted all the funds that are available federally, you don’t have to turn to federal PLUS loans. You can instead cosign a private loan for your child; the interest rate may be in line with (or lower than) Parent PLUS loans, and the debt goes in their name, not yours. Check out these five best private student loans for parents to start your search.