Parent Student Loans

Before Borrowing Parent Student Loans

Perhaps the best thing you can do as a college parent is to help oversee the financial aid process. You want to make sure your child’s college bill is paid (in a timely manner) so they can concentrate on school. Before you borrow parent college loans, make sure you have taken all of the appropriate financial aid steps:

  1. Complete the FAFSA with your student
  2. Help your student look for college scholarships
  3. Review the financial aid award letter from the school with your student. If you are selecting from multiple colleges, carefully compare college costs.
  4. Have your student take out low-cost college student loans from the federal government
  5. If you are willing to help your student pay for school, explore parent student loans, such as the Direct PLUS Loan
  6. If you want the loans to stay in your student’s name, you can co-sign for his/her private student loans

Parent Student Loans vs. Other Financial Options

Parent loans? Retirement funds? Savings? There are many ways to help your child pay for college. Depending on the cost of the school your child is attending, you may be able to cover college costs without borrowing any parent college loans. But for most families, cash and savings reserves cannot cover an entire college education. That’s when you need to understand and explore your financial options, including parent college loans.

Option Advantages Disadvantages Good Idea?
Savings Cheaper than borrowing money
  • A great way to pay for college if you were able to save money and raise kids!
Credit Cards or cash advance Easiest
  • Most expensive choice you can make
  • Most colleges charge a 3% convenience fee for accepting credit cards
  • Interest charges typically compounded monthly.
  • Your growing balance can become extremely difficult to pay off and can damage your credit
401(k) withdrawal Or Pension Fund withdrawal You are borrowing from yourself
  • Withdrawals are taxed
  • You lose valuable compounding – the key to growing your retirement money
  • Can severely reduce the amount of money you have at retirement
  • With your help, your child can find ways to borrow for college – who will lend you money to retire?
Home Equity Small impact on the monthly budget
  • Equity may not be available in this economy
  • Closing costs can be high
  • Risk foreclosure to pay for college. What happens if a financial emergency comes up and you can't afford the payments? You lose your house!
Direct PLUS Loan (Parent student loans) Can borrow up to the full cost of your child’s attendance minus other aid received

For new parent loans, no payments due until 6 months after your child graduates or drops below half-time enrollment
  • Fixed interest rate of @PLIRCurrent%
  • Parent loans are always in your name, not your child's
  • You are responsible for paying back the loan, not your child
  • Must complete the FAFSA to apply
  • Credit check required, although more lenient than typical consumer loans
  • @PLOFCurrent% origination fee set by the U.S. government
  • Student must be under the age of 24, unmarried, an undergraduate and considered a dependent
Co-sign a private student loan Easy, fast, convenient

Loan in your child’s name

Can borrow up to the full cost of your child’s attendance minus other aid received
  • Interest rates are based on credit
  • Fixed and variable options are available
  • Fewer repayment options than federal student loans.

As you can see from the chart above, there are many options for you to help your child pay for college, from savings to parent student loans. Only you can decide which option is best for you.

What are parent student loans?

As a parent, you have several loan choices to help your child pay for school. The most common type of parent student loans are Direct PLUS Loans (see chart above). Direct PLUS Loans are made in your name, not the student’s, and you are fully responsible for making sure the loan gets paid back. There may also be lenders who offer private parent student loans in your name, if you want to try to compare rates to the Direct PLUS Loan.

If you don’t want to have parent student loans in your name, you might research becoming a co-signer on your child’s private student loan. Private student loans are made in the student’s name, but you are also a responsible party on the loan as a co-signer. Learn more about becoming a co-signer.

Ready for a private student loan?

If you need to borrow money for your child’s college, and you don’t want the loan in your name, private student loans can be a great option. Private loans can cover up to the total cost of attendance for your child, which may include tuition, books, room and board, travel, a computer and more. You’ll want to read our section on Becoming a Co-signer to better understand your responsibilities in the private student loan process.

Need Help?

College Loan Corporation has helped over 800,000 families find student and parent college loans!

Should you have questions, experience our first-class customer service for yourself by calling 1.800.2COLLEGE®, or check out our many testimonials from parents and customer-service awards.