Choosing a Student Loan: Parent PLUS vs Private | 02.28.11

Posted in Financial Aid, PLUS Loans, Private Student Loans, Student Loans By Student Loan Network Staff

Deciding on which student loan to apply for can be a headache for both parents and students. With so many aspects to consider, such as repayment plans, interest rates, and loan benefits, deciding on the best loan for you can be both confusing and difficult.

If a student is not eligible for federal loans, or is already taking the maximum, there are other loan options to consider. There is a variety of private student loans to choose from, or you and your parents may consider a Parent PLUS loan. However, these loans have some important differences to be aware of.

The most important aspect when choosing between a parent PLUS loan and a private loan is the borrower. A parent PLUS loan is taken out in the parent’s name and the responsibility legally rests on the parent to repay it. A student and parent can have an agreement where the student pays the loan, but remember, if it were to go into default, it is under the parent’s name not the student’s and is therefore the parent’s responsibility. Private loans, however, will be taken out in the student’s name and all repayment responsibility falls upon the student.

Another important difference to consider is financial disclosure. Private student loans do not require any parent or student information like which you would put on your FAFSA. On the other hand, Parent PLUS Loans require you to file a FAFSA which means you will have to provide financial information.

There are a number of other options to consider when deciding on a loan. Visit for more information on this differences between Private Student Loans vs Parent PLUS Loans.

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3 Responses to “Choosing a Student Loan: Parent PLUS vs Private”

  1. Michaelle says on September 12, 2011 at 7:09 pm:

    In what order will a University use the money granted and loaned? If she is awarded Stafford subsidized loans, Stafford unsubsidized, student grants, pell grants and if I agree to a federal parent plus loan? Will a University use the pell and student grants and next use the Stafford subsidized loan followed by either Stafford unsubsidized loan or federal parent plus loan? Would I be responsible to start making payments on the federal parent plus loan immediately after she receives it or 6 months after she graduates or no longer is enrolled? ? When does the interest on a federal parent plus loan start to accrue? Thank you!

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  2. Lisa says on March 23, 2011 at 3:36 pm:

    I am wondering about whether the Parent Plus loan will effect the loans for my second child. My first child will be attending college in the fall and my second child will be attending 4 years after that. If I take out Parent Plus loans for the first child, will I be able to do this for my second one when his turn comes? Should I just make the first child take out Private loans and cosign for her? After reading the article, I am assuming that I cannot turn these loans over to the graduate once they are finished with school and working. Correct? thanks!

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    • Student Loan Guru says on March 28, 2011 at 10:07 am:

      @Lisa- The Parent PLUS loan requires a modest credit check, including if you have defaulted on any title IV debt within the past 5 years. While it may limit the amount you can take out the second time, the check mostly looks for any adverse credit history. Read A Parent’s Credit Report and PLUS Loans for more on eligibility.

      And you are correct, Parent PLUS loans cannot be transferred to the student after graduation.

      Good luck!

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