Student loans are becoming almost mandatory in order to pay for a college education. While the federal government holds the large majority of student loans, more students are starting to look at private student loan offerings. In addition, more parents are taking out private loans on behalf of their children.

Carlo Salerno, a Washington, D.C. education economist, says that parents are playing a much bigger role in paying for their children’s education than ever before. Part of that larger role includes federal loans like the Parent PLUS loan, but many parents are looking to private funding sources to make those ever-growing college tuition payments.

One important point to note about private loans is that they aren’t eligible for the income-based repayment plans offered by the federal government for its own loans. A little research, however, can net a loan package that will offer flexibility and fit your budget even without the federal repayment plans.

Several private financial companies offer loans geared specifically to parents. It can be confusing to see just how many types of loans are out there; let’s compare a few of the more well-known loan products for parents. Keep in mind that in most cases, interest rate for parent loans, as well as total amount approved, is determined by creditworthiness.

Parent Private Student Loans

SoFi Private Loans

SoFi’s Parent Loan is a no-fee product with an interest rate that starts at only 4.020% APR – almost half of the federal Parent PLUS rate of 7%. Loans can be fixed or variable rate, and can be set to either be paid off quickly or have a lower monthly payment, so parents can have some flexibility in repayment. In addition, SoFi offers several benefits with their parent loans, including career coaching for the student, and licensed wealth advisors for the parent borrowers.

Citizens Bank​​​​

Citizens Bank offers a parent loan that allows borrowers to get up to $295,000, at a lower rate than the federal PLUS loan. Repayment options include both deferred plans and an interest-only plan that lets parents wait until their child graduates school in order to begin principal payments, only paying interest during the student’s time in school. The loan has no origination fees, and rates start at 6.64% APR.

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Sallie Mae

Parent loans at longtime educational lender Sallie Mae include interest-only repayment for up to 48 months, with principal and interest payment terms stretching out to 10 years. Fixed rate loans start at 5.74% APR, and variable rates start lower, at 5.12% APR. Students need to be enrolled in a degree or certificate-granting program in order for their parents to qualify; in addition, the loan may qualify for a tax deduction. 

The loans have no origination fees or pre-payment penalties, and setting up automatic payments offers another .25% discount on the interest rate.

Wells Fargo

Wells Fargo has several options with their parent loans, including interest-only payments for 4 years and a list of ways to get discounts on the interest rate, such as having a checking account with the bank. With the discounts, the variable rates start at 5.24% APR, and fixed rate parent loans start at 6.49% APR; without any discounts, rates can reach up to 12.99% APR.  

There are no fees for setting up a loan, and paying the loan early won’t result in fees. Loan proceeds are disbursed directly to the parents, offering a measure of control, and the max amount available to borrow is the full cost of attendance, up to $25,000 per year or a $100,000 lifetime limit.

College Ave

One of the more flexible parent loan programs is at College Ave. Their loan products offer three repayment options: interest-only, full principal/interest, or interest plus. The third plan allows parents to set their own monthly payment while the student is in school as long as the interest amount is met each month. The no-fee loans start at 6.62% APR for a fixed rate with automatic payments, and variable rates begin at 4.33% APR with auto-debit. Loan amounts can range from $2,000 to the full cost of attendance as designated by the school, and proceeds can be sent directly to the parents but are usually sent to the school.

It can be difficult to choose an educational loan for your college student. With the wide variety of loan options available, however, there’s no reason why you can’t find a product that fits both your needs and your budget.