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4 Benefits to Letting Your Student Borrow for College

If you’re deciding whether to take out loans for your child or have them take that responsibility, a private student loan with a parent as a cosigner can be a good compromise.

Eric Rosenberg Eric Rosenberg Edited by Ashley Harrison Updated October 7, 2021

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

Many parents want to pay for their kids to go to college. Others want their kids to take on a portion of the cost themselves.

But how about a compromise? A private student loan your child takes out, but with you as a cosigner.

Here are some benefits of taking out private student loans with a cosigner that could help your child for years to come.

Here are four benefits to letting your student borrow for college:

  1. Taking out a student loan can help build their credit
  2. Parent PLUS Loans generally have higher interest rates than private loans
  3. Your child’s loan could be eligible for income-contingent repayment
  4. You can still help your student while they’re in college

1. Taking out a student loan can help build their credit

If your student is the primary borrower of a private student loan, the loan balance and payments will show up on their credit report. But, as a cosigner, it will appear on your credit report as well. A positive payment history from private student loans is a great first step to helping your child establish good credit.

Good credit is helpful in many ways. For example, when applying for an apartment, landlords typically look at credit. When getting a loan for a car after college, credit scores influence loan approval and interest rates. Adding your student as a cosigner, even if you plan to make payments yourself, can help them build credit.

2. Parent PLUS Loans generally have higher interest rates than private loans

There are two types of parent loans: federal and private. Both are a common way for parents to help pay for their child’s education, but you shouldn’t rush to take out a federal PLUS Loan before reviewing other options. If you have good credit, you may be able to get a private student loan at a lower interest rate.

Fixed ratesOrigination fee
Parent PLUS Loans7.08%4.248%
Private student loansFrom 3.65%+ None
Rates on federal PLUS Loans for the 2019-2020 academic year. Interest rates on loans disbursed from July 1, 2019, through June 30, 2020. Private student loan info applies to lenders on the Credible marketplace.

Learn More: Parent PLUS Loans vs. Private Student Loans

In some cases, students and parents qualify for a rate higher than the interest rate charged for Parent PLUS Loans. But that doesn’t make them cheaper. Parent PLUS Loans come with a hefty 4.248% origination fee. Once you take that into account, it may be more expensive than a private student loan with a cosigner.

If you’re looking for lower interest rates on private student loans, Credible has you covered. You can compare multiple lenders at once by filling out just one form.

LenderFixed rates from (APR)Variable rates from (APR)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.62%+10 5.86%+10


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.99%+1 5.1%+


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.74%+2,3
4.74%+2,3

custom choice

Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
3.65%+ 5.67%+

edvestinu student loan refinance

Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
7.52%+7 6.99%+7


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.37%+8 5.86%+8


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.89%+ N/A


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.509 - 14.83%9 5.49%9 - 15.83%9
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3. Your child’s loan could be eligible for income-contingent repayment

The Department of Education offers several income-driven repayment plans for federal direct loans to students that are not possible for parents. If your child takes out federal student loans, they could have income-driven repayment options that aren’t available to you.

If your student plans on Public Student Loan Forgiveness (PSLF), they’re required to enroll in an income-driven repayment plan that lowers their monthly payment. PLUS Loans made to parents are eligible for PSLF, but not most income-driven repayment plans. Parents that consolidate PLUS Loans for their child’s education may be eligible for the Income-Contingent Repayment Plan, but not PAYE, REPAYE, or IBR.

4. You can still help your student while they’re in college

When your student takes out a loan with you as a cosigner, you’re in a great position to encourage and guide your child. The joint-status is an opening for you to teach your child important financial lessons and habits around their loan.

A cosigned loan makes it easy for you to support your student while they are in school. For example, you could make their loan payments during school to help avoid a growing balance. At graduation, they can take over the monthly payments.

Going to college is one of the first major investments your child will make. Joining them as a partner in paying for college helps you share in the cost of sending them to school while empowering him or her to take charge of their future.

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About the author
Eric Rosenberg
Eric Rosenberg

Eric Rosenberg is an expert on personal finance. His work has been featured at Business Insider, Investopedia, The Balance, The Huffington Post, MSN Money, Yahoo Finance, Mint.com and more.

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