Compare Student Loan Rates
Best Parent Loans for College of March 2024
Federal Parent PLUS Loan
Why We Picked It
The federal parent PLUS loan offers the most wide-ranging benefits to borrowers. Parents have access to multiple repayment plans that can lower the amount you pay, particularly the income-contingent repayment plan (which you must consolidate your loan to qualify for). Income-contingent repayment limits payments to 20% of discretionary income and allows for forgiveness of the remaining balance after 25 years.
PLUS loans aren’t perfect. They have a 4.228% origination fee for loans disbursed between Oct. 1, 2020 and Oct. 1, 2022 (4.236% for loans disbursed before Oct. 1, 2020), which comes out of the loan amount that’s disbursed to you. Parents also must request a six-month grace period for when their child graduates or leaves school, which happens automatically for borrowers of other federal student loan types. They’re also the only federal loan that requires a credit check, but it’s possible to get a PLUS loan even if you’re determined to have an adverse credit history (more on that below).
Pros & Cons
- Low fixed interest rate
- Multiple repayment and forgiveness options available
- Grace period available if requested
Details
Loan terms: 10 to 25 years, depending on the plan
Origination fee: 4.228% for loans disbursed between Oct. 1, 2020 and Oct. 1, 2022
Loan amounts available: Up to total cost of attendance, minus other financial aid received
Eligibility: Must be an adoptive or biological parent of a dependent undergraduate student in school at least half-time. Must not have an adverse credit history.
Forbearance options: Forbearance available for up to three years in certain circumstances. Enrolling in the income-contingent repayment program can lower monthly payments and result in loan forgiveness after 25 years.
Citizens Bank
Why We Picked It
Citizens Bank’s parent loan offers comparatively low interest rates, and borrowers can qualify for an interest rate discount of up to 0.50% if they have an existing account with the bank. (Student loans are available in all states, but checking and savings accounts are only available in Connecticut, Delaware, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island and Vermont.)
Citizens Bank also offers a relatively rare loan modification program, introduced in spring 2020, that allows for reduced monthly payments for a period of 12 months. That’s in addition to the industry-standard 12 months of forbearance.
Pros & Cons
- International students can qualify with a co-signer who has U.S. citizenship or permanent residency
- Up to 0.50% interest rate discount available for existing Citizens Bank customers
- Co-signer release after 36 months, about 12 months later than many other lenders’ policies
Details
Loan terms: 5, 10 and 15 years
Loan amounts available: $1,000 to $350,000 (depending on degree)
Eligibility: Does not disclose credit score or income requirements.
Forbearance options: Up to 12 months of forbearance available.
Co-signer release policy: Co-signers can be released from the loan after 36 payments.
Rhode Island Student Loan Authority
Why We Picked It
Rhode Island Student Loan Authority, or RISLA, is a Rhode Island-based nonprofit that makes loans for customers across the country. It is the only private lender on our list that guarantees to all borrowers who qualify a fixed interest rate that is lower than the federal PLUS loan.
RISLA also is unique in that it offers an income-based repayment program, which limits payments to 15% of income for a 25-year period if borrowers can’t afford their loan bills, and it charges no origination fees. RISLA lost points in our evaluation because it offers only one loan term—10 years—and parents can’t get a six-month post-school grace period.
Pros & Cons
- Low interest rates
- Income-based repayment plan available
- Nurses pay 0% interest for 48 months following graduation
- No options for international students
Details
Loan terms: 5, 10 and 15 years
Loan amounts available: $1,500 to $45,000 per year ($150,000 aggregate per borrower).
Eligibility: Applicants must show a minimum income of $40,000 per year and a minimum credit score of 680. Most undergraduate students will need a co-signer to qualify.
Forbearance options: Forbearance available for up to 24 months.
Co-signer release policy: Available after 24 months of payments. Periods during which borrowers use income-based repayment do not qualify.
Sofi®
Variable APR
6.32% to 14.88%
with autopay
Fixed APR
6.50% to 14.88%
with autopay
6.32% to 14.88%
with autopay
6.50% to 14.88%
with autopay
Why We Picked It
SoFi’s parent loan comes with standard features like no origination fees and multiple repayment terms. It also allows parent borrowers to take a six-month grace period after the student graduates before making payments. SoFi’s maximum interest rates are on the higher end, though, compared to other lenders.
Pros & Cons
- Forbearance options
- No origination fees
- Six-month grace period available
- Comparatively high maximum interest rates
Details
Loan terms: 5, 7, 10 and 15 years.
Loan amounts available: $5,000 up to total cost of attendance (no aggregate limit listed).
Eligibility: Parent borrowers must be U.S. citizens or permanent residents. Students must be attending school at least half-time.
Forbearance options: Qualified borrowers can take up to 12 months total forbearance.
Co-signer release policy: Available after 24 payments.
College Ave
Why We Picked It
College Ave offers 11 repayment terms, from five to 15 years, giving parents the ability to choose a loan term that fits their lifestyle. The company provides another unique perk for parents: The option to receive up to $2,500 of the loan funds directly, rather than having them sent to the school, so that parents can participate in the student’s spending decisions.
College Ave’s interest rate maximums are on the higher side, though, and the latest parents can start repaying the loan is 25 to 60 days after the student graduates or leaves school.
Pros & Cons
- Interest rate estimate available without undergoing a hard credit check
- International students can qualify with a co-signer who has U.S. citizenship or permanent residency
- Long time period (210 days) before unpaid loans go into default
Details
Loan terms: 5, 8, 10, 15 and 20 years
Loan amounts available: $1,000 up to 100% of the school-certified cost of attendance
Eligibility: Applicants must have a minimum credit score in the mid-600s.
Forbearance options: Up to 12 months of forbearance is available, in three- to six-month increments
Co-signer release policy: Available after 24 payments
*Borrowers with a co-signer who choose the shortest repayment term available and who make full monthly payments while in school qualify for the lowest rates.
1 – College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
2 – 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.
3 – Cover up to 100% of your cost of attendance as certified by your school and less any other financial aid you might receive. Minimum $1,000.
Tips for Comparing College Loans for Parents
Your first task is to decide whether a federal or private parent loan is best for you. If you need federal loan protections, or if you have damaged credit, a PLUS loan is likely a better choice.
The federal government conducts credit checks on PLUS loan borrowers, but there are specific negative marks it’s looking out for. The government will consider you to have “adverse credit history” if you have one or more of the following on your credit report:
- Debts totaling more than $2,085 that are at least 90 or more days past due or that were in collections or charged off in the past two years
- Within the past five years, a:
– Default determination
– Bankruptcy
– Foreclosure
– Repossession
– Tax lien
– Wage garnishment
– Charge-off of a federal student aid debt
But if you learn you have an adverse credit history after you apply, you can explain the circumstances that led to it, and the government could determine that you’re eligible for a PLUS loan after receiving loan counseling. Another option is to get an endorser, similar to a co-signer, that can help you qualify. Finally, your child can qualify for additional federal direct unsubsidized loans to help them pay for school if you can’t get a parent PLUS loan.
If you’ve decided to take out a private student loan, parents generally have stronger credit than undergraduate students who haven’t had time to build their own credit histories. That means that in lenders’ eyes, they’re less risky borrowers than students, and receive interest rates to match.
But when comparing interest rates among lenders, know that only the borrowers with the highest credit scores, least outstanding debt and strongest incomes will get the lowest rates. Also, all rates listed here include a standard 0.25% interest rate discount for using automatic payments.
It’s best to identify the interest rate and terms you’d receive on a private loan, then compare the overall cost and features with those of a PLUS loan. A student loan calculator can help you determine how much you’ll pay over time.
Summary: Best Parent Loan For College
Methodology
We collected data from the seven largest student loan entities that offer parent loans in at least 25 U.S. states and scored them across 10 data points in the categories of interest rates, fees, loan terms, hardship options, application process and eligibility. We chose the five best to display based on those earning three stars or higher.
The following is the weighting assigned to each category:
- Hardship options: 20%
- Interest rates: 20%
- Application process: 20%
- Loan terms: 15%
- Fees: 15%
- Eligibility: 10%
Specific characteristics taken into consideration within each category included number of months of forbearance available, hardship repayment options beyond traditional forbearance, origination fees, availability of a post-school grace period and other factors.
Lenders who offered maximum interest rates below 12% scored the highest, as did those who offered more than the standard 12 months of forbearance, who offered interest rate discounts beyond the standard 0.25% for automatic payments, who charged no origination fees and who offered multiple loan terms maxing out at 15 years.
In some cases, lenders were awarded partial points, and a maximum of 3% of the final score was left to editorial discretion based on the quality of consumer-friendly features offered.
To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.
What Is a Parent PLUS Loan?
The Federal Student Aid office has two types of PLUS loans: one for graduate students and one for parents. A parent PLUS loan offers money to help pay for your child’s undergraduate education. Biological and adoptive parents are eligible, and in some cases, stepparents may also qualify. Approved borrowers can’t have an adverse credit history and you must also meet the general eligibility requirements for federal student aid.
Because PLUS loans are federal debt, they come with more flexible repayment options. You may also find that these loans offer lower interest rates than private loans, especially for applicants with less-than-perfect credit.
How Do Parent PLUS Loans Work?
Parent PLUS loans are the only federal loan that require a credit check for approval. While grad PLUS loans are for graduate students, parent PLUS loans are for parents of undergraduate, dependent students.
Parents with fair, good or excellent credit can apply for and often recieve approval for parent PLUS loans. The money is disbursed directly to the school and the parent is responsible for repayment of these loans—not the student.
Pros and Cons of Parent PLUS Loans
Pros
- Federal benefits and protections. Like subsidized, unsubsidized and consolidation loans, parent PLUS loans receive the same benefits as other federal loans. For example, they’re eligible for deferment, forbearance and forgiveness.
- Fixed interest rate. Parent PLUS loans borrowers are approved based on their credit scores, but scores don’t impact interest rates. Borrowers receive the same fixed interest rate for the life of the loan.
- Borrow up to COA. While other loans have borrowing limits, parent PLUS loans let you borrow up to the cost of attendance, minus any other financial aid, such as grants or scholarships. This means you lower your chances of borrowing other types of loans, like private student loans.
Cons
- Credit check. While most parents might qualify for a PLUS loan even with a credit check, this might be a deterrent for some. If you have many delinquent debts, face wage garnishment or you’ve had debt discharged in bankruptcy, there’s a chance you won’t be approved for a parent PLUS loan.
- Higher interest rates. Compared to other types of federal student loans, parent PLUS loans have higher interest rates. PLUS Loans are almost 3% higher in interest rates compared to subsidized and unsubsidized loans.
- Interest accrues during deferment. While students are enrolled at least half-time in school, you’re not on the hook to make payments. Nonetheless, interest will accrue and capitalize and then get added onto the total loan amount you borrowed. When you start making payments, that larger loan will continue to accumulate interest.
Repayment Options for Parent PLUS Loans
After the student graduates or drops below half-time enrollment, parents—not students—start making payments. A grace period is only granted upon request; it’s not granted automatically like other federal student loans.
But there’s no federal program that lets you transfer a parent PLUS loan from a parent to a student so the student becomes responsible for repayment. If students want to take it over, they’ll need to refinance it into a private student loan.
Types of Parent Student Loans
As a parent, you have two main options for student loans: a federal Parent PLUS loan or a private loan. Here’s a closer look at both loan types.
Federal Parent PLUS Loan
Offered by the U.S. Department of Education, the federal Parent PLUS loan is available to parents of undergraduate students who are enrolled at least half-time in an eligible school. To qualify, you must not have adverse credit, which is defined as one of the following:
- You have delinquent debts of $2,085 or higher
- You had debts in collections or written off in the past two years, or
- You had a default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or write-off of federal student debt in the past five years
If you have adverse credit, you may still be able to qualify by applying with an endorser. With a Parent PLUS loan, you can borrow up to your student’s cost of attendance, minus any other financial aid they’ve already received.
Currently, PLUS loans have a fixed interest rate of 8.05% and a loan fee of 4.228%.
Private Parent PLUS Loans
Borrowing a parent loan from a private lender is also an option. You can find parent student loans from a variety of lenders, including banks, credit unions and online lenders.
Interest rates may be fixed or variable, and repayment terms typically span anywhere from five to 10 or 15 years. To qualify for a private student loan, you’ll need to meet a lender’s requirements for credit and income. Lenders usually offer the most competitive rates to borrowers with the best credit.
Unlike Parent PLUS loans, many private student loans don’t come with origination fees. However, some lenders may require you to start paying back the loan right away, so check with the individual lender to see whether or not it offers a grace period.
Applying for Parent Loans for College
The process to apply for a parent college loan depends on the type of loan you choose. Parent PLUS loans are federal debt and have a slightly simpler application process. There’s more variety when it comes to private parental loans, however, so you’ll need to do some research before submitting your application.
How to Apply for a Parent PLUS Loan
The first step to apply for any type of federal student loan is to complete the Free Application for Federal Student Aid (FAFSA). Your child should submit the FAFSA every year, since it allows them to access federal financial aid, as well as any additional aid provided by their college or other organizations. If your child is a dependent, you’ll also need to provide your information on this form each year.
Once that’s done, you can apply for a parent PLUS loan using the online application, which takes about 20 minutes to complete. You’ll fill in some basic information about yourself, your employer and your child’s school. If you’re approved, you’ll sign the required paperwork and the money will be distributed directly to your child’s school. If any funds are leftover, the remaining amount will be sent to you (or your child, if you choose).
How to Apply for a Private Parent Loan
It’s wise to shop around for private parent loans before you submit a formal application. You can quickly get estimated rates by visiting each lender’s website and completing a short form.
However, each lender has its own credit and income requirements to approve borrowers. If you’re looking for student loans for parents with bad credit, read the lender’s eligibility requirements to make sure you can qualify. If you can’t qualify on your own, it might make sense to add a co-signer to your application.
If you find a few lenders that offer you good deals, you can submit a formal application online. You’ll input your personal details and financial information, including your income, savings and debts. Once the lender reviews your application, they will present you with the details of the loan for which you’ve been approved. Review the final rates and terms, and if all is correct you’ll sign the loan agreement. Funds are typically distributed directly to your child’s school, with any remaining money sent to you.
Find the Best Private Student Loans of 2024
Alternatives to Parent Student Loans
Parent student loans can be costly, as you’ll need to pay back the amount you borrow, along with interest charges and any associated loan fees. Before taking on debt for your child’s education, consider these alternative ways to pay for college:
- 529 plan. Investing in a 529 plan could pay off when your child is ready to go to school. You won’t have to pay taxes on your earnings if you use the money on qualified education expenses. You can also choose a prepaid tuition plan, which locks in today’s tuition rates for future attendance.
- Grants. Make sure your child submits the Free Application for Federal Student Aid (FAFSA), which can put them in the running for federal and state grants. The Pell Grant, for instance, offers up to $7,395 to students with financial need.
- Scholarships. Encourage your child to apply for scholarships, as these awards offer money without repayment. Your child can use scholarship search engines or ask their school counselor about opportunities.
- Work-study. Students with financial need may also qualify for work-study jobs, which provides part-time jobs, usually related to their course of study.
- Part-time job. If your student doesn’t qualify for work-study (or can find a better job elsewhere), they may work part-time during school to earn money for tuition and living expenses.
- Student loans. Your child can also take out student loans themselves, whether those are federal or private student loans. Federal Direct subsidized and unsubsidized student loans are available to students at eligible schools and don’t require a credit check. Private student loans are an option, too, though you may need to co-sign the loan if your child can’t meet a private lender’s credit requirements on their own.
Parent PLUS Loan vs. Private Loan
*For loans disbursed between July 1, 2022, and before July 1, 2023
**For loans disbursed between Oct. 1, 2022 and Oct. 1, 2023
Parent borrowers with excellent credit and a healthy, stable income may find better rates and fewer fees with private lenders. However, if you have fair or average credit, a parent PLUS loan could be a better option, even with the added origination fee. If you value more flexible repayment options, a PLUS loan could be good as well, since repayment options vary with private loans.
And if you, the parent, work for a government agency or nonprofit or may have difficulty making loan payments in the future, consider a federal PLUS loan. That’s because you’ll have access to the Public Service Loan Forgiveness (PSLF) program and monthly loan payments tied to your income (after signing up for the federal income-contingent repayment plan).
Frequently Asked Questions (FAQs)
Who should choose a private parent loan?
If you won’t need access to federal repayment programs, you can qualify for a low interest rate, or you’ll be able to pay off the loan fast and avoid high interest charges, a private parent loan could be a good option. Just make sure to understand your lender’s policies in case you experience an unforeseen financial hardship in the future.
How is the interest rate on a parent loan determined?
All federal parent PLUS borrowers get the same rate, which is determined by Congress, if they qualify. PLUS loans require a credit check, but it is more limited than the check private lenders perform.
Most private lenders tie your interest rate to your credit history and income. Parents often have stronger credit than their undergraduate children, so they may qualify for lower interest rates on private loans as the primary loan borrower—but not always.
It’s best to compare interest rates across not only parent PLUS loans and private parent loans, but also with federal direct subsidized and unsubsidized student loans. In 2020-21, federal student loan interest rates are at record lows, and if your child borrows on their own behalf, you won’t be responsible for payments in the future. Make sure your child maxes out their own federal loans first before you consider taking out a parent loan.
Can I get a Parent PLUS loan with bad credit?
To qualify for a Parent PLUS loan, you can’t have adverse credit. If you have adverse credit, you may still be able to qualify for a Parent PLUS loan by applying with an endorser or explaining extenuating circumstances that caused your adverse credit. Either way, you’ll have to complete credit counseling for Parent PLUS borrowers.
Will parent PLUS loans be forgiven?
Certain borrowers may qualify for parent PLUS loan forgiveness, though the process isn’t a simple one. Parent borrowers may qualify to have their loans discharged through either PSLF or income-contingent repayment. These programs require 10 to 25 years of repayment, after which time the remaining balance can be forgiven. You may also be required to convert your PLUS loan into a direct consolidation loan before you’re eligible.
Can a parent PLUS loan be transferred to the student?
There is no federal program that allows you to transfer parent PLUS loans into the student’s name. However, some private lenders allow the student to refinance their parent’s loan into the student’s own name. Student borrowers should be cautious with this method, though, since refinancing federal loans will turn them into private debt, which generally offers fewer protections.
What if I can’t pay my parent PLUS loan?
Parent PLUS loan borrowers have fewer options when it comes to flexible repayment plans. However, if your monthly payments are too high, you could opt for graduated or extended repayment. If you’re willing to transfer your PLUS loan into a direct consolidation loan, you could also consider income-contingent repayment. All of these options can lower your monthly payments but will result in more interest being paid over time.
If you need to pause your payments, PLUS loans are eligible for the federal forbearance or deferment. However, interest will continue to accrue while your debt is on pause.
What happens to my parent PLUS loan when I retire?
Your retirement has no effect on your parent PLUS loan and you’ll be expected to make payments as usual. However, if you’re enrolled in income-contingent repayment, the amount you owe each month is determined by your income. Once you retire, your earnings may go down—in that case, your loan payment would decrease as well.
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