Loans

Parent PLUS Loan vs. Private Loan

The table below shows a comparison of the Federal Parent (PLUS) Loan vs. a Private Student Loan.

  Federal Parent PLUS Loan
Private Loan
Responsible Party Parent Student
Co-Signer Requirement No (Optional if denied due to adverse credit.) Varies depending on lender.
Interest Rate Fixed at 7.9% Variable, ranges from 3-13%.
Interest Tax Deductible Yes, parents may be able to use interest paid on loan for tax deduction, subject to IRS guidelines. Yes, student may be able to use interest paid on loan for tax deduction, subject to IRS guidelines.
Fees 4% Origination Vary depending on lender.
  May have lower fees but higher interest rates.
Minimum Requirement $100 per semester Varies depending on lender. Range: $500-$1500 minimum.
Loan Limits Can borrow up to student's cost of attendance Can borrow up to student's cost of attendance.
  May have limit depending on lender and credit history.
Credit Check Credit check required. Credit check required.
No debt-to-income ratio requirement Minimum income and debt-to-income ratio requirement.
Repayment Begins 60 days of loan being fully disbursed. Vary depending on lender.
10-25 years. 4-25 years.
Deferment Can request to defer until student is no longer attending at least half time. Vary depending on lender.
Application Process One page application. Online with lender.
  Should exhaust all federal assistance options before applying.
Consolidation Can be included with parent's other federal loans (not student's). Can NOT be included with federal student loans.
Denial If parent applies and is denied, the student is eligible for additional unsubsidized loans. If denied, would have to try another private lender.
Advantage / Disadvantage Parent can check PLUS loan balances on the same site as other Federal Loans: www.nslds.ed.gov Must log on to each lender's site and track yourself. No central site to check all private loans.
Release No, parent made commitment to repay loan. Vary depending on lender, may apply to release cosigner.
Forgivable Yes, if primary borrower or student beneficiary dies or if primary borrower becomes disabled, payments may be waived (conditions apply). Varies by lender. Some waive remaining balance in event of primary borrower's death or permanent and total disability.
Other Student and parent can work out payment arrangements.
Example: the loan is in the parent's name, but the student can make payments.
Student and parent can work out payment arrangements. Example: the loan is in the student's name, but the parent can make payments.
    If the student is dependent, one parent must sign the student's private loan paperwork stating they are aware they had the Parent PLUS option but are choosing the private loan option.

 

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