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Home Student Loans Parent Student Loans Parent PLUS Loans vs. Private Student Loans

Parent PLUS Loans vs. Private Student Loans

Summary: Parents have two college loan options when financial aid falls short: Federal Parent PLUS Loans and private loans. Low interest rates, flexible repayment plans and borrower benefits are available. Learn about each program and find the best lender.

Best Parent Loans for College April 2021

Parent PLUS Loans are typically the best option for parents. However, private parent loans often offer more competitive interest rates and no origination fees. If you have excellent credit, or a creditworthy cosigner, a private parent loan may be the right choice for you for long-term savings.

Best Private Parent Loans for College

  • Interest Rates
    • Fixed as low as: 4.25% APR1
    • Variable as low as: 1.13% APR1
  • Interest Rates
    • Fixed as low as: 3.34% APR1
    • Variable as low as: 1.04% APR1
  • Interest Rates
    • Fixed: 4.24% APR - 12.99% APR2
    • Variable: 1.24% APR - 11.99% APR2
  • Benefits
    • Easy online application!
    • No origination fees, late fees, and no insufficient fund fees. Period
    • Flexible repayment options to help you find the right loan for you
    • 0.25% discount when you set up autopay

Both Parent PLUS Loans and private student loans can help cover the difference between the total cost of attendance (COA) of your school and the financial aid you receive. Both types of loans can be used to pay for educational expenses such as:

  • Tuition and fees
  • Room and board
  • Books
  • Supplies
  • Equipment
  • Transportation
  • Miscellaneous/personal expenses

What is a Federal Parent PLUS Loan?

A federal Parent PLUS loan is offered under the federal student loan program. The loan is only an option for parents of dependent undergraduate students.

How Do I Apply for a Parent PLUS Loan?

To apply for a Parent PLUS Loan, the student will need to file the FAFSA. It is then recommended that the parent wait until the school provides the student with a financial aid offer first. You can find all the details in our companion article about Federal Parent PLUS Loans.

What is a Private Student Loan?

A private student loan can be borrowed by a parent to help cover a child’s college costs. Private student loans are offered by many private student loan lenders. In addition, a parent may cosign a student loan for their child. Parents who cosign for their child may not be the borrower, but are considered equally responsible to repay the loan as a cosigner.

Private Parent Student Loan

When it comes to finding a private student student loan, you may want to get an idea of some lenders that work with your child's school. We can help with that. Insert your child's school below to see lenders we work with that offer competitive loan products.

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Parent PLUS Loan vs. Private Loan


Parent PLUS Loan Private Student Loan
Primary Borrower Parent of a dependent undergraduate student Parent or Student
Cosigner Required Only if parent has an adverse credit history Cosigner may be required
FAFSA Required Yes No
Lender Federal government Private lenders and financial institutions
Interest Rate Type Fixed Fixed and variable options
Interest Rate 5.30%
(2020-2021 academic year)
Depends on borrower and cosigner credit
Interest Rate Reduction for Automatic Payments 0.25% Varies by lender
Tax Deductible Interest Yes Yes
Subsidized Interest N/A N/A
Loan Fees 4.228%
(Loans disbursed Oct. 1, 2020 - Sept. 30, 2021)
Varies by lender
Typically 0% to 5%
Depending on credit
Annual Loan Limits Cost of Attendance (COA) minus other student aid  Cost of Attendance (COA) minus other student aid
Cumulative Loan Limits No Varies by lender
May vary by degree/major & credit
Repayment Term Varies by repayment plan and loan balance
10 to 25 years
Varies by lender
5 to 25 years
Repayment Plans Standard, Extended, Graduated Varies by lender
Death Discharge Student or Parent Varies by lender
Disability Discharge Parent only Varies by lender

College Loan Rates for Parents

A parent PLUS loan will have an interest rate set by congress each year. The current rate is 5.30% for the 2020-2021 award year. A private student loan will have interest rates based on current market trends and the strength of the borrower’s (and if applicable, cosigner) credit.

student loan interest rates for 2020 

Differences Between Parent PLUS and Private Loan

There are three main differences:

  1. Lender: Parent PLUS Loans are federal student loans. The federal government is the lender. Private student loans are offered by private financial institutions, such as banks and credit unions, states, as well as colleges and universities.
  2. Primary Borrower: The parent is the primary borrower on a Parent PLUS Loan. The primary borrower of a private student loan can be the parent or the student. The parent may be a cosigner on the student’s private student loan.
  3. Interest Rate: Parent PLUS Loans have fixed interest rates, currently 5.30% for the 2020-2021 academic year. Private student loan interest rates start as low as 1.04% and are based on borrower credit and come in fixed and variable interest rate options, depending on the lender.

Families should always consider scholarships, grants, and federal student loans, like Direct Subsidized and Unsubsidized Loans, before applying for private student loans.

Learn More About Student Loans for College

Best Student Loans for April 2021

Introduction to Parent PLUS Loans

Private Parent Student Loans

How Does Student Loan Interest Work

Tuition Payment Plans

Student Loan APR

 

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