Best parent student loans for parents who don’t want to cosign


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Parent student loans are a viable option to help you pay for your child’s higher education. (iStock)

College students and graduates aren’t the only ones saddled with student loan debt. 

More than 91% of private student loans for the 2020-2021 academic year were cosigned, according to data from MeasureOne, a data and analytics company. Additionally, 63.48% of graduate school loans included cosigners, the data showed.

If you’re looking to help your children with student loans, you have two basic options: You can cosign a loan for your child or you can take out a student loan in your own name.

Either way, you’re at least partially responsible for the debt. But if you take out student loans as the primary borrower, you may be able to help your child avoid graduating with a mountain of student loan debt.

What are parent student loans?

Parent student loans are loans taken out by a student’s parents or guardians to help pay for their higher education. The loan is in the parents’ names only, so parents take full financial responsibility for repaying the loan. The child’s credit is not affected, since their name isn’t on the loan.

Most experts recommend both students and parents should exhaust all federal aid and loan options before turning to private student loans. Your child may be eligible for federal grants which don’t require repayment. And federal student loans come with many protections and benefits you won’t find with private loans, including low interest rates, income-driven repayment options and access to student loan forgiveness programs.

You can learn more about parent student loans by visiting Credible.

Federal student loans for parents

The Federal Student Aid office offers Parent PLUS Loans to biological or adoptive parents —  and sometimes stepparents — of dependent undergraduate students who enroll at least half-time at an eligible college or institution. Parents must not have an adverse credit history, though they can still qualify for a Parent PLUS Loan with an endorsement from someone with good credit.

Parents may borrow up to the full cost of attendance at their child’s college or university, but the borrowing amount will be reduced by any financial aid their child receives.

The Parent PLUS Loan interest rate is 6.28% for the 2021-2022 academic school year.

Federal parent student loans have multiple advantages, including:

  • Fixed interest rates that remain in effect for the duration of the loan.
  • Essentially no borrowing limits.
  • Four flexible repayment options: Standard repayment over 10 years, graduated payments which increase gradually over a 10-year term, extended repayment with fixed or graduated payments over 25 years. The federal government also provides an income-contingent repayment (ICR) plan for parents, which caps monthly student loan payments at 20% of their discretionary income.

Of course, federal student loans come with some drawbacks as well.

  • You must pay an origination fee on Parent PLUS Loans.
  • With good credit, you may be able to find a lower interest rate with a private student loan.
  • Your loan is subject to a credit check.
  • If your credit is poor, you may need a cosigner —  or “endorser.”
  • You must begin repayment immediately.
  • You can’t transfer responsibility for the loan to your child.
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Parent PLUS Loans are a good option for those who may not have the resources to pay for their child’s higher education out of pocket but who are likely to maintain a long-term source of income to repay the loan.

You might also want to consider these loans if you intend to pursue Public Student Loan Forgiveness, or if you would like an ICR plan.

Private student loans for parents

Qualifying parents and guardians can find private parent loans through non-government institutions like banks and credit unions. These loans cover school-related expenses for undergraduate or graduate students.

Generally, private student loans work like most loans from private lenders, which means the application process, eligibility criteria and interest rates can vary from lender to lender and are usually determined through credit history and income review.

Here are some pros of private parent student loans:

  • With good credit, you may qualify for lower interest rates than with a federal Parent PLUS Loan
  • Interest rates can be fixed or variable
  • No origination fee
  • A statute of limitations exists if the worst happens and you default on your loan (the length of the statute varies by state)

Here are some cons of private parent student loans: 

  • Not eligible for federal benefits, such as income-driven repayment plans and student loan forgiveness
  • Fewer flexible repayment options than federal Parent PLUS Loans
  • Interest rates may be variable
  • Not federally subsidized

Private parents loans may be best suited for parents with good credit who can qualify for a lower interest rate, or for those who would prefer a variable interest rate on their loan.

How do parent student loans work?

With parent student loans, parents have two options: You can either take out the loan as a primary borrower or cosign for your children, who are then the primary borrowers.

The primary borrower is the person who bears full responsibility for paying back the loan. When a parent takes out a parent student loan they are the primary borrower, and it’s entirely up to them to fulfill the loan’s obligations. 

By contrast, a cosigner is someone added to the loan to help the borrower get approved —  they’re only obligated to pay the loan if the primary borrower defaults. Parents should be mindful before cosigning on student loans because they can experience a negative impact on their credit if the primary borrower — their child — makes late loan payments or defaults on the loan.

Who pays a parent student loan?

Determining who must make the payments on a parent student loan depends on who the primary borrower is and whether the loan has a cosigner. When a parent is a primary borrower, they must pay for the loan, and the child is never responsible for payments.

But when a parent is a cosigner, the student is the primary borrower responsible for paying the loan. The parents are only responsible for the loan if their child fails to make payments as agreed.

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7 best parent student loans for parents as primary borrowers

These Credible partner lenders offer student loans directly to parents.

Citizens

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Five, 10 or 15 years
  • Loan amounts: $1,000 to $350,000
  • Minimum credit score: 720
  • Might be good for: Parents with good or better credit; also good for existing account holders who may qualify for a 0.25% loyalty discount and another 0.25% off their rate for enrolling in automatic payments

College Ave

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Five, eight, 10 or 15 years
  • Loan amounts: $1,000 up to cost of attendance
  • Minimum credit score: Does not disclose
  • Might be good for: Parents looking to keep tabs on spending; College Ave can send you up to $2,500 of the parent loan amount to cover your child’s textbooks, activities and other school-related expenses

INvestEd

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Five, 10 or 15 years
  • Loan amounts: $1,001 up to cost of attendance
  • Minimum credit score: 670
  • Might be good for: People who live in Indiana, or whose children attend school in Indiana, and who would benefit from  INvestEd’s one- to three-month forbearance terms

Sallie Mae

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Five to 15 years
  • Loan amounts: $1,000 up to cost of attendance
  • Minimum credit score: Does not disclose
  • Might be good for: Parents looking for multiple repayment options

The following lenders are not Credible partners but do offer parent student loans. They also allow parents to cosign their children’s student loans. 

Education Loan Finance

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Five, seven or 10 years
  • Loan amounts: $1,000 to 100% of school-certified costs
  • Minimum credit score: 680
  • Might be good for: Borrowers needing large loan amounts

Rhode Island Student Loan Authority (RISLA)

  • Loans: Parental Student Loan
  • Rates: Fixed
  • Loan terms: 10 and 15 years
  • Loan amounts: $1,500 to $45,000
  • Minimum credit score: Does not disclose
  • Might be good for: Anyone looking for income-based repayment options

SoFi

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Five, 10 or 15 years
  • Loan amounts: $5,000 to 100% of school-certified costs
  • Minimum credit score: Does not disclose
  • Might be good for: Parents looking to avoid fees. SoFi doesn’t charge fees for loan origination, application, insufficient funds, prepayment penalties or even late payments.

Student loans for parents willing to cosign

The following Credible partner lenders allow parents to cosign for private student loans. 

Ascent

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Five, seven, 10, 12, 15 or 20 years
  • Loan amounts: $2,001 to $200,000
  • Minimum credit score: 600
  • Might be good for: Parents seeking rewards — this loan comes with a 1% cashback graduation reward

EDvestinU

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: Seven, 10 or 15 years
  • Loan amounts: $1,000 to $200,000
  • Minimum credit score: 750
  • Might be good for: Borrowers seeking a higher autopay discount. In this case, the discount for enrolling in automatic payments is 0.50%, which is higher than usual.
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Massachusetts Educational Financing Authority (MEFA)

  • Loans: Parental Student Loan
  • Rates: Fixed or variable
  • Loan terms: 10 and 15 years
  • Loan amounts: $1,500 up to cost of attendance minus any financial aid
  • Minimum credit score: 670
  • Might be good for: Borrowers looking to defer payments for up to five years

How to get a parent student loan

These are the basic steps to apply for a parent student loan.

  • Fill out a FAFSA application. Before you can apply for a Parent PLUS Loan, your child must complete a FAFSA application, which you can find online at fafsa.gov.
  • Exhaust federal financial aid options. You may be able to qualify for federal grants, scholarships and work-study programs.
  • Exhaust federal loan options. Because federal loans provide access to considerable benefits, such as income-driven repayment programs and potential loan forgiveness, it’s a good idea to get federal student loans before turning to private ones.
  • Comparison shop for private parent student loans. If you’ve exhausted federal student loan options, it may be time to shop around for private student loans. Compare offers from multiple lenders to make sure you get the best interest rate, loan term and monthly payment for your situation. Credible makes it easy to compare multiple lenders to get the best loan terms and a lower interest rate.
  • Apply for a private parent student loan. Once you identify a lender and loan offer that works for you, complete and submit the full loan application. Private lenders usually approve or deny loans quickly, so you should have your answer fast.

Credible makes it easy to see your prequalified student loan rates from multiple lenders.

What to consider when choosing a parent student loan

Before signing your name on the dotted line, here are some things to consider. 

  • Affordability — Don’t sign for a loan unless you’re confident you can comfortably repay it as agreed. The loan’s APR, monthly payment and term play essential roles in your loan’s affordability. If you’re not receiving offers with competitive rates and terms, you may want to consider working on your credit for a period of time to improve the quality of loan offers you receive.
  • Credit impact — Parent PLUS Loans don’t require a hard inquiry on your credit, but private lenders will perform a hard inquiry which can affect your credit score. Also, taking on a new loan could increase your debt-to-income ratio and reduce the average age of your credit accounts. If you’re more than 30 days late with a payment — or, even worse, if you default on the loan — your credit could suffer serious damage.
  • Effect on your retirement savings — Nearly half of Americans 55 or older have no retirement savings, according to the U.S. Government Accountability Office. If you fall into this group, you could find it harder to save for retirement if your money is going toward a parent student loan payment.

Methodology

Credible evaluated loans and lenders based on data points in 10 categories, including customer service, discounts, fees, interest rates, repayment options, terms, application process, loan options, eligibility requirements, cosigner release options and minimum credit score requirements. For more information, read the full Credible lender methodology. 


View more information: https://www.foxbusiness.com/personal-finance/best-parent-student-loans

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