Parent PLUS Loans vs. Alternative Loans

Compare various aspects of the Parent PLUS Loan and Alternative Loan options.
In this Section
 Parent PLUS LoanAlternative Loan
Loan Interest RateFixed at 9.08% (After July 1, 2024)Variable, usually no cap. Many programs reset quarterly. Varies from lender to lender. Some lenders also offer a fixed-rate loan.
Loan BorrowerThe parent is the borrower and the loan is in the parent's name.The student is the borrower. While the loan is in the student's name, usually a parent is included as a co-signer. Co-signer bears equal responsibility for loan repayments. Generally, a student might receive a better interest rate with a credit-worthy co-signer.
Credit Check RequiredNo, but a parent with adverse credit history may obtain an endorser.Varies by lender, but a student with little or no credit history may have a better chance of approval by applying with a creditworthy cosigner. 
Loan AmountsUp to the cost of the student's education minus other financial aid.Minimum and maximum borrowing limits vary from lender to lender. It cannot exceed the Cost of Attendance minus other financial aid.
Loan CancellationLoan forgiven if student or parent dies.Varies by lender. Some lenders waive the remaining balance in the event of the primary borrower's death or permanent and total disability.
Cosigner Release OptionThis loan does not require a cosigner.Many lenders provide a cosigner release option where the student can apply to release the cosigner after they graduate, make a specified number of on-time payments, and meet underwriting requirements. 
Loan Interest AccrualParents may postpone payments until student is out of school six months (must apply with servicer each year). Interest accrued during the postponed period is capitalized. Parents may also choose to make interest-only payments while student is in school.Interest accrues while student is in school. Some programs require that the student make minimum monthly payments or interest-only payments while in school. If deferred, repayment usually begins 6 months after student graduates or leaves school.
Loan Deferment/ForbearanceParent may defer payment on this loan until the student is out of school six months (must apply with servicer each year). To apply for this deferment, contact the U.S. Department of Education after the loan is disbursed.Varies from lender to lender. Check with the lender for availability.
Loan QualifyingBased on credit history; debt-to-income ratio is not considered thus making it easier to qualify.Varies from lender to lender but often debt-to-income ratio is considered in credit decision. Many lenders will require a credit-worthy co-signer.
Loan Ease of ApplicationParent must complete a Direct Parent PLUS Loan Master Promissory Note (Direct Parent PLUS MPN) when applying for their first Direct Parent PLUS Loan. Parent must also complete UW-Stout's Parent PLUS Loan Request Form.Online applications are available for most loans. Supporting documentation is generally required (proof of income, co-borrower addendum, etc.).
Loan Fees4.228% origination fee.Fees vary from lender to lender. May include origination and/or repayment fees.
Loan Repayment TermsRepayment begins 45-60 days after loan is fully disbursed although the parent can request that the Department of Education delay repayment until after the student is out of school six months. Parent must apply for this deferment each year. 10 year repayment period.Varies among lenders. Typically, 10 - 25 years.