Given the rising cost of college, finding affordable college financing is more important than ever. As a parent, it’s both understandable and admirable to want to support your child through the process of paying for college. It’s essential that you have the tools to pick the best college loan.
If you’re curious about your parent loan options, you’re in the right place. Here’s what you need to know to pick the best college loan for parents.
Jump Ahead > Parent Loans vs. Traditional Private Student Loans • How to Compare College Loans for Parents • Best College Loans for Parents • FAQ About College Loans for Parents
Best College Loans for Parents
The best parent loan for you will ultimately be the one that suits your needs best. However, having a list of options that offer competitive interest rates, flexible repayment options, and strong customer service will make the search process easier.
The following are our top picks for the best private college loans for parents.
>> MORE: Compare best student loan rates for parents
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Parent Loans vs. Traditional Private Student Loans
While parent loans and traditional private student loans are similar in nature, there are some key differences you’ll want to consider before choosing one over the other.
A parent loan allows you to borrow on behalf of your child to finance their education. While you may require your child to make payments directly to you, you are legally the sole person responsible for paying back the loan.
A traditional student loan, however, is one that your child borrows on their own behalf. If you cosign the student loan, both you and your child are legally responsible for paying back the loan.
>> MORE: How to apply for a student loan
How to Compare College Loans for Parents
Both federal and private lenders offer parent loans. While similar in that parents can borrow both loan types on behalf of their child, they differ in several ways.
>> MORE: Student loan eligibility: Federal and Private loans
Federal Parent PLUS Loan
The only federal student loan parents can borrow on behalf of their child is the Parent PLUS Loan. To receive a Parent PLUS Loan, you must:
- Be the biological or adoptive parent of a dependent undergraduate student who is enrolled at least half-time at an eligible school
- Not have an adverse credit history
- Meet the general requirements to receive federal student aid
The interest rate for Parent PLUS Loans is fixed and set by the government each year. For Parent PLUS Loans disbursed on or after July 1, 2022 and before July 1, 2023, the interest rate is 7.54%.
Like other federal student loans, Parent PLUS Loans have the opportunity to be forgiven, which is not available for private student loans. This is an important factor to consider if you plan to pursue any loan forgiveness programs.
>> MORE: Parent PLUS loan forgiveness: Everything you need to know
Before borrowing a Parent PLUS Loan, you should check to see what rates you qualify for in private parent loans. You may find that some private lenders are able to offer you rates lower than the Parent PLUS Loan interest rate.
Private Parent Loans
Private parent loans are provided by private student loan lenders. Unlike federal Parent PLUS Loans, each individual private lender will offer different interest rates and terms. The eligibility criteria for private parent loans will vary, but in general, you must:
- Meet income and/or credit requirements
- Be borrowing on behalf of a student attending an eligible school
While it is commonly assumed that private student loans always have higher interest rates than federal student loans, that isn’t necessarily true. You should always compare both federal and private parent loan options before agreeing to one or the other.
>> MORE: Federal vs Private student loans: Comparison
Commonly Asked Questions About College Loans for Parents
What is the best way for parents to pay for college?
There is no single best way for parents to pay for their child’s college education. Generally speaking, however, you should begin by encouraging your child to pursue scholarship and grant opportunities. Both forms of aid do not need to be repaid.
Following that, consider what you’re able to contribute out-of-pocket. It’s important to minimize the amount you need to borrow.
After you’ve exhausted both options, consider both federal and private student loans.
>> MORE: What are the different types of financial aid
Is it better to borrow a Parent PLUS Loan or a private parent loan?
One option isn’t necessarily better than the other. If you plan to pursue any loan forgiveness programs, you may prefer a Parent PLUS Loan over a private parent loan. If you are more concerned with finding a competitive interest rate, however, you may find that a private parent loan suits you better.
Do parents need good credit for student loans?
It depends on the lender. While most federal student loans do not factor your credit score into your eligibility, private student loans often do. That said, there are a variety of private student lenders that work with parent borrowers with lower credit scores.
>> MORE: Best student loans for parents with bad credit:
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How much can parents borrow for student loans?
In Parent PLUS Loans, you may be eligible to borrow up to the cost of attendance at your child’s school minus any other aid your child receives.
In private parent loans, the borrowing limit will vary by lender.
How do parents take out loans for college?
To borrow Parent PLUS Loans, complete the PLUS Loan application online.
To borrow private parent loans, see what rates you qualify for by completing the Sparrow application. In less than 3 minutes, we’ll show you which parent loans you qualify for and at what rates.
Final Thoughts from the Nest
There are a variety of parent loan options available, and while beneficial, it can make the process of picking the best option overwhelming. To simplify the process, start with Sparrow. Rather than searching endlessly for a parent loan that works for you, fill out the Sparrow application, and we’ll do the search for you. We’ll show you which parent loans you qualify for and at what rate so you can find the best option for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Some rates listed may include an Autopay Discount, which requires you to agree to make your monthly payments by an automatic monthly deduction (ACH) from a valid bank account. To verify whether the interest rates listed include an Autopay Discount, please read the individual lender disclosures.