Many parents love nothing more than to see their child receive a college education that can land them a great job. But with the cost of college continuing to climb, they might doubt their ability to pay for that education out of pocket.
Luckily, parents can consider taking out parent student loans through the Department of Education or private lenders. These loans require a strong personal credit history and will be taken out in the parent’s name.
To learn more, compare the federal and private student loans for parents below. By doing this, you can better understand which option may offer you the lowest rate before you apply.
On this page:
- Compare Parent Student Loans
- Federal Student Loans for Parents
- Private Student Loans for Parents
- Steps to Take Before You Apply for a Parent Student Loan
Compare Parent Student Loans
Use the table below to help you select a loan that best fits your needs. Each of the options in the table are discussed in more detail further down the page.
|Loan||Variable Rates (APR)||Fixed Rates (APR)||Origination Fee||Term Lengths||In-School Repayment|
|Federal Parent PLUS||N/A||7.08%||4.25%||10 – 25 years||Immediate or full deferment|
|ELFI||As low as 3.95%||As low as 4.99%||$0||5 – 10 years||Deferred, Interest only, fixed only, or immediate|
|Citizens Bank Parent||5.05% – 8.19%||5.48% – 8.52%||None||5 or 10 years||Interest only or full payments|
|College Ave Parent||5.23% – 11.76%||5.96% – 11.91%||None||5 – 15 years||Interest only, partial, or full payments|
Federal Student Loans for Parents
Students and parents should typically consider federal student loans before looking into other options. If your child has already met federal limits or if you simply don’t want your child to have to take out loans in his or her name, you have the option of taking out a Parent PLUS Loan.
Parent PLUS Loan
Rates and Fees
Parent PLUS Loans currently have a fixed rate of 7.6%, which is the highest rate of all federal student loans. Variable rates are not offered through this loan.
One big downside of Parent PLUS Loans is that there is an origination fee of 4.25% which will increase the total cost of the loan.
In order to take out a Parent PLUS Loan, you must have a good credit score.
The U.S. Department of Education makes Parent PLUS Loans available to parents with a child who is attending a participating school at least half-time.
Before a parent applies for a Parent PLUS Loan, they must first fill out the Free Application for Federal Student Aid. This will provide a better idea of what free money might be available for the child in the form of grants.
Once you understand what your child’s financial needs are, you can move ahead with getting a Parent PLUS Loan if you think that’s the best route to go. These loans are meant to fill in the gaps after you’ve tapped out other financial aid sources.
You can find the application for getting a Parent PLUS Loan at StudentLoans.gov. You can also contact your child’s university for guidance about the process.
Best Private Student Loans for Parents
Parents also have the option to apply for private student loans. This might be a good option for parents who want to maintain control of the loan funds. When it comes to student loan disbursement, any money released for the loan will be sent right to the parent, not the child.
Keep in mind that you’ll need a good credit score to take out one of these loans. And, the better your credit history, the less you’ll have to pay in interest.
Here are the three best parent student loans offered by private lenders.
1) College Ave Parent Loan
College Ave Student Loans offers parent student loans with no origination fees. You’ll have the opportunity to have part of the loan amount forwarded to you so you can cover extra educational expenses that come up.
The fixed-rate interest on these loans ranges from 6.62% APR to 10.57% APR and the variable rate ranges from 4.96% APR to 9.94% APR. College Ave offers a mix of payment options, including interest-only payments, interest plus payments, and full principal and interest payments. The repayment period can last from five years to 15, depending on the plan.
2) ELFI Parent Loan
The ELFI Parent Loan lets parents take out a loan in their own name so their child isn’t burdened with debt. Variable rates start as low as 3.95% and fixed rates start as low as 4.99%.
Loan amounts range from $10,000 to 100%. Repayment for this loan can last as long as 10 years. There are no application, origination, or prepayment fees.
There is a minimum credit history of 36 months, with a minimum credit score of 680.
3) Citizens Bank Student Loan for Parents
Citizens Bank claims it can offer lower parent loan rates than federal Direct PLUS loans. Variable APRs currently range from 5.17% to 8.49%, and fixed APRs range from 5.74% to 8.56%.
You can take out this loan every year your child is in school and there are no application or origination fees.
For the application process, parents will need their basic information, a recent pay stub or proof of income, the name of the school your child will attend, how much the school costs, and how much aid has already been received, as well as a few other pieces of information.
Steps to Take Before You Apply for a Parent Student Loan
The first thing you’ll want to research for when looking into a parent student loan program is the interest rate. A lower rate will reduce the overall amount you’ll have to pay back in interest.
The second factor to consider are the repayment plans. Decide how long you’d like to make payments for and what your monthly payment will be, and then look for a loan that can meet those terms.
Lastly, consider if you want to make payments while in school or defer payments until after your child leaves school. While making payments right away can help save money, some parents might not be able to afford it immediately.
Once you select a company to borrow from, you’ll need to gather all of the necessary information to apply. This information may include, amongst other things:
- Personal information: credit score, credit history, driver’s license, Social Security number
- Employment information: proof of income, employer information, 1099 statements
- Education information: school the child is attending, additional student aid, cost of attendance
What to Know About Parent Student Loan Repayment
Parents have a variety of repayment options with the federal Parent PLUS loan and private parent student loans. Some options allow you to begin repaying the loan while your child is still in school. Other plans allow you to wait until they are out of school. You’ll want to consider those terms carefully to be sure to find the plan that works best for you.
After your child graduates, you can even refinance Parent PLUS loans in your child’s name. But, of course, this will only work if your child agrees to it, meets certain criteria, and if they can qualify for a loan on their own.
If you take a student loan out in your name, there is no way to force your child to refinance the loan payments in their name. However, many parents have found this funding source invaluable for protecting their child’s financial health while funding their education.
Author: Jeff Gitlen
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