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If you’re looking for a student loan to help your child pay for college, you have two options: a private or a federal student loan. In this guide, we’ll compare SoFi parent loans, which are private, with parent PLUS loans, a type of federal loan offered by the U.S. Department of Education.
By learning about both loans, you can determine which one would be better suited to your family.
SoFi parent loans vs. parent PLUS loans quick comparison
To help you compare SoFi versus parent PLUS loans, this chart gives an overview of their terms, eligibility requirements, repayment options and application processes.
|SoFi Parent loans||Parent PLUS loans|
|Eligibility requirements||Your child is enrolled full time in college; you’re a U.S. citizen or permanent resident||Your child is enrolled at least half time in college; you’re a U.S. citizen or eligible noncitizen|
|Application process||Apply for an instant rate quote with a preapproval application (soft credit pull); submit full application when you choose a loan (hard credit pull)||Submit the FAFSA; work with your college financial aid office to request a parent PLUS loan|
|Credit requirements||SoFi considers your credit score, debt-to-income ratio, income, career, education and other factors. Another parent or guardian can cosign||You can’t have an adverse credit history. If you do, you can apply with an endorser who has strong credit|
|Borrowing limits||$5,000 minimum, up to the total cost of attendance||Up to the total cost of attendance, minus any other financial aid received|
|Rates/APRs||Fixed APRs at 3.20%; variable APRs at 2.99%||Fixed interest rate of 5.3% for the 2020-21 school year|
|Origination fees||None||4.236% for loans originated after Oct. 1, 2019 and before Oct. 1, 2020|
|When repayment begins||Immediate repayment||Immediate repayment, unless you request a deferment while your child is in school and for up to six months after they graduate|
|Repayment options||5-, 10- or 15-year terms||Standard Repayment Plan (10 years); Graduated Repayment Plan (10 years); Extended Repayment Plan (25 years); Income-Contingent Repayment, if you consolidate first (25 years)|
Now that you’ve got an initial sense of how SoFi parent loans compare to parent PLUS loans, let’s take a closer look at the most important differences:
1. SoFi parent loans could have lower interest rates
There are lots of factors that go into choosing a loan, including eligibility criteria and repayment options. But if your priority is saving money, take a close look at interest rates.
All parent PLUS loans come with a fixed rate of 5.3% in the 2020-21 year. This rate is significantly lower than past years’ rates, which were set around 7%. But it might still be higher than what you’d get on a SoFi parent loan, which has fixed APRs starting from 3.20% and variable APRs starting at 2.99%.
Depending on your credit, income and other factors, you could snag a rate on a SoFi parent loan that’s lower than what you’d get with a parent PLUS loan. Reducing your interest could save you a good deal of money over the long run. That said, a variable rate, unlike a fixed rate, could potentially rise over time.
Since SoFi offers an easy pre-application online, it’s worth it to check your rates. This preliminary rate quote won’t affect your credit score, and you’ll see what rate you could be eligible for.
If it’s lower than the one you’d have on a parent PLUS loan, it could be worth going with SoFi.
2. SoFi could save you money on fees
Besides potentially giving you a lower interest rate, SoFi also saves you money on origination fees; it doesn’t charge any fees for disbursing the loan.
Parent PLUS Loans, on the other hand, come with a 4.236% origination fee. If you borrowed $20,000, you’d be charged a fee of about $850 once it was disbursed.
If you’re only taking out a small loan, this origination fee probably won’t break the bank. But if you’re taking out a large amount, it significantly increases your cost of borrowing.
3. Parent PLUS Loans have more flexible repayment plans
SoFi parent loans have the potential to save you money, but they don’t come with as many repayment options as the federal parent PLUS loan. With SoFi, you must begin repaying at least the interest on your loan while your child is in school. Plus, you can only choose between a five-, 10-, or 15-year repayment term.
Parent PLUS loans, on the other hand, have a lot more options. First, you can request deferment of your loan while your child is in school. With deferment, you won’t have to start repaying the loan until six months after they graduate. (Note that interest will continue to accrue, even while your payments are paused.)
Besides deferment, you can also choose from a variety of repayment plans. The standard repayment plan, for instance, gives you fixed monthly payments over 10 years. The graduated plan also spans 10 years, but payments start small and increase over time.
If your payments are too burdensome, you can opt for the extended repayment plan, which lowers your monthly bills by spreading them out over 25 years. Finally, if you consolidate your parent PLUS loans, you can request Income-Contingent Repayment, which caps your bills at 20% of your discretionary income.
These plans can be a lifesaver if you’re struggling to make your monthly payments. They offer a way to reduce your monthly bills while avoiding student loan default.
If you’re concerned about your ability to pay back the loan, a parent PLUS loan likely has more options than a SoFi parent loan.
4. Parent PLUS, SoFi applications each have pros and cons
When comparing SoFi versus parent PLUS loans, you might also consider the qualification process. As a private lender, SoFi’s eligibility criteria is more stringent than the education department’s.
When you apply for SoFi parent loans, SoFi reviews your credit history, income and other debts. Although it doesn’t advertise a strict minimum, you’ll likely need a decent credit score and steady income to qualify for the best rates.
Parent PLUS loans, on the other hand, only state that you can’t have an adverse credit history. In other words, you can’t have derogatory marks on your credit report, such as unpaid debts or loan defaults. If you do, you could still qualify by applying with a creditworthy endorser.
Although it might be harder to qualify for a SoFi parent loan, the application process itself is easy. As an innovator in the online lending space, SoFi lives up to its reputation with a user-friendly website.
It’s easy to get a rate quote, and filling out a full application is painless as well. That’s not to say applying for a parent PLUS loan is difficult, but the process can vary depending on where your child goes to college.
Shop around to find the right parent loan for you
For college students, federal student loans typically have better terms than private ones. But when it comes to parent borrowing, this isn’t necessarily the case.
Because parent PLUS loans come with origination fees, they might cost you more than a private student loan, such as SoFi student loans for parents.
But be mindful that private student loans aren’t as flexible if you run into economic hardship. If you’re worried about repayment, a parent PLUS loan could be a safer bet.
Besides learning about the different terms and conditions, use a student loan repayment calculator to estimate the long-term costs of borrowing.
That way, you’ll have a clear sense of the costs of borrowing — and you’ll be armed with a foolproof plan for paying back your debt.
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|1.25% – 9.44%*,1||Undergraduate and Graduate|
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|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
1 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.