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 don’t have to provide that money on their own. They can find help in the form of federal and private parent student loans.
On this page:
- Comparing Parent Student Loans
- Federal Student Loans for Parents
- Private Student Loans for Parents
- What You Should Know About Repayment
Comparing Parent Student Loans
Before we dive into each parent student loan option, let’s take a look at how each compares in terms of rates, repayment, and fees.
|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.
Private Student Loans for Parents
Parents also have the option of getting private student loans. This might be a good option for parents who want to help their children while still maintaining 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.
To help you find the best parent student loans, we’ll look at a few of the more well known companies. 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 rates.
1) College Ave Student Loans Parent Loan
College Ave Student Loans offers parent student loans with no origination fees. You’ll also have the opportunity to have part of the loan amount forwarded to you so you have it to pay 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 good 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.
Choosing Between Parent Student Loans
The first thing you’ll want to research for when looking into a parent student loan program is the interest rate. You want to get as low of an interest rate as possible to reduce the overall amount you’ll have to pay back.
>> Read More: Check out our student loan interest rates page to find some of the lowest rates.
The second factor to consider is the flexibility of repayment plans. Decide how long you’d like to make payments and what your monthly payment will be, and look for a loan that can provide those terms.
You can use our Student Loan Payment Calculator to see how much your monthly payments and total loan cost will be based on your interest rate and term length.
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 will help save money, some parent might not be able to swing it immediately.
What to Know About Parent Student Loan Repayment
Parents have a variety of repayment options with federal Parents 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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