Your Guide to Parent Student Loans

April 4, 2020 Loans & Finance

As a parent, it’s common to want to help your child with their college tuition and fees so they don’t have to pay for it all themselves. When it comes to paying for college, parents typically use their income and savings to pay for 30% of their child’s education costs and borrow enough money to cover an additional 10% of the expense.

There are several options for parent student loans, including federal loans and private student loans. Here’s what you need to know about parent student loans and how to choose the best one for your needs.

Parent student loan options
Who’s eligible for parent student loans?
How to apply for parent student loans
Repayment options for parent student loans

Parent student loan options

If you’re shopping around for parent loans for college students, your two choices are parent PLUS loans and private student loans.

1. Federal parent PLUS loans

Parent PLUS loans are part of the federal direct PLUS loan program. They are only available to biological or adoptive parents of dependent undergraduate students enrolled at least half time at an eligible school.

Unlike some other federal student loans that have caps on how much you can borrow per year, parent PLUS loan limits don’t exist. You can borrow up to the total cost of attendance at your child’s school, minus the other financial aid they receive.

The following rates and fees apply on parent PLUS loans as of 2020:

Interest rate: 7.08% for loans disbursed on or after July 1, 2019, and before July 1, 2020
Origination fee: 4.236% for loans disbursed on or after Oct. 1, 2019, and before Oct. 1, 2020

The parent PLUS interest rate is fixed, meaning it stays the same for the length of the loan. Your payment will stay the same, too.

If approved for a parent PLUS loan, payments are due as soon as it’s disbursed, unless you opt to defer the loan until after your child graduates, leaves school or drops below half-time enrollment. Under the default standard repayment plan, you’ll have 10 years to repay your loan.

2. Private student loans

While parent PLUS loans are federally backed by the U.S. Department of Education, private parent student loans are offered by individual banks and online lenders.

Terms and eligibility can vary widely by lender. Lenders will generally review your income and credit when they look at your application to determine whether to offer you a loan. Depending on your creditworthiness, you could qualify for a loan with a lower interest rate than you’d get with a parent PLUS loan. And private student loans for parents usually don’t have origination fees, helping you save money.

Private loans usually have different repayment options, allowing you to choose repayment terms ranging from five to 20 years. The longer repayment term can give you a more affordable monthly payment and more breathing room in your budget. Private lenders typically list both variable and fixed interest rates:

Fixed-rate loans have the same interest rate for the life of the loan
Variable-rate loans usually start off with a low interest rate, but — over time — the rate can change, causing your payment to fluctuate

Some borrowers opt for a variable-rate loan if they plan on paying off a loan early so they can take advantage of the initial lower rate.

Who’s eligible for parent student loans?

The requirements for federal parent PLUS loans are often easier to meet than the criteria for private parent student loans. However, the lending requirements for private loans differ depending on the lender with which you’re working, so it’s a good idea to shop around for various lenders.

Parent PLUS loan eligibility requirements

To qualify for a parent PLUS loan, you must meet the following criteria:

You’re a U.S. citizen or eligible noncitizen
You’re the biological or adoptive parent of an undergraduate dependent student enrolled at least half time at an eligible school
You don’t have an adverse credit history

While most federal loans don’t require a credit check, parent PLUS loans do. The U.S. Department of Education defines an adverse credit history as having one of the following on your credit report in the past five years:

Default determination
Discharge of debt in bankruptcy
Foreclosure
Repossession
Tax lien
Wage garnishment
Write-off of federal student loan debt

You also can’t have one or more debt accounts with a total combined outstanding balance greater than $2,085 that are delinquent by 90 days or more, or that has been placed in collections or charged off during the two years before the date of the credit report.

If you do have an adverse credit history and are denied for a loan, there may be two ways you can regain parent PLUS loan eligibility:

Use an endorser: If you have a friend or relative with good credit, ask them to be an endorser. The endorser acts as a guarantor on the loan. If you don’t make the payments, the endorser is instead responsible for paying them.
Document extenuating circumstances: If there’s an extenuating circumstance, such as a timing issue regarding the foreclosure listed on your credit report, you can submit documentation and request an appeal.

If you qualify for a loan with either of these options, you’ll also have to undergo credit counseling for PLUS loan borrowers.

Private parent student loan eligibility requirements

For private student loan lenders, your credit score is a major factor in their decision in evaluating your application.

In general, you’ll need to have good to excellent credit. Lenders will also want to see that you have a low debt-to-income (DTI) ratio, or a low amount of debt relative to how much money you have coming in each month. Lenders often have minimum income requirements as well. If your credit score or income doesn’t meet their criteria, you may need a cosigner to qualify for a loan.

How to apply for parent student loans

The application process is quite different for parent PLUS loans than it is for private parent student loans. Parent PLUS loans require your child to complete the Free Application for Federal Student Aid (FAFSA) before you can apply, while you’ll have to submit separate applications for private loans.

Parent PLUS loan application process

The application process for parent PLUS loans has two steps:

1. Fill out the FAFSA

Before you can apply for a parent PLUS loan, your child must complete and submit the FAFSA. Your child may need your help to fill out the application since you have to enter your household income and other financial information.

2. Apply for the parent PLUS loan

Once the FAFSA is submitted, you can proceed with the parent PLUS Loan application. In most cases, you can apply for parent PLUS loans online. However, some schools have a different process.

When you go to the Federal Student Aid website to fill out the application and select your child’s school, the site will notify you if the college has a different application process. If that happens, contact the school’s financial aid office and ask for next steps.

The parent PLUS loan deadline can vary by school, so check with the financial aid office to find out when applications need to be submitted.

Private parent student loan application process

Each private parent student loan lender has its own application, but you’ll generally be able to apply online in just a few minutes.

1. Gather necessary information

Lenders will ask you for basic information about yourself, including your name, address, Social Security number, employer name and address, and income. You may also be asked to submit the following documentation:

Government-issued identification, such as a driver’s license
Recent pay stub
W-2 form from most recent tax year

2. Compare loan offers

It’s always a good idea to shop around and compare offers from multiple lenders to ensure you get the best rates. When looking at your options, consider the following key factors:

Interest rate
Interest rate type
Length of loan term
Monthly payment

3. Submit your application

Once you find a lender and loan terms that work for you, you can complete the full application. The lender will review the application and will perform a hard credit inquiry, which can affect your credit score. You’ll usually receive a decision quickly, but the lender may reach out to you if they need additional information or documentation.

Repayment options for parent student loans

Parent PLUS loans and private student loans also have different repayment options.

Parent PLUS loans

With federal parent PLUS loans, there are five repayment options, including one that offers parent PLUS loan forgiveness:

Standard repayment: Under a standard repayment plan, your loans are paid off within 10 years. You have a fixed monthly payment for the duration of the loan.
Graduated repayment: With graduated repayment, your payments start out low. Every two years, they gradually increase, but your loans are still paid off within 10 years.
Extended repayment: When you sign up for extended repayment, your repayment term is extended to 25 years. Your payments are either fixed or graduated.
Income-contingent repayment: Parent PLUS loans are eligible for income-contingent repayment (ICR) if they’re consolidated with a direct consolidation loan. The repayment term is 25 years. The payment is capped at 20% of your discretionary income or what you would pay with a 12-year repayment term adjusted to your income, whichever is less.
Public Service Loan Forgiveness: If you work for a nonprofit organization or government agency, parent PLUS loan borrowers can qualify for parent loan forgiveness through Public Service Loan Forgiveness (PSLF). To be eligible, you must consolidate your loans with a direct consolidation loan and apply for an ICR plan, then work for an eligible employer for 10 years and make 120 qualifying monthly payments.

Private student loans

Your repayment options for private parent student loans are dependent on which lender you choose. In general, your repayment terms can range from five to 20 years. Some lenders require you to start making payments while your child is still in school, while others allow you to defer payments until after your child graduates or leaves college.

Private student loans aren’t eligible for loan forgiveness, so you can’t qualify for PSLF even if you work for a nonprofit organization or the government.

Parent PLUS loans vs. private loans: Which are right for you?

Parent PLUS loans
Private parent student loans

Pros ● Eligible for loan forgiveness
● Eligible for federal loan deferment and forbearance
● Competitive interest rates
● Variable interest rates
● May be dischargeable if the student dies or becomes permanently disabled
Cons ● Not dischargeable if the student is permanently disabled
● Relatively high interest rates
● Not eligible for loan forgiveness● Limited repayment options

If you’re not sure which loan type is best for you, there are three key differences that can help you make an informed decision.

Interest rates

Parent PLUS loans have the highest interest rates of all federal student loans. If you have good credit and a low DTI ratio, you may be able to qualify for a private parent student loan with a lower interest rate, helping you save money. And private student loans can come with variable rates, which may give you more options.

Loan forgiveness

Private loans aren’t eligible for loan forgiveness, so if you work for a nonprofit organization or government agency, you may be better off with parent PLUS loans. By consolidating your debt with a direct consolidation loan and enrolling in an ICR plan, you can qualify for PSLF and have your loans forgiven after 10 years of working for an eligible employer and making qualifying payments.

However, you should know that few people qualify for PSLF. As of December 2018, just 262 out of over 38,000 applicants qualified for loan discharge through PSLF. You can use the federal PSLF Help Tool to assess your eligibility, find out whether your loans and employment qualify for PSLF and figure out what forms to submit.

Discharge in cases of disability

If your child becomes totally and permanently disabled, the type of loan you have will affect your options. Parent PLUS loans can only be discharged if you die, your child dies or if you — the borrower — become permanently disabled. If your child is the one who becomes disabled, your loans aren’t eligible for discharge.

Policies for private student loans vary by lender. Some private lenders — such as Wells Fargo and Sallie Mae — will discharge your parent student loans if your child becomes totally and permanently disabled, eliminating a serious financial burden and giving you some relief.

If you need help choosing a parent student loan, use our Student Loan Term Comparison Calculator to compare your options and see whether a private loan or parent PLUS loan is most cost-effective for you.

Elyssa Kirkham and Meredith Simonds contributed to this report.

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LenderVariable APREligibility 
* 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.
2 Important Disclosures for College Ave.
CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

(1)All rates shown include the auto-pay discount.  The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.

Information advertised valid as of 4/1/2020. Variable interest rates may increase after consummation.

.br-none br{display:none}3 Important Disclosures for Discover.
Discover Disclosures
Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
View Auto Reward Debit Reward Terms and Conditions at DiscoverStudentLoans.com/AutoDebitReward.
Aggregate loan limits apply.
Lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover Undergraduate Loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.00% as of January 1, 2020. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit discover.com/student-loans/interest-rates for more information about interest rates.

Discover’s lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
4 Important Disclosures for CommonBond.
CommonBond Disclosures

Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).

 Rates are as of July 1, 2019 and include auto-pay discount. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment. Variable rates may increase after consummation.

5 Important Disclosures for Ascent.
Ascent Disclosures

Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.

Variable rate loans are based on a margin between 1.90% and 13.50% plus the 1-Month London Interbank Offered Rate (LIBOR) rounded to the nearest 1/100th of a percent. The current LIBOR is 1.629%, which may adjust monthly. Your interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an Annual Percentage (APR) range between 3.14% and 11.88%. Fixed rate loans have an APR range between 4.09% and 13.03% based on your credit worthiness and your selected program. Competitive variable rates calculated monthly at the time of loan approval. Rates are effective as of 03/01/2020 and reflect an Automatic Payment Discount of 0.25% on the lowest offered rate and a 2.00% discount on the highest offered rate. Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. (See Automatic Payment Discount Terms & Conditions.)
Payments may be deferred. Subject to lender discretion, forbearance and/or deferment options may be available for borrowers who are encountering financial distress.
Making interest only or partial interest payments while in school will not reduce the principal balance of the loan. There are three (3) flexible in-school repayment options that include fully deferred, interest only and $25 minimum repayment.
Flexible repayment plans may be offered up to a fifteen (15) year repayment term for a variable rate loan and ten (10) year repayment term for a fixed rate loan. Students must be enrolled at least half-time at an eligible school. Minimum loan amount is $2,000.
Interest rate reduction of 0.25% for enrollment in automatic debit applies only when the borrower and/or cosigner signs up for automatic payments and the regularly scheduled, current amount due (including full, flat, or interest only payments, as applicable) is successfully deducted from the designated bank account each month. Interest rate reduction(s) will not apply during periods when no payment is due, including periods of In-School, Deferment, Grace or Forbearance. If you have two (2) returned payments for Nonsufficient Funds, we may cancel your automatic debit enrollment and you will lose the 0.25% interest rate reduction. You will then need to re-qualify and re-enroll in automatic debit payments to receive the 0.25% interest rate reduction.
All applicants (individual and cosigner) are required to complete a brief online financial literacy course as part of the application process to be eligible for funding.
Eligibility, loan amount and other loan terms are dependent on several factors, which may include: loan product, other financial aid, creditworthiness, school, program, graduation date, major, cost of attendance and other factors. Aggregate loan limits may apply. The cost of attendance is determined and certified by the educational institution.
The legal age for entering into contracts is eighteen (18) years of age in every state except Alabama where it is nineteen (19) years old, Nebraska where it is nineteen (19) years old (only for wards of the state), and Mississippi and Puerto Rico where it is twenty-one (21) years old.
1% Cash Back Graduation Reward subject to terms and conditions. Click here for details. In order to be eligible for the 1% Cash Back Graduation Reward, borrower must meet the following criteria after graduation:

The student borrower has graduated from the degree program that the loan was used to fund.
The student borrower may change majors and/or transfer to a different school, but must obtain the same level of degree (e.g. – undergraduate or graduate)
The graduation date is more than 90 days and less than five (5) years after the date of the loan’s first disbursement.
Any loan that the student has borrowed under the Ascent loan is not more than 30-days delinquent or in a default status as of the graduation date and until any Graduation Reward is paid.

Students can apply to release their cosigner and continue with the loan in only their name after making the first 24 consecutive regularly scheduled full principal and interest payments on-time and meeting the other eligibility criteria to qualify for the loan without a cosigner.

* Application times vary depending on the applicant’s ability to supply the necessary information for submission.

5 Important Disclosures for Citizens.
Citizens Disclosures

Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As March 1, 2020, the one-month LIBOR rate is 1.62%. Variable interest rates range from 2.72% – 10.98% (2.72% – 10.83% APR)  and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.72% – 12.19% (4.72% – 12.04% APR)  based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens One is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensone.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review. 

Citizens One Student Loan Eligibility: Borrowers must be enrolled at least half-time in a degree-granting program at an eligible institution. Borrowers must be a U.S. citizen or permanent resident or an international borrower/eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For borrowers who have not attained the age of majority in their state of residence, a co-signer is required. Citizens One reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Citizens One Student Loans private student loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens One Student Loans-participating school. 

Please Note: International Students are not eligible for the multi-year approval feature.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan. 

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.

2.75% – 10.65%*,1 Undergraduate and Graduate

Visit SallieMae

2.69% – 10.97%2 Undergraduate, Graduate, and Parents

Visit College Ave

2.80% – 11.37%3 Undergraduate and Graduate

Visit Discover

3.52% – 9.50%4 Undergraduate and Graduate

Visit CommonBond

5.20% – 14.18%5 Undergraduate and Graduate

Visit Ascent

2.72% – 10.98%6 Undergraduate and Graduate

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