Federal Parent PLUS loans vs private parent loans - which has better terms for 2025-26?
I'm looking at options to help cover my daughter's college costs for next year, and I'm confused about whether to choose a Federal Parent PLUS loan or go with a private parent loan from our credit union. The Parent PLUS interest rate seems significantly higher (around 8.05% currently), but I've heard we don't have to start repayment until she graduates? Meanwhile, the private loan is offering 5.8%, but payment starts immediately. Is the deferred payment benefit of Parent PLUS worth the higher interest rate? Are there other benefits to the federal option I'm not seeing? Would love some insights from parents who've gone through this decision before. Thanks!
22 comments
Join the conversation
Diego Vargas
The deferment option on Parent PLUS loans can be valuable, but there are several other key differences to consider: 1. Federal PLUS loans offer income-contingent repayment options if you consolidate them (private loans don't) 2. PLUS loans have death/disability discharge protections 3. Federal loans have forbearance/deferment options if financial hardship occurs 4. No prepayment penalties on federal loans That said, the interest rate difference is substantial. Have you calculated how much extra interest will accrue during those 4 years of deferment? The compounding effect can be significant.
0 coins
Chloe Anderson
•Oh wow, I hadn't even thought about the interest accruing during deferment! That's a really good point. I'm guessing that would significantly reduce the benefit of the deferment option. I also didn't know about the income-contingent options if we consolidate - that seems like a valuable safety net.
0 coins
CosmicCruiser
we went w/ plus loan last yr and now regreting it. the intrest is KILLING us and my sons only a sophmore!!! wish we'd gone private tbh
0 coins
Chloe Anderson
•That's definitely concerning to hear. Did you defer payments or start repaying right away? And did you shop around for private loans or just compare to the PLUS rate?
0 coins
CosmicCruiser
•we defered but the intrest still adds up! almost 11k in intrest alone after just 2 yrs on a 40k loan. wish someone told us that part lol
0 coins
Anastasia Fedorov
You should check if your daughter has maxed out her federal student loans first before taking ANY parent loans. She can get $5,500-$7,500 per year depending on her year in school in Direct Loans, which have better terms than Parent PLUS.
0 coins
Chloe Anderson
•She's already taking the maximum federal direct loans she qualifies for ($6,500 as a sophomore next year). Even with that, her scholarship, and what we've saved, we're still about $15,000 short per year.
0 coins
Sean Doyle
I've worked in financial aid for 11 years, and I generally recommend exhausting federal loan options before private loans, but Parent PLUS is a special case. Here's what you should weigh: - Federal protections: PLUS loans qualify for unemployment deferment and economic hardship forbearance, which private loans typically don't offer - Forgiveness potential: While unlikely, federal loans sometimes become eligible for forgiveness programs that private loans never would - Credit requirements: PLUS loans have less stringent credit requirements than private loans - Interest capitalization: With PLUS, interest capitalizes when repayment begins after deferment Calculate the total cost difference over the life of both loans. For many families with strong credit and stable income, private loans can save thousands in interest despite the immediate repayment.
0 coins
Chloe Anderson
•Thank you for such a thorough explanation! I hadn't considered the forgiveness potential. We do have excellent credit (both over 800), so we qualify for the best private loan rates. I think I need to do some calculations on the total cost difference over time.
0 coins
Sean Doyle
•You're welcome! With those credit scores, you're likely to get competitive private loan offers. One strategy some parents use is splitting - taking a smaller PLUS loan to maintain access to federal protections while using private loans for the rest to minimize overall interest costs.
0 coins
Zara Rashid
dumb question maybe but have you looked at your daughters SAI score from FAFSA? our daughters was way higher than expected and we had to appeal it - ended up getting more aid and didnt need parent loans at all
0 coins
Chloe Anderson
•Not a dumb question at all! Yes, we've reviewed her SAI score and already confirmed the financial aid package. Unfortunately, her school doesn't fully meet demonstrated need, so we still have this gap to fill.
0 coins
Luca Romano
I've been trying to reach someone at Federal Student Aid for THREE DAYS to ask about Parent PLUS loan options because I was in the exact same situation. Finally gave up on the phone queue and used Claimyr (claimyr.com) - they got me connected to an agent in 15 minutes who explained all the Parent PLUS terms and how the interest works during deferment. There's a video of how it works at https://youtu.be/TbC8dZQWYNQ if you're interested. Saved me so much frustration!
0 coins
CosmicCruiser
•omg thx for sharing this!! been trying to reach someone about lowering our payments
0 coins
Chloe Anderson
•That's helpful, thanks! I was planning to call FSA with some questions about the PLUS loan application process, but I've heard the wait times are brutal. I'll check out that service if I can't get through.
0 coins
Nia Jackson
We went through this last year and decided on private loans through SoFi. The interest rate difference was just too significant (over 2% lower than PLUS). We're making interest-only payments during school which keeps the balance from growing and was a good compromise for our budget. Just make sure to read ALL the fine print on whatever private loan you consider - some have hidden fees or variable rates that start low but can increase.
0 coins
Chloe Anderson
•Interest-only payments during school is an interesting middle ground I hadn't considered. That might work well for our budget too. I definitely need to read the fine print carefully on these private loans - I know some start with teaser rates that adjust later.
0 coins
NebulaNova
Has anyone used the Parent PLUS loan forgiveness options they keep talking about on the news? Is that actually real or just political talk?
0 coins
Sean Doyle
•Parent PLUS loans are generally not eligible for the same forgiveness programs as student Direct Loans. They can become eligible for Income-Contingent Repayment (ICR) if consolidated into a Direct Consolidation Loan, but that's different from the broader loan forgiveness initiatives you might be hearing about. Most recent forgiveness programs have focused on student borrowers rather than parent borrowers.
0 coins
Anastasia Fedorov
I think you're missing the important part of the equation - with parent plus loans, the debt is ENTIRELY in your name. With private parent loans, some lenders allow cosigning with the student, which lets them take over payments after graduation. That's what we did, and my son is now making the payments while building his credit.
0 coins
Chloe Anderson
•That's a really good point about building credit and responsibility. We've discussed having our daughter take over payments after graduation regardless of loan type, but having it structured that way from the beginning does make sense. Did you have any challenges with the cosigning process?
0 coins
Elijah Jackson
One thing I haven't seen mentioned yet is tax implications - the interest on both Parent PLUS and private parent loans may be tax deductible up to $2,500 per year (subject to income limits), so that could help offset some of the cost difference. Also, some private lenders offer interest rate reductions for autopay (usually 0.25%) which can add up over time. I'm leaning toward doing a mix like Sean suggested - maybe taking a smaller Parent PLUS loan to keep some federal protections while using private loans for the bulk to save on interest. Has anyone here actually done that split approach? I'm curious how complicated it makes the paperwork and repayment process.
0 coins