Parent PLUS Loans are federal student loans made through the Direct Loan Program or the Federal Family Education Loan Program, depending on when the child for whom the loans were borrowed went to school.
Parent PLUS Loans are student loans made by the federal government to parents so that they can pay the cost of attendance for their child’s education. All Parent PLUS Loans are federal student loans, but the U.S. Department of Education doesn’t own all parent loans.
Some Parent PLUS Loans were made by private lenders and are owned by third-party guaranty agencies. Those loans were made to parent borrowers before 2011.
Although banks made those loans instead of the government, they’re not private student loans. Those Parent PLUS Loans are federal loans made under the Federal Family Education Loan Program. They are typically serviced by companies like AES, Navient, and Nelnet.
FFEL Parent PLUS Loans aren’t eligible for President Joe Biden’s student loan forgiveness plan. But they may be eligible for the Public Service Loan Forgiveness and Income-Driven Repayment Plan Forgiveness Programs. They also can be repaid under the income-contingent repayment plan.
Related: How to Apply for $10k Student Loan Forgiveness
Today, some banks and online lenders offer private parent loans. Interest rates for those loans are often lower than the rates for FFEL and Direct Parent PLUS Loans. They also typically don’t charge an origination fee. And if they do, it’s often substantially lower than the 4.228% fee the government charges.
What borrowers gain in savings with private parent loans, they lose in added benefits. Unlike federal Parent PLUS Loans, monthly payments for private student loans can’t be lowered because you lost your job or got sick. At best, some lenders offer a deferment or forbearance for a handful of months at a time. Once that time is up, they’ll expect you to start making payments for the full amount due. Similarly, private loans aren’t eligible for forgiveness or cancellation options. The only way out is to pay the loan balance in full.
Related: How to Refinance Parent PLUS Loans