What You Need to Know About Student Loans for Parents

You’ve made it — your child is 18, ready to go off into the world and conquer college life. As a parent or guardian, you’re probably experiencing all kinds of feelings right now, from pride to anxiety. I have a child in high school, so I get it. I’m not too far away from being in my own #CollegeParentEra.

If you’re like me, you’re probably stressing over money. Life is expensive right now (Does anyone else want to cry after going to the grocery store?), and college is a huge expense. Your student can take out loans, but they may need extra help funding their tuition. That’s where student loans for parents come in. While these loans can get your student to their end goal, you should learn everything you can about them before taking one out.

An Overview of Parent Student Loans

A parent student loan is a federal or private loan that parents can use to help pay for their dependent’s undergraduate college expenses. These loans are generally used to cover tuition, textbooks, housing and dining, or any other costs associated with school.

Be aware: If you take out a parent student loan, you will be responsible for paying it back, plus interest, even if your student doesn’t complete their degree. Taking on extra debt can be a substantial burden.

"Parents need to think about how the additional parent debt impacts their own financial goals," said Matthew Carpenter, managing partner of College Funding Services and chief strategy officer at College Aid Pro, in an interview with U.S. News & World Report. "Will this harm plans for retirement, their daily lifestyle, or household budget? What is the likelihood of a return on the investment?” 

Parent loans are typically more expensive than undergraduate student loans, so it’s best to have your student complete all their financial aid information first before you decide. Once you know how much financial aid they’ll be getting, you can consider a parent student loan to cover anything left over.

Types of Student Loans for Parents

There are two types of student loans you can take out: federal and private.

A federal direct PLUS loan comes from the United States Department of Education, and it’s available to eligible parents through universities that are a part of the Direct Loan program. (If you’re not certain your school qualifies, check with their financial aid office.) When a parent receives a federal PLUS loan, it’s referred to as a parent PLUS loan. Before applying for this type of loan, make sure your student has completed their FAFSA form.

You can also look into private parent student loans, or you might have the option to cosign for your child’s private student loan.

Federal vs. Private Parent Student Loans

There are a few things to consider when you’re trying to decide between federal and private loans for your student’s education:

Look at the interest rates. Federal parent PLUS loans have a fixed interest rate. That rate is determined each year by the federal government — for the 2025-2026 academic year, it’s 8.94%. Private loan interest rates can be fixed or variable; if you have good credit, you can get more favorable rates, but if your credit isn’t great, you may be looking at higher interest rates and pay more over time.

Examine your credit score. Even with a lower credit score, you may be eligible for a parent PLUS loan. You might need a co-signer or be required to prove to the U.S. Department of Education that your credit history has extenuating circumstances. If you are denied for a PLUS loan, these are your options.

Know what your options are after graduation. Federal loans can often be consolidated into one payment, or put on deferment or forbearance if you experience financial difficulties during the repayment period. Private loans may not have that option unless your student can refinance under their name and take the payments on themselves.

How to Apply for a Parent PLUS Loan

If you opt to apply for a parent PLUS loan, you’ll need to follow a few steps. First, make sure to create an FSA (Federal Student Aid) ID at studentaid.gov. You’ll need this when your student fills out the FAFSA — an essential step before you consider taking out a loan. Their FAFSA results will dictate their net cost for that academic year.

Wait until you hear from your student’s chosen schools before applying for a loan. The schools may award additional financial aid or merit-based scholarships that lower the net cost further.

That FAFSA data will also be used when you apply for a parent PLUS loan:

• Log into the Federal Student Aid site.
• Navigate to the Parent Borrowers section.
• Click on the “Apply for a PLUS Loan” link. You can request a specific amount or borrow the maximum amount for which you’re eligible based on the school’s financial aid package.

During the loan application process, you’ll go through a credit check. If you are denied based on your credit score, you can appeal the decision by providing documentation of your extenuating circumstances. You can also find a co-signer with good credit history and take PLUS credit counseling.

Once your loan is approved, you’ll complete and sign the PLUS Master Promissory Note (PLUS MPN), a legal document where you agree to the terms and promise to repay the money. After that, your student’s school will receive the loan application information and certify the amount to ensure it doesn’t exceed the cost of attendance, minus any financial aid already received.

The loan will then be disbursed to your school, which will use the funds to cover tuition, housing, dining, or any other relevant fees. If there are extra funds left over, that amount is refunded. If there is a leftover amount, consider returning the excess funds to lower your repayment amount.

Applying for a Private Parent Student Loan

Applying for a private parent student loan is a slightly different process, since this loan comes from a private financial institution instead of the federal government. Start by researching the various lenders that offer private parent student loans. Compare their interest rates, fees, repayment terms, and borrower benefits.

You’ll also want to check their eligibility criteria, which are typically things like:

• A good credit score
• Stable income/employment history
• U.S. citizenship or permanent residency

Note that some lenders may offer a pre-qualification process where you can see if you’re likely to be approved and view potential interest rates without negatively affecting your credit score.

After you decide on a lender, gather the required documentation, like your Social Security number, proof of income, employer information, current debts, and anything else the lender may need to consider your application. They’ll also check your credit, just like the parent PLUS loan.

If your application is approved, you’ll get a loan offer. Review the terms and conditions carefully to see if the interest rate is fixed or variable, what kind of fees you’ll have to cover, and the repayment terms.

If you decide to accept the loan offer, you’ll sign a promissory note and any other disclosures required by state or federal laws. The lender will certify the amount through the school, and funds will be disbursed. Be sure to verify your chosen lender's disbursement method. Small lenders may not process and disburse funds electronically, meaning your school may have to certify your loan by paper. This means you will receive a check in the mail, which will take longer to get to you, so plan ahead.

Are There Private Student Loan Relief Options?

While there are student loan relief options for federal loans, the same cannot be said for private loans. There are no standardized forgiveness programs for private student loans, but you may be able to explore options like hardship programs, refinancing, or settlements. Some lenders may also offer the opportunity to lower your monthly payment, but you’ll likely pay more in interest over the life of the loan. If you do run into issues paying your private parent student loan, check out this advice from the Consumer Financial Protection Bureau.

How to Manage Finances While Paying a Parent Student Loan

It’s the 2020s: Managing finances is about as easy as trying to swim through wet concrete. But if you’re going to take on another debt, it’s important to plan for it and stick to that plan so you don’t end up stuck and feeling stressed.

First, create a budget. Your loan terms should give you a good idea of what your payments will be once your student graduates. Cut back on the non-essentials like subscriptions and eating out, and use those funds toward paying off the loan.

Next, familiarize yourself with the loan terms, including any grace periods or deferment options. Late fees add up quickly, so don’t miss any due dates. You may also qualify for an interest rate discount when you set up automatic payments.

If you have other debts to pay (because who doesn’t, unless you’re a Powerball winner?), consider repaying the smaller ones first using the debt snowball method. Once those are paid off, you can allocate that money toward the larger student loan payments.

There’s also the possibility of taking on a side hustle to bolster your bank account. If you have the time, consider part-time work or freelancing. You can put that additional income toward repaying the loan.

Co-Signing on Your Student’s Loans

During the loan application process, you may also be asked to co-sign on your student’s loans. Remember, co-signers assume just as much responsibility to repay the loan as the borrower. Ensure you’ll have enough financial cushion available in case your student misses a payment or falls on hard times.

Are There Other Ways to Fund Your Student’s Education?

Before you jump into taking out loans for college, consider other avenues to fund your student’s education. Encourage them to research and apply for scholarships and grants. Their chosen school may offer scholarships. Local companies might provide grants.

Many states offer scholarship programs. In Florida, students can qualify for Bright Futures by meeting certain requirements. Georgia offers the HOPE scholarship to exceptional students. Research the options available in your state.

You can also establish a 529 savings plan, which helps you save for future educational costs. There are two types: an education savings plan and prepaid tuition plans. The education savings plan allows you to make tax-free withdrawals for education expenses, while a prepaid tuition plan gives you the option to lock in current tuition rates for future college attendance.

Have Questions About Parent Student Loans?

Taking out a student loan can be pretty daunting. At USF, we have a great financial aid team available to answer your questions and help with any issues. If you’re not certain about your loan or your student’s financial aid award, reach out to our team.