Parent Student Loans

Parent student loans are for parent of undergraduate students who are willing to help them with their college debt . Learn more about parent plus loans, consolidation of parent plus loans, private parent loan lenders, how to receive student loans, private student loan options for parents and more.

Updated by Priya shah on 21st January 2020

The demand for parent-student loans is increasing rapidly as per recent data. As it helps to unburden the debt of the student and after they graduate from college and can start on the right foot financially.

Parents of a dependent student can take the loans to provide their children’s aid packages and help them pay for college or schools. The parent loan can be categorized into two categories federal and private student loans. In this article, we will provide an overview of all the available loans a parent can take in order to help their children.

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Parent loan

Parent loans are the type of student loan that parents can avail for their children to pay for their college education and other relevant expenses. But they typically come with a short term period and a higher rate of interest than other student loans. You may also not get any grace period and other options like deferment options may be because your child would if they apply for financing themselves.

To qualify for this loan you must be a U.S. citizen or have a permanent resident. Also must be a parent or legal guardian of the student at a renowned university. And meet the credit requirements. And most importantly federal parent loans are available only to biological or adoptive parents.

The loan is categorized into federal and private student loan where parent plus loan comes under the federal student loan category. 

What is Parent plus loan?

The parent plus loan is the federal direct student loan that is available for parents of dependent undergraduate students. The parent PLUS loan interest rates are fixed rates of 7.08% and also have flexible loan limits. In order to qualify the eligibility criteria, the parent must have a strong credit history, and also must make sure they don't have an adverse credit history. 

Parent plus loans have a 4.236% of origination fee for the first loan disbursed. Before enrolling any borrower for the parent plus loan program, the child must exhaust eligibility for the loan to get the best loans. They have a lower interest rate and fees. Most of the parents also borrow this parent plus loan program to reduce the burden of the child and they don’t take on too much student loan debt.

As borrowing the direct loan before parent plus loan will no doubt save money for the future of the student. 

Parent plus loans are those loans that are available to the parents of dependent undergraduate students. The parents of independent undergraduates are not eligible for the parent plus loan. Parent plus loans can also be called the financial responsibility of the parents.

The very first step of the loan process is to fill the free application for federal student aid(FAFSA). It is the requirement to borrow the parent plus loan. In order to get the parent plus loan, the parent is supposed to contact the financial aid office at the student college or university for more queries and detail info. 

Parent is supposed to fill and sign a Master promissory note in order to request the loan. Parent should request for the loan, not the student. The FSA ID that was used to sign the form is required to request the loan. 

How to apply?

  • The ones who are applying for a plus loan must submit the FAFSA form and also sign a master promissory note.

  • Students must enroll in school for at least a half-time basis.

  • Students complete financial aid history must be checked before getting into any agreement of parent plus loan.

  • The parent cannot owe an overpayment on a federal education grant neither be in default on previous loans.

Eligibility for the parent plus loan

  • The modest credit check determines whether the parent has an adverse credit history.

  • The borrower must not subject to default within the past five years of a bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off. 

  • More than $2085 in total debt in collections or charged off in the past two years, before the date of the credit report.

  • Both the parent and student must be U.S citizens, nationals or eligible noncitizens.

  • The parent loan proceeds must be used for educational purposes.

Interest rates and fees

  • The direct loan program has a fixed interest rate of 6.41%.

  • The interest rate on the plus loan is not subsidized.

  • The plus loan charges the fees of 4% that is deducted from each disbursement check.

Consolidation of parent  plus loans

Although a plus loan can be consolidated like other loans  Stafford and Perkins loans but cannot be consolidated with the students Stafford and Perkins loans. As the borrower of both are different and parents have their own Stafford loans that they can consolidate together with any plus loans that have been borrowed for their children.

Consolidation of loans leads to various alternative repayment terms like extended repayment, graduated repayment, and income-contingent repayments.

Parent plus loan repayment

The parent plus loan repayment is the various loan repayment options that show the ability to fill funding gaps after exhausting federal student loans to students, grants, and scholarships. 

The consolidation of loans reduces the interest rate by 0.25%. It’s always the best advice to consolidate parent plus loan separately from Stafford and Perkins loan. To avail the better benefit of the interest deduction, and by refinancing parent plus loan into child's name.

In order to get your Parent PLUS loans forgiven, you need to enroll with an eligible repayment plan. There are four main income-driven repayment plans out of which one is an income-contingent repayment plan.

Worried about your college tuition? Find the best student loans for you 

Private parent loan lenders

College ave parent loan

College ave is an online lender known as the private lender that offers loans to parents so they can cover the full cost of their child’s education. It offers various choices between paying interest while you are in the school itself, making the interest lower as possible and principal repayments. The loan term may range from 5 to 15 years. You can prequalify online and maintain the offer for between 60 to 90 days. The online process is very simple that takes around three minutes to fill out the application. 

  • The interest rate starts from 5 - 6% that may be fixed or variable.

  • They don’t charge origination fees.

  • The repayment term exceeds up to 10 years.

Sallie Mae parent loan

Sallie Mae is another online private lender that helps to get a loan. It was started in 1973 as a government-backed student loan program, but now they are completely private online lenders. The interest rates are comparatively higher than parent plus loans. To apply for a loan in Sallie Mae you don’t have to be a parent or guardian but you can be kind of family member, sibling, or a family friend. 

The process of a loan of Sallie Mae’s parent loan is so simple that it takes 15 minutes to get prequalified and complete the application on its site. After the approval of the loan and child school receives the loan you have the option of choosing the payment if you are paying only the interest or making full repayments.

  • The interest rate starts from 5 - 6% that may be fixed or variable.

  • They don’t charge origination fees.

  • The repayment term exceeds up to 10 years.

Citizens Bank student loan for parents

Citizens Bank student loans for parents are unlike other loan lenders. Citizen bank has limits to how much the loan amount can be borrowed to pay for the child’s education also based on the degree. Like other loans, you can apply online for the citizen’s bank student loan. But the application might be a bit more complicated than others. They ask for the extensive documentation, that may include a pay stub that is recent and not more than 30 days old or something else like proof of income and monthly housing cost.

You can choose between interest-only and full repayments. 

The advantage that we get is mostly the interest rate discounts. Like deduction of 0.25% rate of interest on autopay and another 0.25% discount for those who already have an account with citizens bank.

  • The interest rate starts from 7% of fixed rate 

  • They don’t charge origination fees.

  • The repayment term exceeds 5  to 10 years.

Choosing the right Parent loan: Parent plus loan vs. private student loan

Parent plus loans are funded by the government. Parent plus loan offers various protections for the borrower and a  number of repayment options when compared to private student loans especially to the parents. Parent plus loans have flat interest rates of 7.08% plus in addition origination fee of 4.236%. 

Private student loans can be applied through a bank, credit union or online lenders. The interest rate on a private student loan depends on your cosigner credit. Beyond a 690 credit score, you are likely to pay a higher rate of interest than federal student loans. 

How will I receive my student loans?

After the approval of the loan, the school will apply parent plus loan funds to the student’s school account for the payment of tuition, fees or other related expenses and charges. After the clearance of these expenses if any amount is excess they will return the amount to the student by parent authorization. That will help the student to pay other education-related expenses for the study they are pursuing.

What if I get trouble repaying my loan?

Nothing can be done once you default your student loan but many steps can be taken to avoid the default of the student loan. All of a sudden if you are not able to make your scheduled payments, you can contact your loan servicer as soon as possible. Your servicer may suggest and help you deal with the various options for keeping your student loan in a sound state. You have various options for lowering the monthly payments or request a deferment or forbearance that can pause your payment for a certain period of time.

Do I need a cosigner for a private student loan?

A cosigner is required when you individually fail to qualify for the loan, and when you don’t have an income either good credit score or no credit. Then you may require a cosigner to get private student loans. 

Your cosigner must have a steady income and importantly excellent credit score. Signing with cosigner means they are bound for the loan bill if you can’t pay it off. The co signer's credit history can also be affected if you fail to make on-time payments towards your student loans. The lenders also look at the school you are graduating in and the income and career potential to determine the amount you can borrow depending on the rates.

The cosigner debt-to-income ratio will be also checked by the lender to make sure that you have enough funds to pay student loan expenses.