Private Parent Loans
By Mark Kantrowitz
Private parent loans are non-federal education loans that are borrowed
by the parent of an undergraduate student. Only the parent borrower is
obligated to repay the debt. (This is in contrast with private student
loans, where the loan is borrowed by the student and usually cosigned
by the parent.) These loans are similar in concept to the Federal Parent PLUS loan.
Some parents prefer a private parent loan because they are the only
borrower. This avoids the need to rely on the student to make the
monthly loan payments. Private parent loans are a good option when the
student is unlikely to manage the debt responsibly.
List of Private Parent Loans
This table lists all education lenders who provide private parent loans.
The lenders are listed in alphabetical order.
|Alaska Commission on Postsecondary Education (ACPE) (Family Education Loan (FEL))||Alaska||Immediate||10||Both|
|Brazos Education Lending Corporation||Texas Residents||Immediate||5, 7, 10, 15, 20||Death Only|
|Citizens Bank|| ||Immediate, Interest-Only||5, 10||Both|
|Citizens One|| ||Immediate, Interest-Only||5, 10||Both|
|College Ave (Parent Loan)|| ||Immediate, Interest-Only, Interest-Plus||5-12||Both|
|Iowa Student Loan (College Family Loan)|| ||Immediate, Interest-Only, Full Deferment||10 (Immediate, Interest-Only), 15 (Full Deferment)||Both|
|Kentucky Higher Education Student Loan Corporation (KHESLC) (Advantage Parent Loan)||Alabama, Florida, Georgia, Kentucky, Mississippi, Missouri, Ohio, Tennessee, Virginia, West Virginia||Immediate, Interest-Only, Full Deferment||10||Both|
|Rhode Island Student Loan Authority (RISLA)||Rhode Island||Immediate||10, 15|
|Sallie Mae|| ||Immediate, Interest-Only||10|| |
|SoFi|| ||Immediate||5, 10|| |
|Wells Fargo Private Parent Loans|| ||Immediate, Interest-Only||15||Both|
- Geographic restrictions require that the borrower to be a legal resident of or enrolled in an eligible college or university in the specified state or states. In some cases, the cosigner, if any, must also be a state resident.
- Repayment terms may depend on the loan balance at the start of repayment.
- Death and disability discharges cancel the remaining debt when the primary borrower dies or becomes totally and permanently disabled. The death and disability discharges do not apply when the cosigner dies or becomes disabled.
- Lender terms and conditions are subject to change without notice. For the most up-to-date information about a lender's products and services, please visit the lender's web site.
Federal vs. Private Parent Loans
Private parent loans compete with the Federal Parent PLUS loans. If
the parent has very good or excellent credit, the private parent loan
may charge a lower interest rate and lower fees than the Federal
Parent PLUS loan.
The main tradeoff between private parent loans and federal education
loans, other than cost, is the better benefits associated with the
federal loans. But, Federal Parent PLUS loans are not eligible for
income-driven repayment plans or public service loan forgiveness, like
federal student loans. (There is a loophole that will allow
some Federal Parent PLUS loans
to qualify for income-contingent repayment, if the loans are
consolidated first.) So, the differences between private parent loans
and Federal Parent PLUS loans aren't as great as the difference
between federal and private student loans. The main remaining
differences for parent loans are as follows:
- Death and disability discharges. Federal Parent PLUS loans are
cancelled when the borrower dies or becomes totally and permanently
disabled, or upon the death of the student on whose behalf the loan
was borrowed. Private parent loans are starting to offer similar
- Forbearances. Federal Parent PLUS loans are eligible for
forbearances of up to three years in total duration. Most private
parent loans are eligible for just one year of forbearances.
- Deferment. Federal Parent PLUS loans allow full deferment and
immediate repayment as payment options during the in-school
period. Most lenders of private parent loans do not allow full
- Credit underwriting. Federal Parent PLUS loans are available to
borrowers who don't have an adverse credit history. The credit
underwriting criteria for private parent loans are generally stricter,
and may also require minimum credit scores, maximum
debt-service-to-income ratios and minimum income thresholds.
Other Types of Parent Loans
Other borrowing options for parents include non-education loans, such
as a 401(k) loan or a home equity loan or line of credit.
- 401(k) Retirement Plan Loan. A parent may borrow up to
$50,000 or half of the vested balance in their 401(k) retirement plan
to pay for college. A 401(k) loan offers a low interest rate and is
available without regard to the borrower's credit. But, a 401(k) loan
must be repaid in 5 years (and within 60 days of job loss), the loan
is treated as taxable income if not repaid (and may be subject to a
10% tax penalty if the parent is under age 59 1/2), and the interest
is not tax deductible. The 401(k) loan is repaid from after-tax
dollars, leading to double-taxation on the loan payments when the
borrower retires. Borrowers cannot make further 401(k) contributions
until the 401(k) loan is repaid in full, missing out on the employer
match on contributions to the employee's 401(k).
- Home Equity Loan or HELOC. Parents who own a home may
obtain a home equity loan or line of credit (HELOC). Interest rates
are based on the borrower's credit, but tend to be lower because they
are secured by the home. If you default on a home equity loan or line
of credit, you can lose the home. Home equity loans are preferred,
because they usually have a fixed interest rate. But, if the proceeds
of the loan are unspent as of the date the Free Application for
Federal Student Aid (FAFSA) is filed, they must be reported as an
asset on the FAFSA. A home equity line of credit (HELOC) doesn't have
this problem, but the interest rates are usually variable. The
interest on up to $100,000 in home equity loans and HELOCs can be
deducted on the borrower's federal income tax return, but the borrower
must itemize to claim the deduction.