PRIVATE PARENT STUDENT LOANS

Yes, you can still take out both federal and private parent loans during the COVID-19 pandemic. If you need to borrow money to pay for school, it’s generally a good idea to start with federal loan options before turning to private student loans to help fill any gaps.

To take out federal student loans, your child will need to fill out the Free Application for Federal Student Aid (FAFSA). You can also apply for a federal Parent PLUS Loan by submitting a Direct PLUS Loan application.

If you decide to get a private student loan, be sure to consider as many lenders as possible to find the right loan for your situation.

As you weigh your lender options for a private parent student loan, here are several important points to consider:

• Interest rate: This is one of the biggest factors that will affect your overall loan cost. The lower your interest rate, the less you’ll pay for a loan over time. You’ll generally need good to excellent credit to qualify for the best rates. You might also get a better rate if you pick a shorter repayment term.
• Repayment terms: You’ll typically have five to 20 years to repay a private student loan, depending on the lender. Keep in mind that some lenders don’t offer longer terms to parent borrowers, though. It’s usually best to choose the shortest term you can afford to keep your interest costs as low as possible.
• Loan amounts: You might be able to borrow up to your child’s cost of attendance with some lenders, while others offer lower loan maximums.
• Fees: Some lenders charge fees on private student loans, such as origination fees or prepayment penalties. These can increase your total loan cost. Keep in mind that if you take out a loan with one of Credible’s partner lenders, you won’t have to worry about application, origination, or disbursement fees.
• Discounts: Many lenders provide rate discount options to borrowers. For example, you might get a rate discount if you sign up for automatic payments, while other lenders provide discounts to borrowers who already have an account with them.
• Cosigner release: If you decide to cosign your child’s loan rather than taking out a parent loan in your name, you’ll share responsibility for the loan. However, some lenders provide a cosigner release option, which means you could be removed from the loan in the future. To qualify, you’ll generally have to make a specific number of consecutive, on-time payments — usually 12 to 48, depending on the lender.

If you’re ready to apply for a private parent student loan, follow these four steps:

1. Gather your information. When you apply for a private student loan, you’ll need to provide a variety of personal and financial information, such as your name, Social Security number, and proof of income. Also be prepared to answer questions regarding your child’s school, cost of attendance, and any other financial aid they’ve gotten.
2. Compare lenders and pick a loan option. Be sure to compare as many lenders as you can to find the right loan for you. Consider not only interest rates but also repayment terms, any fees charged by the lender, and eligibility requirements. After you’ve done your research, choose the loan option that best suits your needs.
3. Complete the application. Once you’ve picked a lender, you’ll need to fill out a full application and submit any required documentation, such as tax returns or pay stubs.
4. Manage your payments. If you’re approved for the loan, the lender will request certification from your child’s school. This process can take a few weeks or more, depending on the school. Afterward, be prepared to begin making payments. You might consider signing up for autopay so you won’t miss any payments in the future — many lenders provide a rate discount to borrowers who opt for automatic payments.

If you’re the parent of a college student, there are two types of student loans that you can access, including:

• Parent PLUS loans: These federal student loans are a kind of Direct PLUS Loan available to parents who want to cover their child’s education costs. Unlike most other federal loans, Parent PLUS Loans require a credit check. They also generally have higher interest rates.
• Private student loans: These loans are offered by private lenders, including online lenders as well as traditional banks and credit unions. Some lenders also provide private loans specifically designed for parents. Additionally, if you have excellent credit, you might qualify for a lower interest rate on a private loan compared to a PLUS Loan.

If you’re thinking about applying for a Parent PLUS Loan, here are a few potential benefits to keep in mind:

• Fixed interest rates: All federal student loans come with fixed interest rates, which means your payments will stay the same throughout the life of your loan.
• Higher loan amounts: With a PLUS Loan, you might be able to borrow up to the cost of attendance of your child’s school (minus any other financial aid they’ve received).
• Come with federal protections: Like other federal loans, Parent PLUS Loans provide federal benefits. For example, if you consolidate your PLUS Loan into a Direct Consolidation Loan, you can sign up for an income-driven repayment (IDR) plan. You’ll also have access to student loan forgiveness programs and other protections.

Federal student loans also come with some possible drawbacks to be aware of, such as:

• Requires a credit check: Unlike with other federal loans, you must pass a credit check to be eligible for a PLUS Loan. While you don’t need to have a specific minimum credit score, you can’t have an adverse credit history. This means your credit report can’t have any negative information — such as defaults, foreclosures, or bankruptcies — listed from the past five years. If you have an adverse credit history, someone with good credit will need to agree to endorse your loan (similar to cosigning).
• Higher interest rates and fees: PLUS Loans have higher interest rates compared to most other federal loans. Also keep in mind that like other federal loans, PLUS Loans come with a disbursement fee that will reduce the actual amount of money you get. For the 2021-2022 academic year, this fee for PLUS Loans is 4.228% — much higher compared to Direct Subsidized or Unsubsidized Loans.
• No grace period: PLUS Loans don’t have a grace period, which means your repayment period will start as soon as the loan is disbursed. However, you might be able to defer your payments if your child is enrolled at least half time, as well as for six months after your child leaves school or drops below half-time enrollment.

Like federal loans, private student loans for parents also come with pros and cons to consider. A few of the potential advantages include:

• No application deadline: Unlike with federal loans, you can apply for a private student loan at any time.
• Lower interest rates: If you have excellent credit, you could qualify for a lower interest rate on a private loan compared to a PLUS Loan.
• Variable rates available: Unlike federal loans, many private student loans offer a variable-rate option. While a variable rate can fluctuate depending on market conditions, choosing one might be a cost-effective option if you plan to quickly repay your loan before the rate can change.

There are also some possible disadvantages to consider, such as:

• Fewer options for poor or fair credit: You’ll typically need good to excellent credit to qualify for a private student loan. This means you might have a hard time getting approved if you have poor or fair credit.
• No federal protections: Private loans don’t come with the benefits of federal loans.
• Lack of repayment options: Private loans don’t offer the variety of repayment options available with federal loans. For example, you likely won’t be able to sign up for an IDR plan or graduated repayment plan.

If you decide to take out a private parent loan, remember to consider as many lenders as you can to find the right loan for your needs.

Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.

While a parent student loan can be a good choice in some cases, it isn’t right for everyone. Here are a couple of important points to keep in mind as you consider your options:

• Your credit. If you don’t have a good credit history, it could be difficult to qualify for a Parent PLUS Loan or private student loan. Additionally, if you opt for a private loan, you could end up with a higher interest rate — which means you’ll pay more in interest over time.
• Loan responsibility. Taking out a parent loan in your name means you’re responsible for repaying it. If you don’t want to be the only person liable for repayment, you might consider cosigning a private student loan in your child’s name instead. However, cosigning your child’s loan still means you’ll be on the hook if they don’t make their payments.

The requirements for taking out a parent student loan depend on the type of loan you choose.

Federal parent student loans
Here are a few of the requirements you’ll need to meet to take out a Parent PLUS Loan:

• Residency: You must be a U.S. citizen or eligible non-citizen.
• Have a dependent student: You must be the biological or adoptive parent of a dependent student (stepparents might also qualify in some cases) who is enrolled at least half time at an eligible school.
• Good credit: You must pass a credit check. If you have an adverse credit history, someone with good credit will need to act as an endorser for the loan.

Private parent student loans
Eligibility criteria for private student loans can vary by lender, but a few common requirements that you’ll likely come across include:

• Good credit: Most lenders require you to have good to excellent credit — a good credit score is usually considered to be 700 or higher. There are also some lenders that offer student loans for bad credit, but these loans usually come with higher interest rates compared to good credit loans.
• Verifiable income: Some lenders have a minimum income requirement while others don’t — but in either case, you’ll likely need to provide proof of income.
• Low debt-to-income ratio: Your debt-to-income (DTI) ratio is the amount you owe in monthly debt payments compared to your income. Lenders typically prefer borrowers to have a DTI ratio no higher than 40% for private student loans — though some lenders might require lower ratios than this.

This depends on the type of loan you get.

• For Parent PLUS loans, the borrower must be the biological or adoptive parent (or stepparent in some cases) of the student to be eligible. If you aren’t the student’s biological parent and haven’t formally adopted them, you won’t be able to take out a PLUS Loan.
• For private parent student loans, the parent and guardian eligibility rules will depend on the individual lender. If you’re considering a private loan, be sure to check with the lender to see what their specific rules are.

If you aren’t eligible for a parent loan, another option might be cosigning a private student loan taken out by the student. This could help them qualify more easily for a loan — especially if they have poor or no credit — and might get them a lower interest rate than they’d get on their own.

Just keep in mind that as a cosigner, you’ll share responsibility for the loan — meaning you’ll be liable if the student doesn’t make their payments.

How much you’ll be able to borrow can vary depending on the kind of loan you choose.

• With a federal Parent PLUS Loan, you can borrow up to the cost of attendance of your child’s school (minus any other financial aid they’ve received).
• With a private student loan, loan maximums will depend on the lender. Some lenders allow you to borrow up to the cost of attendance of your child’s school, while others have lower loan maximums.

Federal student loan rates are set by Congress each year. Here are the rates you can expect for the 2021-2022 academic year:

• Parent PLUS Loans: 6.28%

Private student loan rates, on the other hand, are determined by individual lenders based on market conditions. Also keep in mind that the actual rates you’re offered will be affected by other factors, such as your credit score and the repayment term you choose.

Here are the rates you can expect on private student loans from Credible’s partner lenders:

• Fixed rates starting at: 3.22% APR
• Variable rates starting at: 2.49% APR

There are also a few strategies that might help you qualify for a better rate on a private loan, including:

• Have good credit. Lenders generally offer their best rates to borrowers with good to excellent credit. If you’d like to get approved for lower rates in the future, you might consider spending some time building your credit. There are several potential ways to do this, such as making on-time payments on all of your bills and paying down credit cards.
• Apply with a cosigner. If you have poor or fair credit, applying with a creditworthy cosigner could improve your chances of getting approved. Even if you don’t need a cosigner to qualify, having one might get you a lower rate than you’d get on your own.
• Compare lenders. Shopping around and comparing your options from as many lenders as possible can help you find a loan with the most optimal rate for your needs.

The best private parent student loan lenders are ones that provide competitive interest rates, a wide selection of loan terms, inclusive eligibility requirements, and responsive customer service.

To find the best loan for your needs, it’s important to shop around and compare as many lenders as you can. Here are some of the most important details about the loans offered by Credible’s top parent student loan lenders. Note that while some of these lenders don’t provide a specific parent loan, each of them allows parents to act as a cosigner on their child’s loan.

• Ascent: If you have poor or fair credit, Ascent could be a good option for a private student loan. You can borrow $2,001 to $200,000 (depending on if your credit is tested or not) with repayment terms from five to 20 years (depending on your loan type).
• Citizens: With Citizens, parents can borrow $1,000 up to $350,000 (depending on your child’s degree) with a five- or 10-year term.
• College Ave: With College Ave, parents can borrow $1,000 up to 100% of your child’s cost of attendance with terms from five to 15 years. Additionally, parents have the option to receive up to $2,500 of the loan directly, giving you more control over your child’s spending on textbooks, electronics, or other educational expenses.
• Custom Choice: If you need a smaller student loan, the Custom Choice Loan might be a good option. You can borrow $1,000 to $99,999 annually ($180,000 aggregate limit) with a three- or five-year term.
• EDvestinU: If you have excellent credit, EDvestinU could be a good choice. You can borrow $1,000 up to 100% of your child’s cost of attendance ($200,000 aggregate limit) with terms from seven to 15 years.
• INvestED: If you live in Indiana or your child is attending an Indiana school, INvestEd could be a good option. You can borrow $1,001 up to 100% of your child’s cost of attendance (minus any other financial aid they’ve received) with terms from five to 15 years.
• MEFA: With MEFA, you can borrow $1,500 up to your child’s certified cost of attendance (minus any other financial aid they’ve received) with a 10- or 15-year term. Keep in mind that MEFA loans can be used only for nonprofit or public universities — for-profit schools aren’t eligible.
• Sallie Mae: With Sallie Mae, parents can borrow $1,000 up to 100% of their child’s school-certified cost of attendance with terms from 10 to 15 years. If you opt to cosign your child’s loan instead, keep in mind that Sallie Mae offers cosigner release after just 12 months of consecutive, on-time payments — a shorter time than most lenders.