Before you drain your retirement accounts to pay for your child’s college education, make sure you’ve considered all your options — including federal and private student loans for parents.
Both the federal government and many private lenders offer student loans for parents. Here are six leading options for parent student loans, along with tips on how to make the best borrowing decision for you and your family.
6 great parent loans for college
Here are six excellent options for parent student loans, both federal and private:
1. Parent PLUS loan
- Federal loan from the Department of Education
- Loan amount up to the cost of attendance of your child’s school, minus any other financial aid already received
- Interest rate of 7.08% (as of July 1, 2019) and origination fee of 4.236% (as of Oct. 1, 2019)
- Eligible for some federal repayment plans and forgiveness programs
- Borrowers with adverse credit have to apply with an endorser
2. Citizens Bank Student Loan for Parents
- Both fixed 4.68% – 11.95% and variable rates 1.29% – 11.43% available for Citizens Bank student loans for parents
- Rate discount of up to 0.50% offered for autopay and qualifying accounts
- No origination fees or prepayment penalties
- Parent student loan terms of five or 10 years
- Loan amounts from $1,000 to $350,000
- Multi-year approval option, so you can secure funding for multiple years with one application
- In-school interest-only or immediate repayment options
3. College Ave Parent Loan
- Fixed 4.39% – 12.99% and variable rates 1.49% – 11.98% available on College Ave student loans for parents
- Rate discount of 0.25% after autopay enrollment
- No origination fees or prepayment penalties
- Student loan terms of five to 15 years
- Loan amounts from $1,000 up to certified cost of attendance
- Option to disburse up to $2,500 directly to the parent for additional out-of-pocket expenses
- Lower in-school payments or immediate repayment options
4. Sallie Mae Parent Loan
- Fixed 4.74% – 11.85%
and variable rates 1.25% – 9.44% available
- 25% rate discount for autopay enrollment
- No origination fees or penalties for prepaying Sallie Mae student loans
- 10-year term on student loans for parents
- Student loan amounts from $1,000 up to certified cost of attendance
- Option for interest-only payments while student is enrolled, for up to 48 months
- Available not just to parents, but also to other student benefactors
- Free quarterly FICO credit score updates
5. Wells Fargo Parent Loan
- Fixed 4.99% – 10.72%
and variable rates 4.33% – 10.30%
- Rate discounts of up to a combined 0.50% for having a Wells Fargo checking account and enrolling in autopay
- No origination fees or prepayment penalties
- Term of 15 years
- Loan amounts up to $25,000 per year, with a lifetime limit of $100,000
- Request up to 48 months of interest-only payments when your child is enrolled at least half-time
6. Education Loan Finance (ELFI) Parent Loan
- Fixed 3.20% – 6.69% and variable rates 2.39% – 6.01% on ELFI parent loans
- No origination, application or prepayment fees
- Loan amounts starting at $10,000
- Repayment terms of five or 10 years
- Option to make immediate, interest-only or fixed payments on the loan, or to defer loan payments while the child is in school and for six months after they graduate
Things to consider when choosing a parent loan
As a parent, you can choose a federal or private student loan. While federal loans are usually a better option for students, the federal PLUS loan might not have an advantage over private parent loans.
Since parent PLUS loans carry the highest interest rates of any federal student loan, you might be able to save money by applying for private parent loans instead, especially if you have strong credit.
As with any financial product, you’ll need to shop around to find a good deal for your student loans for parents. Here are the key features we looked for when choosing our picks for the best parent loans for college.
Low student loan rates
When you’re choosing student loans for parents, interest rates are key. In order to make sure you’ll incur the least amount of debt possible, compare interest rates for both private and federal loans.
Low or no loan fees
Student loans for parents can come with charges such as student loan origination fees. Watch out for these costs and make sure to compare annual percentage rates (APRs), which will reflect the full cost of the loan — including any fees.
Student loans designed for parents
Allowing parents to cosign their children’s student loans is common. However, if you’re looking for a loan that won’t add to your child’s student debt, you’ll want to find lenders that offer loans directly to parents.
Eligibility requirements you can meet
Lastly, you might want to consider your creditworthiness. You’ll need a good credit score, reflecting a solid credit history and a low debt-to-income ratio, to qualify for private student loans for parents. If you’re unlikely to qualify on your own, you might need to apply with a cosigner.
A similar rule applies to the parent PLUS loan. While you don’t need excellent credit, anyone with adverse credit won’t qualify unless they add an endorser to their application.
How to decide if a parent student loan is right for you
In addition to shopping around among private lenders, you should compare student loans for parents to other college financing options. Here are some questions to consider:
Is your credit good?
To figure out if you could benefit from private student loans for parents, consider your creditworthiness. The better your credit, the more likely it is that you’ll qualify for a parent loan — along with rates that are low enough to make them worth your while. If you don’t know your current credit score, you can quickly check it with free online credit check tools.
Typically, you’ll need good to excellent credit (a FICO score of around 700 or higher) to get the best rates on parent student loans.
If you qualify for low rates, you could save a lot in loan fees and interest, especially if you can beat the 7.08% interest rate and 4.236% loan fee on parent PLUS Loans. For example, if you borrowed $20,000 from a private lender at 6.00% — instead of the federal rate of 7.08% — you’d pay about $1,300 less in interest over the 10-year repayment term.
If your FICO score falls below that 700 benchmark, on the other hand, a parent PLUS Loan might be a better choice. Parent PLUS Loan eligibility requirements are easier to meet than most private lenders’ credit standards. While private student loans require good credit, PLUS Loans simply require that you don’t have “adverse credit.”
Even if you do have credit problems, it could be worth applying. If your parent PLUS Loan is denied, the Federal Student Aid Office will allow your child to borrow more direct unsubsidized loans to help cover any gap in funding.
Can you afford to repay parent student loans?
Some parents want to own a student loan to simplify the borrowing process and keep their child out of student debt.
Of parents who borrowed for their child’s college, two-thirds say they don’t regret it, according to our parent student loans survey, although over half of parents surveyed reported student debt balances of $40,000 or more.
Still, you should borrow responsibly and take on parent student loans only if you’re confident you can afford to repay them. Limit loan amounts as much as possible, and choose a student loan term that will result in affordable monthly payments.
Also, make sure you can continue to prioritize other important financial goals, such as saving for your retirement, alongside repaying student loans and covering college costs.
Are you and your child repaying student loans together?
Some parents might view repaying student loans as a responsibility their child should share. If that’s you, then cosigning a private student loan, rather than borrowing a parent loan, might make more sense. This way, both you and your student share equal legal responsibility for repaying the debt.
Many lenders offer cosigner release, meaning your child eventually could assume full responsibility for managing and repaying the cosigned loan. Between cosigning a student loan and taking our parent loans on your own, consider which is the better fit for your financial future.
Ultimately, student loans for parents allow borrowers to pay for college costs and control future repayment if necessary. By exploring your options for the best parent loans, you’ll know how to choose the borrowing option that’s right for you and your family.
The information in this article is accurate as of the date of publishing.
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