Parent PLUS Loans vs Private Student Loans - Which FAFSA option has lower interest rates?

I went with Parent PLUS for my son last year. The decision was easy for me because of the federal protections. Yes, the origination fee stinks (ours was like $950 on a $22k loan), but knowing I could pause payments if I lost my job was worth it. Also if something happens to you or your spouse the loan can be discharged, but private loans still come after your estate.

private loans ALL THE WAY!! my parents got stuck with a 8.1% plus loan and we're STILL paying it off 6 years later. thats highway robbery!!

I've counseled hundreds of families on this exact decision, and there's no one-size-fits-all answer. Here's what I typically recommend considering: 1. **Financial stability**: If your income is rock-solid and you have substantial emergency savings, private loans might make sense to save on interest. 2. **Risk tolerance**: PLUS loans offer safety nets that private loans don't - income-contingent repayment, death/disability discharge, forbearance options, and potential forgiveness programs. 3. **Loan term**: How quickly can you realistically pay it off? Shorter term = private might win. Longer term = federal protections become more valuable. 4. **Total debt**: For $18,000, the origination fee is around $756. If you can pay off the loan within 3-4 years, a private loan at 5.25% would likely save you money despite the fee difference. With your credit scores, I'd suggest getting actual rate offers from 2-3 private lenders (SoFi, Earnest, College Ave) and compare the TOTAL cost over your expected repayment period, not just the interest rate.

My daughter's school financial aid office told us most families pick PLUS loans and warned us about private loans having all these hidden gotchas in the fine print. But then my sister got a private loan for my niece that was almost 3% lower than the PLUS loan rate?? I'm so confused why the school pushed the higher rate option??

I tried calling Federal Student Aid to ask questions about PLUS loan repayment options compared to private loans, and I couldn't get through after waiting on hold for over an hour. I discovered this service called Claimyr (claimyr.com) that holds your place in line and calls you back when an agent is available. Saved me so much time! They have a video showing how it works here: https://youtu.be/TbC8dZQWYNQ Anyway, when I finally talked to the FSA agent, they explained that PLUS loans qualify for income-contingent repayment plans if you consolidate them after graduation, which can cap payments at 20% of discretionary income. No private loans offer anything close to that protection.

One important consideration many families overlook: PLUS loans remain the parent's legal obligation forever, while private loans can sometimes be in the student's name (with a parent co-signer) and potentially be refinanced to remove the parent later if the student establishes good credit and income. That said, the repayment flexibility of federal loans is unmatched. During COVID, all federal loans including PLUS had 0% interest and suspended payments for over 2 years. Private loan borrowers received no such relief. Here's what I recommend: 1. If you plan to pay off the loan within 3-5 years and have stable finances, private loans may save you money. 2. If you need 10+ years or value payment flexibility, PLUS loans offer significant protections. 3. Don't forget to consider a combination approach - maybe PLUS for part and private for part to diversify your options.

UUUUGH I hate this whole system so much. My parents got Parent PLUS loans for me and now they're struggling to retire because of MY education debt. I feel so guilty. Whatever you choose, please make sure your daughter understands the sacrifice you're making. I wish I had understood how much financial pressure I was putting on my parents when I was 18. Maybe I would have chosen a cheaper school or worked more during college.

One thing no one mentioned yet - with PLUS loans, even though they're in your name, your daughter can take over payments after graduation if she wants to help out. They remain legally your responsibility, but many families have arrangements where the student makes the payments. Just make sure you're on the same page about expectations.

Based on all the information you've shared - stable income but modest emergency fund, 5-7 year repayment timeline, and good but not exceptional credit - I would recommend a hybrid approach: 1. Start with a smaller private loan (perhaps $5,000-8,000) at the best fixed rate you can secure with your husband as the primary applicant (using his 780 score). 2. Use PLUS loans for the remaining $10,000-13,000 to ensure you have federal protections for the majority of your debt. This gives you the best of both worlds - some interest savings from the private portion while maintaining federal safeguards for most of the obligation. It also lets you compare both systems firsthand before making decisions about future years of funding.