If you’re thinking about taking out a federal parent PLUS loan to help pay for your child’s school in the fall, you might want to think again, student loan experts said.
Families often use federal parent PLUS loans to fill funding gaps left after all student federal aid, grants and scholarships have been exhausted. In the last three months of 2023, 3.8 million parents borrowed $112.2 billion in PLUS loans, Department of Education data showed. For 2024-25, those loans will be extremely expensive at a more than three-decade high 9.08% interest rate, plus fees.
“It’s worth taking a look at how private loan options compare for the remainder of your education financing needs, particularly if you are considering taking out…PLUS loans,” said Brian Walsh, head of advice and planning at online bank SoFi.
How much can you save with a private loan?
In some cases, a private loan could save you tens of thousands of dollars over the life of a 10-year loan, student loan experts said.
Learn more: Best personal loans
Thomas Graf, executive director at not-for-profit state lender Massachusetts Educational Financing Authority (MEFA), gives a comparison using last year’s rates for a 10-year $18,000 loan:
◾ A parent PLUS loan at the 2023-24 rate of 8.05% would mean a $228 monthly payment, or $27,423 for the life of the loan.
◾ A MEFA loan at 6.47% means monthly payments of $204, or $24,493 total.
“You would have saved 10.7% over the life of the loan,” he said, and that’s not…
