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Parent student loans are available to mothers and fathers who want to help put their kids through college.
There are generally two types: Federal parent PLUS loans and private parent loans.
As much as you love your child, don’t take on debt for them unless you’re in a strong financial position yourself.
Student Loans Explained (2019)
Before taking out parent student loans, make sure that:
- Your child has maxed out federal student loan options
- You’re saving enough for retirement
- You’ve paid off high-interest debt, like credit cards
If you decide to move forward with a parent loan, make sure you and your child work out clear plans for repayment.
The loan will ultimately be your responsibility to repay.
The only way to transfer parent loans is to have your child refinance the loan in his or her name.
Federal parent PLUS loans
Federal direct PLUS loans are government loans that parents can take out to help pay for a child’s college education. They have higher interest rates and fees and qualify for fewer repayment plans than federal direct subsidized and unsubsidized loans for students.
» MORE: Estimate monthly payments using a parent PLUS loan calculator
Assuming your child has exhausted federal student loan options and your finances are sound, consider a parent PLUS loan if:
- You work for the government or a 501(c)(3) nonprofit and want to pursue Public Service Loan Forgiveness
- Your credit isn’t strong enough to qualify for a lower rate with a private parent loan
To apply for a PLUS loan, fill out the Free Application for Federal Student Aid with your child.
NerdWallet’s FAFSA guide can help. Then, complete the direct PLUS loan application for parents.
» MORE:Are you eligible for a parent PLUS loan?
Parent PLUS loan interest rates
Interest rates for federal direct PLUS loans are fixed and set by Congress each year; they’re 7.08% for 2019-20. There is also a substantial loan fee of 4.236%, which is deducted proportionally from each loan disbursement.
If your finances and credit are solid, you may find private parent student loans a better deal.
» MORE: Current student loan interest rates: federal, private, refinancing
Private parent student loans
Private parent loans are private student loans offered by banks and online lenders.
They generally don’t come with fees, unlike federal parent PLUS loans.
» MORE:Your parent PLUS loan was denied: Now what?
A private parent loan may be a better option than a federal parent PLUS loan if:
- You don’t plan to pursue Public Service Loan Forgiveness
- You have good enough credit to get a better rate than the PLUS loan rate while taking the PLUS loan fee into account
Before applying for a private parent loan, shop around to find the lowest student loan interest rate you qualify for.
Some lenders have a pre-qualification process that allows you to see a personalized rate before the lender does a hard credit pull.