Parent student loans can be beneficial for parents who wish to assist their children pay for college but are unable to do it out of pocket. This sort of Loan requires the parent (or, in certain cases, grandparent, legal guardian, or other relative) to apply on the student’s behalf and accept financial responsibility for loan repayment. Of course, you’ll want to make sure you’re financially prepared to take on debt, as many parent student loan lenders expect at least interest payments while the student is still in school.
Parents can select between federal and private student loans. Federal loans are often easier to qualify for and offer access to forgiveness programs, but they may have higher interest rates and origination fees than private loans.
themoneymail Select ranks the best parent student loan lenders based on eligibility, availability, loan amounts, interest rates, terms, and more. (To learn more about how we select the best parent student loans, please see our methodology.)
1. Federal Parent PLUS Loan (Best overall)
-
Cost
4.228% of the loan amount for loans disbursed on or after Oct. 1, 2020
-
Eligible loans
Direct PLUS loans, PLUS loans for graduate and professional students, and parent PLUS loans
-
Loan types
Fixed
-
Fixed rates (APR)
8.05% for loans disbursed on or after Jul. 1, 2023, and before Jul. 1, 2024
-
Loan terms
10–30 years, depending on the repayment plan
-
Loan amounts
The maximum amount is for the total cost of attendance
-
Minimum credit score
Not mentioned, but there are still choices for those applying for a parent PLUS loan with bad credit.
-
Minimum income
N/A
-
Allow for a co-signer
An endorser may be obtained if applying with adverse credit
Pros
- Can borrow up to the cost of attendance.
- Can request postponement or forbearance.
- Ability to still acquire a loan award even with a bad credit background.
- Can choose from multiple repayment plan alternatives.
Cons
- Parents cannot pass payment responsibilities to their child for the
- 4.228% fee.
Federal grants and aid that do not require repayment should always be your priority when it comes to supporting your child’s college education. However, if you need additional money, federal loan possibilities may be worth investigating. Federal loans feature set interest rates, which may appeal to parents with poorer credit ratings and make it easier to request forbearance or deferment than private loans.
Unlike most private loans, which have borrowing limits, Federal Parent PLUS Loans allow you to borrow as much as you need to fund your child’s educational expenditures.
Repayment Options for Parent PLUS Loans
After the student graduates or falls below half-time attendance, parents, not students, begin making payments. A grace period is only offered upon request, not automatically, as with other federal student loans.
But no government mechanism allows you to transfer a parent PLUS loan from a parent to a student, making the student liable for payments. If students want to take it over, they must refinance it with a private student loan.
2. SoFi Parent Loan (Best for saving money)
-
Cost
There are no origination or application fees, insufficient funds fees, prepayment penalties, or late costs.
-
Eligible loans
SoFi parent loan
-
Loan types
Fixed and variable rates
-
Variable rates (APR)
6.34% – 14.83% APR (with autopay)
-
Fixed rates (APR)
6.5% – 14.83% APR (with autopay)
-
Loan terms
5, 7, 10 and 15-year terms available
-
Loan amounts
The minimum is $1,000, and the maximum amount is for the whole cost of attendance.
-
Minimum credit score
Not disclosed
-
Minimum income
Not disclosed
-
Allow for a co-signer
Not revealed, but students applying for a private student loan can have their parents co-sign on the loan.
Pros
- Can borrow up to the cost of attendance.
- There are four loan repayment terms available.
- Does not charge origination, application, insufficient funds, prepayment penalties, or late fees.
- Your student does not have to be enrolled in their degree program full-time, but they must attend at least half-time.
- Deferment possibilities are available.
- Can apply and receive a credit decision in roughly three minutes.
- Sign up for autopay and get a 0.25% interest rate decrease.
- Additional 0.125% interest savings if you are an existing SoFi member.
- If you have previously taken out a SoFi private student loan, you will automatically receive a 0.125% discount.
- Earn points by completing tasks in the SoFi app; points can be used to pay down your parent’s student loan balance.
- Unemployment protection scheme is provided.
Cons
- Your child’s school must be on the SoFi’s list of qualifying schools.
SoFi parent loans contain no fees and offer three ways to economize on interest charges: Receive a 0.25% interest rate decrease when you sign up for autopay; an additional 0.125% interest reduction if you are an existing SoFi member; and an automatic 0.125% discount if you have previously taken up a SoFi private student loan.
This lender also offers an unemployment protection scheme for clients who lose their jobs due to no fault of their own. This service enables debtors to put their loans on deferment and change their monthly payments.
3. Citizens Bank Parent Loan (Best for no fees)
-
Cost
There are no origination or application fees, disbursement fees, or prepayment penalties.
-
Eligible loans
Citizens Bank parent student loan
-
Loan types
Fixed and variable rates
-
Variable rates (APR)
7.22% – 9.57% APR
-
Fixed rates (APR)
7.33% – 9.56% APR
-
Loan terms
5 and 10-year terms
-
Loan amounts
The minimum is $1,000, and the maximum amount depends on the type of degree (graduate or undergrad, MBA, Law, and Healthcare).
-
Minimum credit score
Not disclosed
-
Minimum income
Not disclosed
-
Allow for a co-signer
Not disclosed, however, students applying for a private student loan can have their parents co-sign on the loan
Pros
- There are no origination, application, disbursement fees, or prepayment penalties.
- Can get rate information in only two minutes.
- Multi-year approval
Cons
- Loan amounts vary based on degree type
- payback terms are limited.
Citizens Bank provides a no-frills parent student loan option with no origination, application, disbursement, or prepayment costs. Eligible borrowers can input their information online and obtain a quote in as little as two minutes, making it a convenient and quick way to weigh your options.
4. College Ave Parent Student Loan (Best for flexible repayment terms)
-
Cost
No origination fees or prepayment penalties
-
Eligible loans
College Ave Parent Student Loans
-
Loan types
Fixed and variable rates
-
Variable rates (APR)
5.59% to 17.99% APR (shown with auto-pay discount)
-
Fixed rates (APR)
4.43% to 17.99% APR (shown with auto-pay discount)
-
Loan terms
5–15 years
-
Loan amounts
Minimum is $1,000; Maximum is up to 100% of the cost of attendance
-
Minimum credit score
Not disclosed
-
Minimum income
Not disclosed
-
Allow for a co-signer
Not disclosed
Pros
- No origination costs or prepayment penalties.
- Repayment terms are adjustable as long as they are between 5 and 15 years.
- Access a free credit pre-qualification tool.
- Access the mobile app to manage your loan.
Cons
- Interest rates are at the upper end.
- No grace period for parent-student debts.
- Interest-only payments are necessary while the student is in school.
College Ave distinguishes out by allowing borrowers to choose a loan repayment term that fits them, as long as it is between 5 and 15 years. Borrowers can also repay their loans early without incurring prepayment penalties.
Compare offers to find the best student loan
Eligible borrowers
Biological or adoptive parents of a dependent undergraduate student enrolled at least half-time; must have good credit and be eligible for federal student aid.
Loan amounts
Up to 100% of the cost of attendance
Loan terms
10 to 25 years
SoFi: SoFi saves borrowers money on loans by not collecting origination, application, insufficient funds, prepayment, or late fees. But what sets it apart are the savings provided. Members who sign up for autopay receive a 0.25% interest rate decrease, an additional 0.125% interest reduction for being an existing SoFi member, and an automatic 0.125% discount if they have previously taken up a SoFi private student loan. Parents can now use SoFi Points to repay their parent student debts.
Eligible borrowers
Applicants with good credit; and parent loan borrowers may be a parent, grandparent, aunt, uncle, or even a family member who wishes to apply for the loan.
Loan amounts
Up to 100% of the cost of attendance
Loan terms
5, 7, 10 and 15-year terms
Citizens Bank: Citizens Bank’s parent student loan has no origination, application, disbursement, or prepayment penalties. It also provides a 0.25% rate decrease for enrolling in auto-pay, as well as an additional 0.25% for borrowers who already have an account with the bank. One disadvantage is that, unlike some other lenders who may grant loans of up to 100% of the cost of attendance, Citizens Bank has loan maximums that vary based on the type of degree students pursue.
Eligible borrowers
US citizens or permanent residents with good credit and a student enrolled at least half-time.
Loan amounts
Loan limits depend on the type of degree the student pursues:
Undergraduate: $150,000
Graduate Degrees: $150,000
MBA and Law: $225,000
Healthcare: $180,000 or $350,000 depending on your degree
Loan terms
5 and 10-year terms
College Ave: College Ave has no origination costs, offers low-interest rates, and allows parent student loan borrowers up to 15 years to repay their balance. Borrowers must begin paying at least the interest charges while their student is in school, but they can also start repaying a portion or the entire principal. According to College Ave’s website, the loan application takes three minutes to complete and provides an instant credit determination.
Eligible borrowers
Parents, grandparents, guardians, sponsors, and family members must be US citizens or permanent residents with acceptable credit.
Loan amounts
Up to 100% of the cost of attendance
Loan terms
5 to 15 years
Alternatives to Parent Student Loans
Parent student loans can be expensive since you must repay the amount borrowed, plus interest and any associated loan fees. Before taking on debt for your child’s education, consider these other options to pay for college:
- 529 plan. Investing in a 529 plan may pay financially when your child is ready for school. If you utilize your earnings for eligible educational costs, you will not be required to pay taxes on them. You can also select a prepaid tuition plan, which locks in current tuition prices for future attendance.
- Grants. Make sure your child completes the Free Application for Federal Student Aid (FAFSA), which will put them in the running for federal and state grants. The Pell Grant, for example, provides up to $7,395 to students in financial need.
- Scholarships. Encourage your youngster to seek scholarships, which provide money without payback. Your youngster can use scholarship search engines or talk to their school counselor about available opportunities.
- Work-study. Students in financial need may also be eligible for work-study positions, which provide part-time jobs that are typically relevant to their course of study.
- Part-time job. If your kid is not eligible for work-study (or can find a better job elsewhere), they may work part-time throughout school to help pay for tuition and living expenses.
- Student loans. Your youngster can also take out school loans, whether government or private. Federal Direct subsidized and unsubsidized student loans are accessible to qualifying students and do not need a credit check. Private student loans are also a possibility, though you may need to co-sign if your child’s credit does not meet the requirements of a private lender.
Parent PLUS Loan vs. Private Loan
| Parent PLUS Loan | Private Parent Loan For College | |
|---|---|---|
|
Interest rate
|
7.54%*
|
Varies; can range from 3-12% or more rate
|
|
e types only
|
y fixed rates fixed
|
d or variable rates
|
|
Origination fee
|
4.228%**
|
Many lenders don’t charge origination fees loan
|
|
n amount
|
p to the cost of attendance
|
p to the cost of attendance
|
|
Repayment period
|
10-25 years
|
Varies; typically 5-20 years
|
Parent borrowers with excellent credit and a steady income may be able to discover lower interest rates and fees from private lenders. However, if you have fair or average credit, a parent PLUS loan may be a better option, despite the higher origination charge. If you value more flexible repayment options, a PLUS loan may be an excellent option, as payback possibilities differ amongst private lenders.
If you, the parent, work for a government agency or a nonprofit organization, or if you anticipate having problems making loan payments in the future, consider a federal PLUS loan. This is because you will be eligible for the Public Service Loan Forgiveness (PSLF) program, as well as monthly loan payments based on your income.
Can I take out a student loan without a co-signer?
It is feasible to obtain a student loan without a co-signer if the lender’s stipulations permit it. However, co-signers may be recommended for applicants with less-than-ideal credit to increase their chances of approval.
What Is a Parent PLUS Loan?
The Federal Student Aid Office offers two types of PLUS loans: one for graduate students and one for parents. A parent PLUS loan provides funding to assist your child pay for their undergraduate education. Biological and adoptive parents, as well as stepparents, are eligible. Approved borrowers cannot have a bad credit history, and they must also meet the standard eligibility requirements for federal student aid.
Because PLUS loans are government debt, they offer more flexible repayment alternatives. You may also notice that these loans have cheaper interest rates than private loans, particularly for applicants with less-than-perfect credit.
How Do Parent PLUS Loans Work?
Parent PLUS loans are the only government loans that need a credit check to qualify. Parent PLUS loans are for parents of undergraduate, dependent students, whereas graduate PLUS loans are for graduate students.
Parents with fair, good, or excellent credit can apply for and frequently receive approval for parent PLUS loans. The money is sent directly to the school, and the parent, not the kid, is responsible for repaying the loans.
How to Apply for a Parent PLUS Loan
The first step in applying for any sort of federal student loan is to fill out the Free Application for Federal Student Aid (FAFSA). Every year, your child should complete the FAFSA, which allows them to receive federal financial aid as well as any other aid granted by their college or other organizations. If your child is a dependent, you must also supply your information on this form each year.
Once that is completed, you can apply for a parent PLUS loan through the online application, which takes approximately 20 minutes to complete. You will provide basic information about yourself, your work, and your child’s school. If you are approved, you will sign the necessary paperwork, and the funds will be transferred directly to your child’s school. If any monies are left over, the remainder will be sent to you (or your child, if you like).
How to Apply for a Private Parent Loan
Before submitting a formal application for a private parent loan, do your research. You may immediately obtain estimated rates by visiting each lender’s website and filling out a simple form.
However, each lender has its own credit and income standards for approving applicants. If you are looking for student loans for parents with terrible credit, be sure you meet the lender’s qualifying standards. If you are unable to qualify on your own, consider adding a co-signer to your application.
If you locate a few lenders who give you decent terms, you may fill out a formal application online. You will enter your personal and financial information, such as your income, savings, and debts. After reviewing your application, the lender will offer you with the loan specifics for which you have been accepted. Review the final rates and terms, and if everything is correct, sign the loan agreement. Funds are normally distributed directly to your child’s school, with the remainder remitted to you.
Who should choose a private parent loan?
A private parent loan may be a suitable alternative if you don’t need access to federal repayment programs, can qualify for a low-interest rate, or can pay off the loan quickly to avoid excessive interest costs. Simply make sure you understand your lender’s policies in case you face an unexpected financial problem in the future.
How is the interest rate on a parent loan determined?
If they meet the eligibility requirements, all federal parent PLUS borrowers receive the same rate set by Congress. PLUS loans involve a credit check, but it is more limited than that performed by private lenders.
Most private lenders base interest rates on your credit history and income. Parents typically have better credit than their undergraduate children, so they may be eligible for reduced interest rates on private loans as the principal borrower—but not always.
It is best to compare interest rates for parent PLUS loans, private parent loans, and government-direct subsidized and unsubsidized student loans. Federal student loan interest rates are at a historic low in 2020-21, and if your child borrows on their own, you will not be responsible for future payments. Before you consider taking out a parent loan, be sure your child has used up all of their federal loans.
Will parent PLUS loans be forgiven?
Certain borrowers may be eligible for parent PLUS loan forgiveness, but the process is not straightforward. Parent borrowers may be eligible to have their loans dismissed through PSLF or income-contingent repayment. These schemes need a repayment period of 10 to 25 years, after which the remaining sum is forgiven. You may also need to convert your PLUS loan into a straight consolidation loan before becoming eligible.
Can a parent PLUS loan be transferred to the student?
There is no federal provision that permits you to transfer parental PLUS loans to the student’s name. However, some private lenders allow students to refinance their parent’s debt in their name. Student borrowers should be wary, however, because refinancing federal loans converts them into private debt, which normally provides fewer protections.
What happens to my parent PLUS loan when I retire?
Your retirement does not affect your parent PLUS loan, and you will be required to make payments as usual. However, if you are enrolled in income-contingent repayment, your monthly payment is decided by your income. When you retire, your earnings may decrease, and so will your loan payment.
Can parent student loans be forgiven?
Federal Parent PLUS Student loans may be eligible for government forgiveness programs. Borrowers should contact their servicer or go to the Federal Student Aid website to learn more about how to qualify.
What is the maximum amount you can borrow for a parent student loan?
The maximum amount you can borrow for a parent student loan will be determined by your lender. Most lenders allow you to borrow up to 100% of the cost of attendance, while others have limits. Make sure to read the terms before taking funding.
Do parent student loans come with a fee?
Federal Parent PLUS Student Loans have an origination cost, however some private student loan lenders do not charge origination fees, application fees, disbursement fees, or prepayment penalties.
In Conclusion
529 college savings plans and financial aid packages may not always be enough to fund your child’s higher education. Parent student loans can be a helpful college finance alternative because they shift part of the repayment responsibility from students to their parents. However, before applying for a loan, make sure the terms meet your demands and circumstances.
Why trust themoneymail Select?
Our methodology
While the organizations we selected for this post frequently rank as having some of the market’s lowest interest rates, we also compared each company based on the following factors:
Loan Availability by State
Loan amounts and interest rates (fixed or variable).
Loan length in years and repayment choices.
Borrower safeguards such as postponement or forbearance.
Bonus benefits, such as autopay rate savings.
A borrower’s interest rate is determined by their credit score, income, debt-to-income (DTI) ratio, savings, payment history, and general financial situation. To obtain private student loans, lenders will run a thorough credit check and seek a complete application, which may include proof of income, identity verification, proof of address, and other requirements.
The post Best Parent Student Loan Interest Rates appeared first on ThemoneyMail.
This post first appeared on The Money Mail - A Blog About Mark And Lucy, Talking About Money And Life, please read the originial post: here
