It’s typically better to check into financial aid options like scholarships and grants first if you want to help pay for your child’s college education. However, you can pick between two forms of parent loans for education, including government Direct PLUS Loans and private student loans, if there is any remaining debt.
Private student loans can have variable interest rates and fewer fees in contrast to government Direct PLUS Loans, commonly known as parent PLUS loans, which have fixed interest rates and federal protections. The best option for you will rely on your priorities and the financial position of your family.
Parent PLUS vs. private student loan rates
| Parent PLUS loans | Private parent student loans | |
| Type of interest rate | Fixed | Fixed or variable |
| Current rates | 6.28% for 2021-22, 7.54% for 2022-23 | 2% to 14% |
| Origination fee | 4.228% | Varies by lender |
| Credit check required | Yes | Yes |
| Repayment terms | 10 to 25 years | 5 to 25 years |
| Borrowing limits | Up to the cost of attendance, minus financial aid | Often up to the cost of attendance, minus financial aid |
| FAFSA required | Yes | No |
A parent PLUS loan: what is it?
Parent PLUS loans are federal loans that parents can use to cover all or a portion of their child’s college expenses. The most recent information from the Trellis Company indicates that approximately 3.6 million parents currently have this type of financing.
You may take out a loan for your child’s college expenses, less any other financial aid they receive. However, it’s crucial to be aware that loan fees are a little bit greater than those of federal loans intended for students. Parents must pay a 4.228 percent upfront loan fee, which is subtracted from the loan payout, in addition to a 6.28 percent interest rate for the 2021–2022 school year and a 7.54 percent interest rate for the 2022–2023 school year.
What’s the process for federal parent PLUS loans?
Federal parent PLUS loans have a disbursement date after which interest starts to accrue; however, payments can be postponed while your child is enrolled in school. Parent PLUS loans, in contrast to private options, are qualified for various federal repayment and forgiveness programs.