Now that your student was accepted into their dream school, it’s time to figure out how to pay for their education (as if getting into college wasn’t difficult enough, eh?). From parent loans to student loans, you have a lot of options. Therefore, finding the most suitable way to afford educational costs can be difficult to navigate. Keep reading to learn more about the best parent student loans of 2024.
Jump Ahead > How Student Loans Work • Types of Student Loans • When to Consider Loans • A Parent’s Role • Parent Loans vs. Student Loans • Which Loan Option is Best?
7 Best Parent Student Loans
Below is a list of some of the best parent student loan options. Rather than searching for lenders one-by-one, we recommend starting the process with an automated parent student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
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How Do Student Loans Work?
Student loans are borrowed money that can be used to pay for educational expenses like tuition, room and board, school supplies, and more. Students can only qualify for these loans if they are enrolled at an accredited institution at least half-time.
Student loans almost always accrue interest. Interest is a small percentage of the loan that is added on top of the total loan amount. Therefore, how much you originally borrow is not the amount you will pay back. Accordingly, it is essential that you choose your loans carefully and compare total cost projections.
Types of Student Loans
There are two main types of student loans you can borrow: federal student loans and private student loans.
The main difference between federal and private student loans is who offers them. The federal government offers federal student loans. In contrast, private student loans are offered by credit unions, banks, and other private institutions.
The following chart details the nuances of federal student loans and private student loans.
| Federal Student Loans | Private Student Loans | |
| Borrower Requirements | The Direct Subsidized Loan is only for undergraduates with financial need. Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds. | No financial need is required; anyone can apply. |
| Cosigner Needed? | No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans. | In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all. |
| Interest Rates | Interest rates tend to be lower than that of private student loans and are always fixed, meaning they do not change. | Interest rates tend to be higher for students because they lack a strong credit history. However, rates may vary with a cosigner. Interest rates can be fixed (meaning they do not change) or variable (meaning they change based on the economic market). |
| Borrower Protection Plans | The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans. | Depends on the lender, but selections are often limited. |
| Credit Score Requirements | Typically, federal loans do not look at credit scores, except the Direct PLUS Loans. | Most private lenders will be looking for students and cosigners with strong credit histories and scores. |
| Borrowing Limits | For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year. For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan. For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan. | High borrowing limit, up to 100% of the cost of attendance. |
| Grace Period | Federal student loans do not have to be paid if you are a current student who is enrolled at least half-time. Direct Subsidized, Direct Unsubsidized, and the Federal Family Education Loan have six-month grace periods before you start making regular loan payments. | Some private loan lenders provide a six-month grace period, while others will require immediate repayment upon graduating, leaving school, or dropping below half-time enrollment. |
| Repayment Plans | The federal government offers eight repayment options: • Standard Repayment Plan • Graduated Repayment Plan • Extended Repayment Plan • Pay As You Earn Repayment Plan (PAYE) • Revised Pay As You Earn Repayment Plan (REPAYE) • Income-Based Repayment Plan (IBR) • Income-Sensitive Repayment Plan (ISR) • Income-Contingent Repayment Plan (ICRP) | Private student loans tend to have fewer repayment options in comparison to federal student loans. |
When Should You Consider Student Loans?
Before pursuing student loan options, exhaust all other financial aid options. Specifically, this includes college savings accounts, scholarships, grants, and work-study. After all, borrowing money is far more expensive than spending it.
Consider the following options to finance educational costs before resorting to student loans:
College Savings Account
If you have a 529 Plan, a mutual fund, or a Roth IRA that you specifically created to finance your child’s educational costs, tap into them. Be sure to read the fine print so you are meeting withdrawal requirements.
Scholarships
Scholarships are a form of gift aid that is awarded based on academic merit, financial need, racial/ethnic group, specific affiliations, or outstanding achievements.
If your child has received any scholarships, use that money to cover a portion of their college tuition. If not, encourage your child to continuously apply for scholarships. They are offered year-round and can amount to a hefty total.
Grants
Grants are another form of gift aid that do not need to be paid back. They are offered by federal, state, public, and private entities.
Unlike scholarships, however, grants are awarded solely based on financial need. Your child should apply to any and all grants they qualify for.
Work-Study
Work-study is a federal program that employs students with an on-campus job. Specifically, students can work for an allocated amount of hours and use their paychecks at their own discretion. Generally, only students with demonstrated financial need can qualify for federal work-study.
If there is still a lot of money left to pay after you’ve exhausted the above options, consider a student loan.
A Parent’s Role in the Student Loan Process
As first-time navigators in the student loan process, it may be difficult to draw the line in regards to how involved you or your student should be.
Here are two ways parents can aid in the student loan process:
- Parents can help guide their children through the student loan process by explaining how it works. Student loans can be a great opportunity to involve your student in the family’s finances and teach financial literacy. Working with your child to find student loans and discuss long-term goals will emphasize the responsibility of student loan debt and help your child in the long run.
- You can be a cosigner for your child to help them qualify for private loans they may not otherwise qualify for. Unlike most federal loans, which do not require cosigners, students are generally unable to qualify for competitive private loan terms without a cosigner. If you have a strong credit history and are willing to put your name on a loan with your student, consider cosigning. It is a great way to strengthen the chances of your child receiving a more competitive rate.
Parent Loans vs. Student Loans: What Should You Do?
Between parent loans and student loans, they both have their individual pros and cons. Consider your family’s financial needs as you choose between them.
Federal Parent PLUS Loan
The Parent PLUS loan is a parent loan offered by the federal government. This is the only federal loan option for parents.
To qualify for the Parent PLUS loan, you must:
- Be the biological or adoptive parent of a dependent undergraduate student (step-parents may qualify in certain cases)
- Not have an adverse credit history
- Meet general eligibility requirements for financial aid
If you borrow a Parent PLUS loan on or after July 1st, 2023, and before July 1st, 2024, the fixed interest rate is 8.05%, which may be relatively high for someone with a strong credit score. You may want to consider your private parent loan options because they may offer lower, more competitive interest rates.
However, the main benefit of Parent PLUS loans is the potential for loan forgiveness. Between federal parent loans and private loans, determine which option is most viable for your family by factoring in loan forgiveness and borrowing cost projections.
Pros and Cons of a Federal Parent PLUS Loan
| Pros | Cons |
| You may have the option for federal loan forgiveness. Federal loans offer extensive borrower protection plans. Federal loans offer flexible repayment options. All federal loans have a fixed interest rate, so you’ll never have to worry about your rate increasing. | Parent PLUS loans have higher interest rates relative to some private parent loan options. Parent PLUS loans have origination fees. While an excellent credit score is not required, you must pass a credit check. Repayment begins immediately after the loan is disbursed. Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc. |
Private Parent Loan
Private landers (like banks and credit unions) finance private parent loans.
With a private parent loan, you borrow on behalf of your child to pay for their education. Even though the loan is for your student, you have the legal responsibility to pay back the loan because it was originated in your name.
Countless private parent loans are offered by different entities, meaning that each loan has its own repayment terms and interest rates. As you look into your private parent loan options, make sure to compare them side by side and read the fine print so you know exactly what you are getting out of each loan.
Pros and Cons of a Private Parent Loan
| Pros | Cons |
| You can qualify for competitive interest rates if you have good or excellent credit. Given the amount of private lenders in the market, you will have many loan options to consider. You can borrow a private parent loan regardless of your relationship with the student. There are low or no origination fees. | Private parent loans are not eligible for loan forgiveness. There are limited repayment options and borrower protections, in comparison to federal loans. Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc. Interest rates may be higher for parents with low or bad credit. |
Private Student Loan
Like private parent loans, private student loans are offered by private entities.
However, with a student loan, your child borrows the loan. While you can help your child with their loan payments, they have the legal responsibility to pay back the loan in full. If you cosign the student loan, you and your child are both legally responsible for paying back the loan.
Oftentimes, students are unable to qualify for a private student loan or receive competitive terms without a cosigner. This is because they have weak, or nonexistent, credit histories. As a parent, you can offer to cosign the loan so they qualify for more competitive loan terms.
Pros and Cons of a Private Student Loan
| Pros | Cons |
| Your student can build up a strong credit history. Borrowing limits usually meet, or are higher than, the tuition costs. There is no financial need requirement. The loan is in the student’s name if you do not cosign for it. | Private student loans do not qualify for loan forgiveness. Students may require a cosigner to qualify. Private student loans without a cosigner may have higher interest rates than federal student loans. If you cosign the loan, your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc. |
Which Loan Option is Best for Parents?
The best loan option is the one that works best with your family’s needs.
As you are exploring federal and private parent/student loan options, consider your financial standing. Is your family more suited to pay for a private loan with a low interest rate, or would your family benefit more from more flexible repayment options?
Do you want your child to borrow a student loan so they have skin in the game, or would you rather borrow a parent loan because you qualify for a more competitive interest rate and loan terms?
These are all questions you should consider as you compare your options. Remember, there is no one “right” answer. The only right choice is the one you know works best for your family.
Closing Thoughts From the Nest
As you and your student continue to navigate through the student loan process, remember to take a breath and relax. Navigating this process can feel overwhelming, but we’re here to help.
When comparing loan options, consider using Sparrow’s free search tool. If you submit a free application with us today, you can see all the private loans you qualify for across 15+ lenders. We’ll even help you view the long-term loan projections based on different repayment plans and compare loan terms with different cosigners.