Best Parent Student Loans for College
Parents who want to have a role in helping fund their child’s education don’t need to take out a second mortgage. Instead, they have several options for taking out their own parent student loans. Parents may take out federal student loans or private student loans in their name.
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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:
- Federal Student Loans for Parents
- Private Student Loans for Parents
- What You Should Know About Repayment
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.
The second factor you may want to consider is the flexibility of repayment plans. Plan how long you’d like to make payments, and look for a loan that can provide those terms.
Federal Student Loans for Parents
Federal loans are one of the best loan options for paying for a child’s education. Students can secure subsidized or unsubsidized loans through the Stafford loan program, both of which have a fairly low interest rate. But if you don’t want your child to be burdened with a student loan in their name, you have the option of taking a Parent PLUS loan out in your name.
Parent PLUS Loan
Parent PLUS student loans are federal loans available for parents with good credit scores. For the 2018 to 2019 school year, the rate for a Parent PLUS loan is 7.6%.
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 form. Then, they’ll have a better idea about what free money they might receive for their child in the form of grants.
Sometimes parents who don’t think their child will be entitled to any grants are pleasantly surprised after filling out the FAFSA. It’s better to exhaust your options for finding free money for your child’s education than it is to look at loan options.
Once you have a better idea as to 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. The loans also have an origination fee of about 4.3 percent.
Pros
- Parent PLUS loans help reduce or eliminate the student’s need to take on debt
- You don’t need collateral to get one
- There are no loan fees for prepayment
- Parents with adverse credit may still be eligible
Cons
- Taking on too much debt for a child’s education can bankrupt parents’ other saving goals such as retirement
- You child won’t have any official responsibility for paying back any part of the loan
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.
Several banks offer these types of loans. To help you find the best parent student loans, we’ll look at a few of the bigger banks that you’re likely already familiar with. 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.
Citizens Bank Student Loan for Parents
Citizens Bank claims it can offer lower loan rates than Federal Direct PLUS loans. Variable APRs currently range from 5.17% to 8.49%, and fixed interest rates range from 5.74% APR to 8.56% APR.
You can take out this loan every year your child is in school.
Parents don’t have to pay application fees or origination fees for this loan.
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.
Sallie Mae Parent Loan
The Sallie Mae Parent Loan also lets parents take out a loan in their own name so their child isn’t burdened with that debt. As long as you are creditworthy, you can qualify. The fixed interest rate will vary – from a competitive 5.74% APR to a high of 12.87% APR.
To repay it, you can make interest-only monthly payments while your child is in school for up to four years. After that, you’ll have a 10-year repayment term.
You can fill out the loan application online, or call Sallie Mae to start the process.
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 years, depending on the plan.
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.
