How Do Parent Student Loans Compare to Undergraduate Student Loans?

College Student Has Individual Tuition From Teacher In Library
Brazos Staff

BIG Ideas:

  • Federal loans available from the government include Direct Subsidized and Unsubsidized Loans for students and Parent PLUS loans for parents.
  • Private loans, which are available to both students and parents, help fill the funding gap where federal aid and savings leave off. 
  • When choosing the right loan for your situation, consider who will be responsible for repayment, the budget of students and parents, and if all financial aid has been exhausted. 

There’s no question, getting a college degree is a major commitment and milestone. 

But it’s not just the homework assignments, final exams, and late-night study sessions that require knowledge and commitment. There’s an even bigger challenge that students and families must overcome first: paying for college.

Fortunately, there are solutions to help make it affordable: student loans for students and parents. 

While both student and parent loans can help make college affordable, the loans you choose will impact who will repay the loan, how much you can borrow, and the options available if the student or parent experiences financial difficulty.

Read on to learn about the differences between a parent loan vs. student loan and how to determine which option may be the best fit for your family. 

Understanding your loan options

There are several types of federal and private student loans available to students and parents:

If you’re a student, you have a few options from the federal government for undergraduate student loans:

  • Direct Subsidized Loans: Available to undergraduate students who demonstrate financial need, these loans offer a valuable benefit that makes them ideal: the government pays the interest while the student is enrolled in school at least half-time as well as during the grace period after graduation. So, students who qualify for this loan will save money on interest.
  • Direct Unsubsidized Loans: With these loans, which are not based on financial need, the student is responsible for the interest that accrues on the loan. Payments generally aren’t required until the grace period ends after graduation, although students may choose to make payments while in school.

If you’re the parent of a dependent undergraduate student, you may be eligible for a federal Parent PLUS loan that can help cover the school’s cost of attendance, minus other financial aid received by the student. 

Private loans – for parents and students

In addition to student loans from the federal government, you can apply for private student loans available from private lenders like banks, credit unions, non-profits (like us!), and other lenders. These loans can help bridge the gap when federal aid, grants, scholarships, and federal student loans are not enough to cover the full cost of attendance.

The differences between loan options

Understanding the differences between a student loan vs. parent loan can help you determine who should borrow and be responsible for repayment. Here are some key factors to consider:

Interest rates. 

Because interest rates can greatly impact your cost of borrowing and payment amount, it’s important to compare rates for each type of loan and lender. 

  • Federal Direct Subsidized and Unsubsidized Loans and Parent PLUS loans have fixed interest rates set by Congress. 
  • Private loans may have fixed or variable rates and will vary by lender and the borrower’s creditworthiness and income. 

Repayment responsibility

  • With federal Direct Subsidized Loans and Direct Unsubsidized Loans, the student is the borrower and is legally responsible for repaying the loan. 
  • With Parent PLUS loans, the parent is the borrower and is legally responsible for repaying the loan, even though the funds are used for the student’s education.
  • With private loans, the borrower may be either the student or the parent. Since private lenders typically consider factors such as income, credit history, employment, and debt-to-income ratio, students often need a co-signer to qualify. If a parent co-signs a private student loan, they become equally responsible for repaying the debt.

Borrowing amounts 

  • Federal student loan borrowing limits vary based on factors such as dependency status, year in school, financial need, and the type of federal loan. In general, dependent undergraduates can borrow up to $5,500 to $7,500 per year in Direct Loans, depending on their year in school.
  • For PLUS loans taken after July 1, 2026, the borrowing limit is capped at $20,000 per year per student and $65,000 per student lifetime. 
  • With private loans, borrowing limits vary by individual lender. 

Repayment terms 

  • With Direct Subsidized Loans and Direct Unsubsidized Loans, repayment generally begins after a six-month grace period following graduation, or when the student leaves school or drops below half-time enrollment.
  • With Parent PLUS Loans, parents typically must begin making payments once they receive all the funds. They may, however, be able to request to defer payments while the student is enrolled in school at least half-time or until the grace period is over (typically six months after graduation). 
  • With private loans, repayment varies by lender so check terms carefully. Repayment terms often range from 5 to 20 years. 

Eligibility

  • To qualify for a Direct Subsidized Loan, the student must demonstrate financial need, while Direct Unsubsidized Loans are available regardless of financial need.
  • To qualify for a Parent PLUS Loan, the parent borrower must not have an adverse credit history and meet other requirements.
  • Private student loans, however, require a credit check and income verification. Students applying on their own may require a co-signer. 

How to choose the right loan for your family

The loan that’s right for your family depends on several factors. Here are some questions to consider to help you choose:

  • Who will be responsible for making payments after the student leaves school?
    If it’s the student, federal student loans are often the best place to start, with private student loans helping cover remaining costs.

  • Have you exhausted federal aid along with scholarships and grants?
    The key is to get as much help as you can without borrowing more than you need. 

  • How much can the student realistically afford to pay after college?
    Factor in the student’s field of study and living situation after college. For example, will they live at home or pay rent?

  • How much can the parent realistically afford?
    One thing parents want to avoid is putting their own financial futures – or the educational future of their other children – at risk. 
  • Who is more likely to qualify for the best rates and terms?
    Borrowers with strong income and credit may qualify for lower rates, which can reduce the cost of borrowing. 

Additional steps to help make borrowing easier

  • Have “the talk.” Sit down together and discuss who will help contribute to college and who will be responsible for making payments after the student graduates. If the student will be responsible, federal student loans in their name may make more sense than parent student loans. 

  • Research your options. If you’re a parent looking to assist with the cost of college after financial aid, scholarships, and savings, look at private lenders. Be sure to shop around and to look at mission-driven, non-profit private lenders.

  • Borrow only what you need. Just because a lender offers you a higher borrowing amount doesn’t mean you have to take it all. Create a budget to determine college costs, including tuition, fees, room and board, books and supplies, and other college-related expenses – and borrow only the amount you need. 
  • Apply for scholarships and grants. One way to lower the amount you need to borrow is to apply for scholarships and grants available from organizations, trade associations, companies, and other institutions. That’s FREE money you won’t have to pay back! Check out these tips for finding opportunities.

There’s no magical answer to which option is right for you. It’s simply a matter of understanding your options, determining who will be responsible for repayment, and borrowing only what you can realistically afford.

Brazos can help you save on private student loans

For more than 50 years, Brazos Higher Education has helped students and parents finance the cost of college. As a Texas non-profit student loan lender, we offer competitive rates on private loans for students and parents. Contact us today.