Best Student Loans for Parents

Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice, and in 2017 he received the SABEW Best in Business Award.

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Parents with top-notch credit scores have a wealth of student loan options, including Parent PLUS loans and private loans. Our picks of the best student loans for parents may be a better option as the rates can be lower than you'll find anywhere else in the market. Check out our shortlist to see which may be a fit for you.

Here are The Ascent's picks of the best student loans for parents:

Provider Rates & Terms Great For Get Started

College Ave Student Loans

Rates & Terms:

Fixed Rates: 5.29 - 12.78%

Variable Rates: 4.2 - 11.44%

Terms: 5, 8, 10, 15 years

Great For:
  • Graduate and career loans
  • Flexible term options
  • Graduation reward
  • Checking rates won't impact your credit score

Wells Fargo private student loans

Rates & Terms:

Fixed Rates: 5.49 - 10.93%

Variable Rates: 4.8 - 10.72%

Terms: See terms

Great For:
  • Discounts
  • High limits
  • Up to 0.75% rate discount for Wells Fargo customers with autopay

Sallie Mae Student Loans

Rates & Terms:

Fixed Rates: 5.49 - 11.85%

Variable Rates: 4.37 - 11.47%

Terms: 5,15 years

Great For:
  • Specialized loan programs
  • Free FICO® Score
  • Repayment flexibility
  • Get 4 months of free homework support with Chegg's Study Starter when you apply
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College Ave

Private lender College Ave charges no origination fees or prepayment penalties whatsoever and offers term lengths of five to 15 years and loans can be made up to the total cost of attendance, minus any other financial aid. What's more, parents have the option to get as much as $2,500 disbursed directly to them to help with other costs of sending their child to school. While your child is in school, College Ave allows borrowers to pay any amount, as long as it is at least enough to cover the interest charges.

  • Fixed Rates: 5.29 - 12.78%
  • Variable Rates: 4.2 - 11.44%
  • Loan amounts: 100% of their school’s cost of attendance.
  • Soft inquiry: Yes
  • Funding: Undergraduate and Graduate
  • Autopay discount: 0.25%
  • Graduation discount: $150 as statement credit
  • Loyalty discount: None
  • Fees: None
  • Deferred interest: None
  • Forbearance: No
  • Cosigner: Yes

Wells Fargo private student loans

In addition to the standard auto-pay discount and no origination fees, Wells Fargo offers an additional 0.25% interest rate discount for parent borrowers who have Wells Fargo checking accounts and the repayment period can be as long as 15 years. The bank allows parents to make interest-only payments for as long as four years while their child is enrolled in school on at least a half-time basis. One potential drawback to Wells Fargo’s parent loans is that the loan limit is $25,000 per year, or $100,000 in lifetime borrowing, but it could still meet the needs of many parent borrowers.

  • Fixed Rates: 5.49 - 10.93%
  • Variable Rates: 4.8 - 10.72%
  • Loan amounts: Up to $120,000
  • Soft inquiry: No
  • Funding: Undergraduate
  • Autopay discount: 0.25%
  • Graduation discount: No
  • Loyalty discount: Yes, up to 0.50% rate discount for certain Wells Fargo customers
  • Fees: $0 origination, $0 early repayment
  • Deferred interest: Yes, make no payments until six months after leaving school
  • Forbearance: No
  • Cosigner: None

Sallie Mae private student loans

Sallie Mae offers some of the industry’s lowest APRs to borrowers with strong credit, with rates starting at 5.49% (fixed) or 5.74% (variable). Sallie Mae charges no origination fees and offers loans up to the school’s cost of attendance. One unique perk is that Sallie Mae borrowers have access to quarterly FICO® Score updates. However, Sallie Mae only offers a 10-year repayment term for parent borrowers.

  • Fixed Rates: 5.49 - 11.85%
  • Variable Rates: 4.37 - 11.47%
  • Loan amounts: 100% of their school’s total cost of attendance
  • Soft inquiry: No
  • Funding: Undergraduate and Graduate
  • Autopay discount: 0.25%
  • Graduation discount: None
  • Loyalty discount: None
  • Fees: None
  • Deferred interest: None
  • Forbearance: No
  • Cosigner: Yes

How we picked the winners

There are several factors we evaluated when it comes to student loans for parents, and here are some of the most important:

Interest rates -- While a loan’s interest rate isn’t the only factor you should consider, it’s certainly important. After all, other factors being equal, you certainly want to pay as little as possible to borrow money.

Fees -- Some parent loans charge origination fees, while others don’t. The same goes for prepayment penalties. These costs can make a big difference in your overall borrowing expense.

Discounts -- It’s become the industry standard to offer borrowers a 0.25% interest rate discount for auto-paying the bill. However, some lenders offer additional discounts for borrowers who have existing relationships, such as by maintaining a checking account.

Repayment flexibility -- Some parent loans require repayment to begin right away, and some allow parents to defer payment while the student is still enrolled in school. Others are somewhere in the middle, requiring just interest-only payments while the student is still enrolled.

Term length -- Some lenders offer just one repayment term length, while others give the borrower a choice among a few options.

Disbursement options -- Some lenders allow for excess loan proceeds to be distributed to the parent to help cover out-of-pocket educational expenses, while others simply disburse all of the funds to the school with any overage going to the student. Some parent loans give the borrower the choice.

Soft credit pull -- Does the lender allow you to check your interest rate and loan terms without affecting your credit score?

Why you can trust me

I’m a Certified Financial Planner® who has published more than 4,500 articles on various personal finance and investment topics, and my work has been syndicated on news outlets such as MSN Money, USA Today, CNN Money, and more. In addition, I’m a highly experienced student loan borrower myself (14 individual loans throughout undergrad and grad school and one federal direct consolidation loan) who has extensive firsthand experience with the student loan borrowing, repayment, and student loan refinancing.

What are Parent PLUS Loans?

A Parent PLUS Loan is a type of student loan made by the U.S. Department of Education to parents of dependent students. Like other parent loans, they are designed to supplement other forms of student aid, such as scholarships, grants, and other federal student loans available to your child. Also like other parent loans, Parent PLUS Loans are the legal responsibility of the parent, not the student.

Parent PLUS Loans have fixed interest rates that are set each year, depending on market interest rate conditions. For the 2018-19 school year, the Parent PLUS Loan interest rate is 7.6% for all borrowers. In addition to this, there’s a loan fee that you’ll have to pay, which also is subject to change annually. Currently, the loan fee is 4.248%, which is deducted from your Parent PLUS Loan before it is disbursed to your child’s school. This is rather high, especially considering that many private lenders have no origination fees whatsoever.

Unlike most other types of parent student loans, Parent PLUS Loans don’t require an extensive credit check. There’s a basic check to see if you have an adverse credit history, which means:

  • Having one or more debts with a combined balance greater than $2,085 that are 90 or more days delinquent or have been placed in collections or charged off within the previous two years.
  • Or, having an adverse action such as a foreclosure, repossession, tax lien, or wage garnishment within the preceding five years.

If none of these apply to you, you’ll pass the credit check. And all Parent PLUS Loan borrowers receive the exact same loan terms, which makes them a popular choice among borrowers with less-than-ideal, but not terrible credit histories.

How do student loans impact a parent’s credit score?

A student loan is a form of installment debt, just like an auto loan or mortgage. Sure, there are more deferment options, and repayment tends to be a bit more flexible than with other types of loans, but at the end of the day, it’s in the same boat when it comes to credit impact.

Student loans can affect virtually every category of the borrower’s credit score. If you’re not familiar, here are the five categories of information that make up the FICO® Score and how a parent student loan can affect each one:

  • Payment history (35% of FICO® Score) -- This is the most important category, so if you make your payments on time as agreed, a parent student loan should help you in this respect.
  • Amounts owed (30%) -- This considers how much you owe on loans and credit lines, especially relative to their limits or original balance. In other words, when you first obtain a parent student loan, your score could potentially suffer a bit in this category. As the balance starts to decline, however, it could become a positive factor.
  • Length of credit history (15%) -- Among other age-related factors, this considers how old your individual credit accounts are, as well as the average age of all accounts. So when your parent student loan is new, it could hurt you a bit in this category.
  • New credit (10%) -- When you apply for a parent student loan, it will create a credit inquiry, which is a part of this category. And when you actually get the loan, it will show up as a new credit account. The point? This category can also suffer when you first get your parent student loan.
  • Credit mix (10%) -- Do you have just one type of credit account (like credit cards), or do you have several different kinds? If you don’t have any student loans on your credit, adding a parent student loan can actually boost this category.

Can parents deduct student loan interest?

Student loan interest is tax deductible for parents, provided that the loan is in their name. The student loan interest deduction allows taxpayers to deduct as much as $2,500 in qualified student loan interest per year.

One of the key requirements is that the interest you deduct must be interest that you’re legally obligated to pay. In other words, you’re legally obligated to pay interest on a loan that was made to you (such as a parent student loan). On the other hand, if your child borrows money in their name, you can’t deduct the interest on their loans, even if you paid it (a possible exception is if you’re a co-borrower or co-signer on the loan).

How to choose the right parent student loan

Unfortunately, there’s no one-size-fits-all student loan product for parents. If there is, I certainly haven’t found it.

The point is that while I feel like there are four solid options between Parent PLUS Loans and the three private lenders I’ve discussed here, it’s very important to take a look at each one to decide which makes the most sense for you. For example, if you have so-so credit, the interest rate offered by Parent PLUS Loans might be the best available to you. Or if you have good credit and a checking account with Wells Fargo, that option could make the most sense. It all depends on you.

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