Parent PLUS Loans Vs. Private Student Loans

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Parent PLUS loans are government loans that parents can take out to pay for all or some of their child’s college education. According to the U.S. Department of Education, approximately 3.6 million parents hold this type of loan. You can borrow up to your child’s cost to attend school, minus any other financial aid they receive.

It’s important to note that loan costs are a bit higher than those of federal loans designed for students. Parents need to pay an origination fee that is 4.228 percent of the loan amount and are charged a federal student loan interest rate of 8.94 percent for the 2025-26 academic year.

While federal Direct PLUS Loans (also known as Parent PLUS loans) come with fixed interest rates and federal protections, private student loans can have variable interest rates and higher fees. The right choice for you depends on your priorities and your family’s financial situation.

Parent PLUS vs. private student loan rates

Parent PLUS vs private loan costs

Here is a comparison table to give an idea of what your loans may look like if you were to take a parent PLUS or private loan with a $10,000 initial loan amount with a FICO score in the “good” range.

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How do federal parent PLUS loans work?

• Each year, lenders set the interest rate for its private loans; Congress sets the interest rate for parent PLUS loans.
• Federal loans only have a fixed rate; private loans can come with either fixed or variable rates. 
• Interest accrues on federal parent PLUS loans as soon as the loan is disbursed, though you can defer payments while your child attends school. 
• Parent PLUS loans are eligible for forgiveness programs and income-driven repayment plans, which can make monthly payments more affordable.
• Parents will need to reapply for the Parent PLUS loan annually.

To apply for a parent PLUS loan, follow these steps:

1. Check your eligibility: You need to be the biological or adoptive parent of a dependent undergraduate student who is enrolled at least half-time in an eligible school. Stepparents qualify in some cases, but grandparents and legal guardians do not. You’ll also need to meet eligibility requirements for federal student aid and have a strong credit history.
2. Fill out the FAFSA: Before you apply for the loan, your child should first fill out and submit the Free Application for Federal Student Aid (FAFSA).
3. Apply for the loan: Head to the Direct PLUS Loan Application for Parents to apply. If you qualify, the loan will be included in your child’s financial aid package.
4. Receive the funds: The Department of Education will send the funds directly to your child’s school, which applies the money toward tuition, fees, room, board and other school-related expenses. Any funds left over will be disbursed to you (or the student, if you allow).
5. Consider your repayment options: Parent PLUS borrowers are eligible for four types of repayment plans – a standard repayment plan, a graduated repayment plan, an extended repayment plan and an income-contingent repayment plan (if parent PLUS loans are consolidated into a Direct Consolidation Loan).

How do private student loans for parents work?

• Private student loans originate from private financial institutions such as banks, credit unions and online lenders. You’ll likely need to reapply each year.
• Parents may take out the loan as the primary borrower or as a cosigner for their child. Private lenders may offer a cosigner release after a series of consecutive, on-time payments.
• Most private student loan lenders have a minimum credit score requirement and use this information to determine the borrower’s interest rate. 
• Private loans tend to have several repayment terms ranging from five to 20 years and allow you to borrow more than the federal loan limit, sometimes up to the full cost of attendance. 
• Private loans lack the income-driven repayment plans and student loan forgiveness opportunities that federal loans offer.

3 parents explain how they’re covering rising education costs

Three parents in different stages of schooling share how much they’re paying for their children’s education and the financial tools they’re using to do so.

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How parents can decide which loan to choose

The decision between federal PLUS loans and private parent or student loans is a personal one, but there may be some circumstances in which one loan works better than the other.

Parent PLUS loan

• You want to use federal loan benefits
  

  If you want access to longer repayment periods, then parent PLUS loans could be your best option. You could be eligible to repay parent PLUS loans with a graduated, extended or income-contingent repayment plan, provided you consolidate your parent PLUS loans with a Direct Consolidation Loan first.

• You work in the public or nonprofit sector
  

  If the borrowing parent works in a PSLF-eligible position, their Parent PLUS loans may be eligible for the program if they’ve been consolidated and paid under a qualifying repayment plan.

• You have fair credit
  

  Since the federal student loan rate is set by Congress every year and is the same for all borrowers regardless of credit, you don’t have to worry about your lower credit score triggering a higher interest rate.

Private loan

• You have excellent credit
  

  If you have a strong credit score and a long credit history, you may be able to get a much lower interest rate with a private parent loan. To find out about the interest rate you might qualify for as a private parent loan applicant or cosigner, look for online lenders that let you “get prequalified” or “check your rate” without a commitment.

• You want a variable rate
  

  Where federal PLUS loans come with a fixed interest rate only, private student loans can have either fixed or variable rates. In some cases, a lower variable rate could be more advantageous in the short term.

• You want to avoid fees or get a discount
  

  Parent PLUS loans charge an origination fee of 4.228 percent, but private student loans often come with no origination fee.

Is it better for a parent or a student to take out a loan?

The answer to this question depends on the parent and student’s unique financial circumstances. Generally speaking, the student should maximize their federal student loans before seeking help from their parents.

Once a student has exhausted their federal student loans, they should discuss their next set of options with their parent(s) to determine the best path forward. Parents should weigh the pros and cons of getting a parent PLUS loan before applying for a private student loan in their name only or cosigning a private loan with their student. It’s important to keep in mind that the parent bears responsibility in all three scenarios.

Bottom line

If you’re a parent who wants to provide financial help for college, either a parent PLUS loan or a private loan could meet your needs and fill the gap between financial aid and the cost of attendance. Your best bet is comparing both options based on how much they would cost you over the long term.

A good starting point is to check out private student loan rates and fees and compare them to the fixed, expected costs of parent PLUS loans. If you can save money and secure a comparable monthly payment and repayment timeline with private student loans, doing so could lead to considerable savings.