Compare the Parent PLUS Loan to an Alternative Loan
Many students and families need to borrow educational loans to finance their education. The decision becomes whether to borrow a Direct Parent PLUS Loan or a private alternative loan.
Keep in mind that whether a parent is a borrower on a Federal Direct PLUS Loan or a co-signer on a private alternative loan, the parent is equally liable for repayment of either loan.
| Parent PLUS Loan Terms & Conditions | Alternative Loan Terms & Conditions |
|---|---|
| Fixed interest rate of 7.9 percent (as of 7/1/09) |
Monthly or quarterly fixed interest rates may range from 5.75 percent to 14 percent* Monthly or quarterly variable interest rates may range from 2.24 percent to 12 percent* *Fees and interest rates vary depending on the borrower's credit rating |
| Offer delayed repayment option |
Payments may be deferred while student is enrolled at least half-time |
| Parent may borrow up to the cost of attendance minus other financial aid | Student (typically with a co-borrower) may borrow up to the cost of Attendance minus other financial aid |
| Requires credit check based on federal standards — no debt-to-income ratios or credit-scoring Parent may have a better chance of being approved as a borrower on a Direct Parent PLUS Loan than as a co-borrower on a private alternative loan |
Requires comprehensive credit review process |
| Parent PLUS Loan Repayment | Alternative Loan Repayment |
|---|---|
| Parent is responsible for repayment |
Student is responsible for repayment; however, a co-signer is typically required and equally liable. Co-borrower may be released after 24-48 on-time payments (as determined by lender). |
| Accrued interest capitalizes one time, at time of final repayment |
Accrued interest may be capitalized monthly, quarterly, or one time at final repayment |
| Federally insured against death and disability for both the parent and student |
Some lenders have no death or disability benefits |
| Opportunities for consolidation, interest rate capped at 8.25% |
Limited consolidation options |
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