Best Parent Student Loans (and What Exactly are They?)

by Raptor Staff on November 23 2022

Parent student loans are loans that parents or legal guardians can take to help cover the cost of their child’s college tuition. This is different from student loans, which a student takes to pay for their own college tuition. The funds from both loans can be used to cover any college-related costs including tuition, fees, room, board, and school supplies. Although both loans help with the cost of college, they are fundamentally different from each other.  

How Do Parent Student Loans Work? 

Unlike student loans, which are in the student’s name, a parent student loan is entirely in the parent’s or guardian’s name. The parent or guardian who applies for the loan takes full responsibility for managing and repaying the loan. 

There are two types of parent student loans – Federal Parent PLUS loans and Private parent student loans. The federal government funds Parent PLUS loans. Private parent student loans are issued by private lenders and financial institutions. 

The eligibility criteria, application processes, and terms and conditions vary significantly among these two types of loans. Each has its benefits and drawbacks too. 

Here’s what you should know about taking a Parent PLUS loan vs taking a private parent student loan. 

What Are Parent PLUS Loans? How Do They Work? 

Parent PLUS loans are a type of federal student loan that’s available only to parents of students enrolled in an accredited college. The student you’re taking the loan for must be your biological or legally adopted child. Grandparents and legal guardians are not eligible to apply for Parent PLUS loans unless they have legally adopted the student. 

Features of Parent PLUS loans: 

 These loans have a fixed interest rate set by the federal government for the current academic year. A new rate is set on July 1 every year. All PLUS loans taken during that academic year will have the same interest rate. That rate remains the same throughout the life of the loan. 

  • These loans have a fixed interest rate set by the federal government for the current academic year. A new rate is set on July 1 every year. All PLUS loans taken during that academic year will have the same interest rate. That rate remains the same throughout the life of the loan.
  • A parent can borrow up to the cost of attendance minus any financial aid that the student receives for that year. The cost of attendance is different for each student. It is determined by the student’s college. 
  • Parents do not need to meet any credit score requirements but they will need to undergo a credit review. This is only to check for any adverse credit history such as repossession, foreclosures, or bankruptcy.  
  • The funds are disbursed directly to the student’s school. The school uses it to pay for tuition and other school-related expenses. 
  • The standard repayment term for Parent PLUS loans is ten years. Borrowers have the option of choosing from different repayment plans to repay the loan over ten years. However, these loans are not eligible for income-based repayment plans. 
  • Repayments start from the day the funds are disbursed. However, borrowers can apply to defer repayment if the student meets certain enrollment requirements. 

Pros & Cons of Parent PLUS Loans


  • Parents can borrow up to the full cost of attendance minus any financial aid received, which is higher than other loan limits
  • Borrowers can choose from different repayment plans to fit their budget
  • Borrowers can choose to make extra payments to pay down the loan early without penalty
  • PLUS loans come with deferment and forbearance options
  • The loan can be discharged if the parent borrower becomes completely and permanently disabled or if the student dies


  • Interest rates are among the highest of all types of student loans
  • There’s no automatic grace period so payments become due as soon as funds are disbursed to the school
  • PLUS loans are not eligible for the income-based repayment program
  • The loan cannot be transferred to the student at any time
  • Defaulting on repayments can result in garnishment of wages, Social Security benefits, and tax refunds

How To Apply for Federal Parent PLUS Loans

If you wish to apply for a Parent PLUS loan, you’ll need to first fill out the FAFSA (Free Application for Federal Student Aid) along with your child. After this is done, you’ll also need to fill out and submit a separate Direct PLUS Parent Loan application. Ask the financial aid office at your child’s school if they have any special requirements or procedures for filing this application. 

What Are Private Parent Student Loans For College? How Do They Work? 

Private parent student loans are issued by non-government financial institutions such as banks and credit unions. Only parents or legal guardians of undergrad college students are eligible for parent student loans. The funds can be used to cover all types of school-related expenses. 

Features Of Private Parent Student Loans

  • A private parent student loan is a type of installment loan. It works the same way as personal loans, home loans, and vehicle loans. The only difference is the funds must be used to pay for a student’s education. 
  • Every private lender sets their own base terms and interest rate. They then customize the rates and other terms based on the applicant’s credit history and income. The interest rates, eligibility criteria, application process, and terms and conditions vary from one lender to another.
  • Parents with a good credit scores are more likely to enjoy better lending terms overall. For example, they will qualify for lower interest rates and lower fees, which translate to bigger savings. These rates are usually lower than that of PLUS loans. 
  • Because interest rates and loan terms vary among lenders, prospective borrowers must take time to compare lenders before signing any agreement. 
  • Private parent student loans offer greater flexibility in terms of who is responsible for paying the loan. Parents can choose to take full responsibility for the loan. Alternatively, they can share responsibility with the student by cosigning the loan. 

Pros & Cons of Private Parent Student Loans


  • Borrowers with good credit enjoy greater savings because of lower interest rates and lower fees
  • The terms are more flexible than PLUS loans
  • Parents can assume full responsibility of the loan or they can choose to share responsibility with their child
  • High competition among lenders allows borrowers to score great deals especially if they have good credit


  • Parents with poor credit pay significantly higher interest rates
  • There are no deferment or forbearance options
  • These loans cannot be discharged

Should I Take A Parent Student Loan For My Child? 

College students typically do not have a high enough credit score to qualify for lower interest rates. The higher interest rate could add thousands of dollars in accrued interest to their loan over the term of the loan. This is unnecessary. If you have good credit, you could score a parent student loan at a much lower interest rate. 

If you’re hesitant about assuming full responsibility for your child’s education loan, consider cosigning a loan. With a cosigned loan, your child will benefit from the lower rate while also sharing responsibility for the loan with you. 

Which Are The Best Parent Student Loans For College? 

There’s no single type of loan that’s best for everyone. The best parent student loan for you will depend on your income, credit history, financial goals, and other financial commitments. Take time to compare the different types of parent student loans that are available and identify one that best suits your needs. 

If you have poor credit, a Federal Direct Parent PLUS loan may be the best option for you. This is because credit history is not a factor that goes into approving your application. Nor is it a factor in determining the interest rate you’ll pay on the loan. 

If your credit is good, a private parent student loan may be the better option for you. With a good credit history, you’re more likely to qualify for a low-interest rate, which could save you thousands of dollars in interest over the loan term. 

Use our Student Loan Finder tool to easily and quickly find and compare loans from reputed lenders. 

We hoped you enjoyed this article! Remember, you can and potentially lower your monthly student loan payments and save money.