It’s only natural that parents want to do all they can to provide for their kids, including helping with their education. This is why many parents save up a college fund for years, gradually building up a sizeable amount of cash to cover the increasing cost of a college education. Paying for your child’s college without financial aid can be a big challenge and that’s where parent student loans come in.
The total student loan debt in the United States now exceeds $1.5 trillion. A typical student graduates with $28,650 in debt, although this figure can be much higher depending on the length and location of study. Many moms and dads out there don’t want to see their kids saddled with such enormous amounts of debt so early on in life. College loans for parents can help, letting you take out a student loan and bear its full cost in place of your child.
A Brookings report has revealed that an increasing of parents are choosing to take out these kinds of loans. Over 3.4 million parents have taken out federal Parent PLUS loans, and many others choose to take out private parent student loans as well. The advantages are clear: you get to handle the burden of debt instead of your child, and you also get more control than by simply being a co-signer. So let’s take a look at the 5 best parent student loans.
Federal vs Private Parent Student Loans
Before we get into the specifics of the various options for parent loans for college students, it’s important to note the difference between federal student loans and private loans. The Federal Student Aid Office provides Parent PLUS loans, which are the first option considered by many parents.
Meanwhile, there are also various private financial companies and banks offering college loans for parents too. The specific details and interest rates of federal and private parent student loans can vary. So it’s wise to shop around and compare the different loan options to see exactly which loan gives you the best deal.
What To Know About Parent Student Loans
When searching for parent loans for college students, here are some key factors to consider for parent borrowers:
- Interest Rates – Interest rates are always an important factor to think about when looking for any kind of loan funds. The lower the rate, the less debt you’ll have to deal with. A few loans also have a fixed interest rate.
- Fees – Student loans for parents can sometimes come with a range of fees and charges, like origination fees. Finding loans without fees or with minimal fees is key so the total loan amount does not become too overwhelming.
- Eligibility – To be eligible, you have to meet certain loan terms. In general, when applying for parent student loans, you’re going to need a good credit score and strong credit background in order to be approved.
#1- Parent PLUS Loans
As mentioned above, Parent PLUS is the only option for federal loans when it comes to parent student loans. Here’s everything you need to know about them:
- Overview – Parent PLUS loans aren’t the best in terms of interest rates or fees, and can actually give you the highest total amount of debt. However, the loan program is still one of the best options for parent student loans due to their simple eligibility requirements and the easy application process. You will be required to fill out Free Application for Federal Student Aid, commonly known as FAFSA. Being a federal loan, it may present a few advantages. For example, the loan can be put into deferment during unemployment or difficult financial times.
- Eligibility – One advantage of Parent PLUS loans is that the eligibility requirements are quite relaxed. For private lenders, you often need a strong credit score, but you can get Parent PLUS loans with a lower score. The only real eligibility requirements are that you are a biological or adoptive parent of an undergraduate student, that the student be enrolled at least half team, and that you don’t have an adverse credit history. You’ll also need to meet the basic Federal Student Aid requirements.
- Fees – In terms of fees and charges, the one big thing to worry about with Parent PLUS loans is the origination fee. This currently adds up to 4.236% of the initial loan cost, so it can add a lot to your overall total.
#2- SoFi Parent Student Loans
SoFi has established itself as a leading provider of student loan refinancing and has recently begun offering private student loans too, including college loans for parents.
- Overview – One unique advantage of SoFi Student Loans is that it’s online-only. So everything is done digitally, including the application process. This can be very convenient and helps to speed things up in terms of applying, getting approved, and getting your money. With no fees and very competitive interest rates, SoFi also stands out in terms of value. Plus, it offers a range of unique member benefits like career coaching and financial advice.
- Eligibility – The only real downside to SoFi is its strict eligibility criteria. SoFi is a lender that aims to work with quality borrowers and therefore has strict credit check. This means that you’ll need to have a strong credit history and a solid financial situation too. SoFi doesn’t publicly share its precise requirements in regard to the eligibility for these loans. But reports show that borrowers generally tend to have incomes exceeding $100,000 and you must be a U.S. citizen.
- Fees – As stated earlier, one of the best aspects of choosing SoFi for parent student loans is that you don’t have to worry about any fees, whatsoever. No origination fees, no insufficient funds fees, no late fees, and no other hidden charges.
#3- Sallie Mae Parent Student Loans
Sallie Mae also offers parent student loans, allowing parents to take out loans for their children in their own names.
- Overview – Sallie Mae parent student loans are available to both parents and other individuals who want to support a student during their education. With some competitive rates, discounts for those who use auto-debit payments, no origination fees, and free study help and homework support, these loans have an impressive list of advantages. Since they’re not exclusively for parents, they can be an option for non-parents who want to help out. They also come with flexible repayment options, and the minimum amount of these loans is just $1,000.
- Eligibility – The eligibility requirements for Sallie Mae parent student loans are similar to what you will see with other banks and lenders. Applicants need to be creditworthy, with a good FICO score and strong financial situation.
- Fees – Sallie Mae doesn’t charge any origination fees or prepayment penalties.
#4- College Ave Parent Student Loans
College Ave is a student loan specialist, providing regular undergraduate loans as well as parent loans.
- Overview – An interesting aspect of College Ave parent student loans is that they give you the option to get up to $2,500 of the loan sent directly to you, rather than the student, giving you a little more control over how the money gets used. College Ave offers speedy online applications and a lot of customization options too, letting you decide how you want to pay. You can choose between interest-only payments, interest plus payments, and other options. Loans from this provider can run between five and 15 years and go from a minimum of $1,000.
- Eligibility – You’ll need a credit score above 700 to qualify for a parent student loan from College Ave. This is in line with many other private lenders, putting College Ave on par with other big names like Sallie Mae and SoFi.
- Fees – Just like with Sallie Mae and SoFi, there are no fees or charges for parent student loans with College Ave.
#5- Citizens Bank Parent Student Loans
Citizens Bank is another option you might consider when searching for the best parent student loans.
- Overview – Citizens Bank aims to provide highly competitive rates, standing out from the other options listed above by providing a 0.5% discount for autopay. It also provides multi-year approval processes, meaning you only need to apply once and can then request funds for each year until graduation, and provides quite a few flexible payment plans too.
- Eligibility – To apply for parent student loans with Citizens Bank, you’ll need to provide proof of income, have a good credit score (700+), and provide quite a lot of information about yourself and the student in question. It’s not the speediest application process, but the eligibility requirements are very similar to other lenders.
- Fees – Citizens Bank doesn’t charge any application, origination, or disbursement fees on its parent loans for college students.
College education costs are going up and it’s becoming more and more difficult for many parents to just save up and pay those costs outright. Parent student loans are one option that can help, and the five types listed above are the best college loans for parents you can find right now.
It’s important, however, to compare your options. There are plenty of private student loans you can co-sign with your children too, still allowing you to be able to help out with repayment plans and provide support to your children.
Plus, when your kids graduate and head off into employment, they’ll be able to make use of various tools and services to assist with their student loan repayments. They can use a service like FutureFuel.io, for example, to find the best refinancing option for their student loans and cut down their interest rates, or they can seek out loan forgiveness programs.
So, when it comes time to thinking about college education and which type of loan to take out, be sure to do all of your research. There are some great parent student loans out there, but private student loans can have a lot to offer too.