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You are here: Home / Types of Aid / Loans / Federal Direct Parent PLUS Loan / Compare the Parent PLUS Loan to an Alternative Loan

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 Direct Parent 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 & ConditionsAlternative Loan Terms & Conditions
Fixed interest rate of 6.41 percent (as of 7/1/13)

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 RepaymentAlternative 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 Limited consolidation options
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