Should you take out a parent PLUS loan, a private parent loan, or cosign a private loan?

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TL;DR

• Now that federal changes have placed limits on parent PLUS loans, it’s a good idea to consider private student loans to fill in funding gaps.

• Parents are fully responsible for repaying parent PLUS and private parent student loans while cosigned private student loans split the responsibility between the student and cosigner.

• Before you commit to a loan, weigh the pros and cons of each option so you can make the most informed decision for your unique situation and preferences.

Table of Contents

1. How a federal parent PLUS loan works

2. Alternatives to parent PLUS loans

3. Private loan or PLUS loan? How to choose

4. Comparing the costs of parent PLUS and private loans

5. See what interest rates you could qualify for

Once you and your student have determined the cost of the colleges they’re considering—and who’s planning to pay for it—it’s time to get into the financing details.

If your child needs more money for school beyond federal loans in their name, you may choose to help them out. In that case, you have three main options: borrowing federal parent PLUS loans, private parent loans, and cosigning private education loans. Understanding the differences between parent PLUS loans, private parent loans, and cosigned private loans will help you decide which is right for your family.

How a federal parent PLUS loan works

Federal PLUS Loans—including parent PLUS loans—are part of the government’s Direct Loan Program. They’re available to the parents of dependent undergraduate students.

Before you fill out a loan application, you’ll need to first file the FAFSA (Free Application for Federal Student Aid). The FAFSA will not only let the U.S. Department of Education and your child’s school determine how much financial aid they can receive, but also which types of loans your family qualifies for. Students should max out subsidized federal loans first, because the federal government pays the interest on these loans while your child is in school and during any grace periods or deferments.

After maxing out subsidized federal loans, you may also be eligible to take out unsubsidized federal loans. However, even with these two loan types combined, students don’t always get all the funding they need for school.

As a parent, you’ll need to apply for a parent PLUS loan separately and sign a Master Promissory Note (MPN). Previously, parent PLUS loans let parents borrow up to the school’s full cost of attendance, minus any other financial aid the student receives.

However, as of July 1, 2026, new federal legislation placed limits on parent PLUS loans.

Now, parent PLUS loans are capped at $20,000 per year and $65,000 total per student. If you relied on the parent PLUS loans to cover large funding gaps in the past, you may need to explore other funding options now, such as applying for private student loans or finding a trustworthy cosigner.

Additionally, if your parent PLUS loans are disbursed on or after July 1, 2026, you’re now limited to the Standard Repayment Plan, which is usually up to 10 years. This means you won’t qualify for the new federal Repayment Assistance Plan (RAP), a program based on your income and family size, and you may have less flexibility with your federal loans than you did previously.

Now that parent PLUS loans are capped, many families will need to explore other funding opportunities. Fortunately, there are a few different options that can help your student cover their educational expenses.

Fees and interest rates for parent PLUS loans

A parent PLUS loan has a fixed interest rate, which means it will stay consistent throughout the life of the loan. You can see federal interest rates for the current school year on the studentaid.gov website. The upside to a fixed interest rate is that all qualifying borrowers get the same rate, no matter what their credit score is. The downside is that you won’t be able to get a lower interest rate if you have great credit.

It’s worth keeping in mind that parent PLUS loans can cost more than other types of student loans. They also come with an upfront origination fee, which is deducted from each disbursement. The fee is usually around 4% of the loan amount, which can add up fast.

While you can request a deferment so that you don’t need to make payments until six months after your student graduates or leaves school, interest will still accrue during this time. So, deferring your payments could make your loan more expensive in the long run.

Repayment options for parent PLUS loans

Unlike many other student loan options, a parent PLUS loan will always be in the parent’s name and cannot be transferred to the student—which means that you, the parent, are legally responsible for repaying the loan.
While parent PLUS loans do come with some federal benefits, they are no longer eligible for newer plans like the Repayment Assistance Plan (RA).

Fortunately, however, parent PLUS loans are eligible for federal student loan consolidation. If you use this federal program, you may become eligible for an income-based repayment plan called income-contingent repayment (ICR). This plan sets your monthly payment at a percentage of your disposable income, ensuring it will remain affordable no matter how much you make.

If you’re struggling with loan repayment, you may also be able to request student loan deferment or forbearance through the federal government. These programs allow you to reduce or temporarily stop payments during periods of hardship.

Alternatives to parent PLUS loans

Cosigned private loans are a popular alternative to federal parent loans. Unlike federal interest rates, private loan interest rates vary widely. They largely depend on the borrower’s credit history. Since your student likely doesn’t have a long employment history or good credit score quite yet, they will likely need a cosigner to help them qualify for a private loan. In most cases, that cosigner will be you, the parent.

Private student loans can have fixed or variable interest rates. The total amount you’re able to borrow will also depend on the lender and the student and cosigner’s credit profiles. Loan fees vary by lender, but Earnest’s cosigned private loans, for example, do not come with a disbursement or origination fee¹. If you have excellent credit and a strong personal finance record, it’s possible to qualify for private loans that cost less than parent PLUS loans.

Repayment options for private student loans

Private loans don’t come with federal loan forgiveness and the same repayment options available to federal loan borrowers. Some private lenders, like Earnest, will sometimes let you put your loan in deferment², forbearance or even skip a payment³. Others may require you to start making payments as soon as your child’s first academic year. This results in an immediate payment burden but can save you money in the long run.

You may also refinance your private student loans⁴ later down the road. Refinancing will involve another credit check, so if you’ve improved your credit score since you first took out your loans, you could qualify for an even lower interest rate. You can also use refinancing to extend your loan term⁵.

Private loan or PLUS loan? How to choose.

Both private loans and parent PLUS loans involve a credit check. However, only private lenders will use your credit history to determine your rate. So, if you have an excellent credit score, you’ll likely get a low interest rate through a private lender.

But if you don’t have a great score, a federal parent PLUS loan might be the better choice. PLUS loans are also ideal if you prefer a fixed interest rate or plan on pursuing public service loan forgiveness in the future.

However, the key difference is debt ownership, which determines who is legally responsible for repaying the loans.

Parent PLUS loans

With parent PLUS loans, which are only available to parents of dependent undergraduate students, the parent borrower is 100% responsible for repayment. This means if you take one out, your student doesn’t have a legal obligation to repay it—and the loan can’t be transferred to your student’s name.

Cosigned private student loans

If you take out a private student loan with your student, they’ll be the primary borrower and you’ll be the cosigner. Both of you will be legally responsible for repaying the loan.

Unlike parent PLUS loans, cosigned private student loans let your student build credit history and are an option, even if your income is too high.

Some lenders, like Earnest, offer a cosigner release option. Earnest will also automatically review eligible loans for cosigner release. If the cosigner is removed, the student borrower will be fully responsible for repayment.

Private parent loans

You may decide to take out a private parent loan in your own name, without listing your student on the loan. In this case, you will be 100% responsible for repaying the loan. This is similar to parent PLUS loans but terms are determined by a private lender instead of the federal government.

Since parent PLUS loans are now capped, families can also use a combination of these three options to cover the full cost of attendance.

Choose parent PLUS if:

• You prioritize federal protections.

• You’re okay with borrowing caps and origination fees.

Choose a private parent loan if:

• You want sole responsibility.

• You have strong credit and may qualify for a lower interest rate.

• You want to avoid origination fees.

Choose cosigned if:

• You want your student to build credit.

• You’re comfortable sharing responsibility.

• You have strong credit and want to help your student qualify for a lower interest rate.

Comparing the costs of parent PLUS and private loans

Let’s say you take out a parent PLUS loan and borrow $20,000 to cover your student’s entire academic year. The current 4.228% federal origination fee would reduce the actual funds they get to around $19,155. This means the school will receive less money but you will still accrue interest on the entire $20,000 at the fixed 9.07% rate.

However, if you choose a private parent or cosigned private student loan with no origination fee, the full $20,000 would go to the school and you won’t owe an upfront fee. The loan would stretch further and cover more of your student’s tuition and educational expenses.

Now that parent PLUS loans are capped, many families may increasingly turn to private or cosigned loans to bridge any remaining funding gaps. Check out our student loan calculator to compare payment plans.

See what interest rates you could qualify for

If you’ve decided to supplement your child’s college education fund with private student loans, it’s time to start shopping around. There are a number of reputable private lenders out there, but Earnest offers some of the lowest cost loans on the market.

We also provide flexible repayment terms⁶, no fees¹, a 9-month grace period⁷, cosigned option, and automatic cosigner release. Whether you’re looking into a cosigned or parent loan to help support your child’s education, we make it easy to check your eligibility before you apply.

Next Steps Checklist

• Estimate your total cost of attendance to understand any funding gap you might have.

• Complete the FAFSA as soon as possible to find out whether you’re eligible for any federal aid.

• Compare parent PLUS loans with private cosigned and parent loans to determine which option makes most sense for you.

• If you decide private loans are a good fit, shop around and prequalify with multiple lenders.

Frequently Asked Questions (FAQ)

Can parent PLUS loans cover the full cost of college?

In the past, parent PLUS loans could pay for the full cost of attendance minus other financial aid. However, recent federal changes have capped borrowing limits to $20,000 per year and $65,000 per student, meaning the Parent PLUS loan might not fully cover all your college expenses.

Who is legally responsible for repaying parent PLUS loans?

If you take out a parent PLUS loan, you’re 100% responsible for repaying it. The student has no legal obligation to pay it back and it can’t be transferred into their name.

What is the difference between parent PLUS loans and cosigned private student loans?

With parent PLUS loans, the parent is 100% responsible for repayment. With cosigned private student loans, both the student and cosigner are on the hook for repaying the loan unless the cosigner is released through a cosigner release.

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice. It is accurate as of its publishing date.

Earnest Private Student Loans are subject to credit approval.

Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities. 2) Next, fill out a FAFSA^® form to apply for federal student loans options. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at studentaid.gov/.

1 Earnest does not charge fees for origination, late payments, returned check, or prepayments. Florida Stamp Tax: For Florida residents, Florida documentary stamp tax is required by law, calculated as $0.35 for each $100 (or portion thereof) of the principal loan amount, the amount of which is provided in the Final Disclosure. Lender will add the stamp tax to the principal loan amount. The full amount will be paid directly to the Florida Department of Revenue. Certificate of Registration No. 78-8016373916-1.

2 Deferment options are not available for borrowers who choose our Principal and Interest Repayment plan.

3 Earnest clients may skip a single payment during a 12 month period. Your first request to skip a pay can be made once you’ve made at least 6 months of consecutive on-time full principal and interest payments, and your loan is in good standing. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

4 Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan.

5 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

6 Repayment terms and repayment options available vary based on loan type.

7 Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.