Student Loan Refinancing
How to Pay off Student Loans Fast
Managing Your Student Loan Debt
Parent PLUS Loan Refinancing
Why Parents Should Refinance Student Loans
How to Refinance Parent Student Loans
Parent’s Guide to Student Loans
When to Apply for Private Loans
How to Pay for College Tuition
Applying for Student Loans Guide
Find Scholarships & Grants
Student Loan Refinance 101
Student Loan Glossary
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Having a child in college can be daunting. You have to worry about their education, their safety, and how you’re going to pay for it all.
Typically, that means taking out loans to cover any education costs remaining after scholarships, grants, and college savings or 529 accounts have been exhausted.
When it’s time to consider additional funding, there are essentially two student loan sources available.
The first source is federal loans through the U.S. Department of Education, which administers the financial aid program (often referred to as FAFSA) sponsored by the government. The second source is the private student loan marketplace, where top-tier banks and credit unions offer low-interest loans to parents with good credit and income.
Some parents luck out and their child qualifies for tons of scholarship money, or perhaps even a free ride to their college of choice.
For most parents, there are gaps in funding that can exhaust savings and other sources of funds quickly.
During the 2021-2022 school year, private colleges averaged $43,775 in tuition and fees with out-of-state public school tuition averaging $28,238 and in-state tuition averaging $11,631.
With a four-year program, you can quickly find yourself needing to supplement the cost of education with loans. Let’s walk through the options.
As a general rule, you should exhaust federal loan opportunities before pursuing private student loans. However, federal Parent PLUS loans have high interest rates across the board, while parents with excellent credit and income may be able to qualify for lower rates through private lenders.
In the end, your decision may come down to the option with better benefits. Let’s weigh the pros and cons of federal Parent PLUS loans and private parent loans for college.
Direct PLUS Loans for Parents, or Parent PLUS Loans, are available through the Department of Education for schools participating in the Direct Loan program.
You must be the biological, adoptive, or stepparent of the child to qualify. Grandparents and legal guardians are not eligible for Parent PLUS loans unless they have legally adopted the child.
Here are some terms and benefits of Parent PLUS Loans:
In the next section, we’ll do a side-by-side comparison of two private lenders, including a look at pros and cons. Here are a few things that are common to nearly all private lenders:
Interest rates are increasing and likely will continue to increase through 2023. However, the private student loan marketplace still has some great rates available.
If you have high income and excellent credit, you may qualify for the lowest interest rates offered by lenders. Just be sure to compare the private student loan perks as well. For instance does the private lender offer forbearance or deferment plans?
There are numerous factors to consider while shopping for the best private parent loans for college. In addition to finding the lowest rates, you’ll want to watch out for any fees the lender may charge, look for benefits like autopay discounts or forbearance options, and weigh the other pros and cons of each lender.
Here’s an overview of what to consider when shopping for private student loans for parents.
While the federal Parent PLUS Loan rates for 2022-2023 are fixed at 7.54% regardless of credit history or income level, private parent loans for college range between for fixed rate loans and 0.94% and 12.99% for variable rate loans, among Purefy’s recommended lenders.
With excellent credit and income, you could capture a rate well below the federal level.
Unlike a mortgage, private student loan lenders don’t charge origination or application fees. You can get a free rate quote through a marketplace like Purefy with no obligation to move forward with the loan.
Our Top-Rated Picks for 2022 Offer Low Rates and No Fees
Option to skip a payment once a year
In-school deferment available if you return for another degree
Optional $25 payment plan during school to reduce interest after graduation
1% Cash Back Graduation Reward program
Let’s compare the terms and eligibility requirements between two top-tier private student loan companies, along with a few pros and cons of their programs.
As technology grows more sophisticated, it’s no longer necessary to contact each individual bank or credit union and submit a loan application to get a rate quote.
In the past, the legwork was not only time-consuming, it also resulted in multiple hard credit inquiries (which can lower your credit score).
Luckily, things are easier today. Through Purefy’s rate comparison tool, you’ll complete a short form before you are presented with real-time rates for multiple lenders.
From there, you can compare the information to see what offer might work best for your circumstances. There is no cost and no obligation to proceed.
Weigh your options and shop around for the best offer but consider the overall loan package (including fees and any potential benefits) before deciding on a parent student loan. And if you have any questions, contact our team of expert student loan advisors who are here to guide you through the student loan process.
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