Closing the Gap to Pay for College: Navigating Private Loans, Co-Signing a Private Student Loan, or Parent PLUS Loans

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Closing the Gap to Pay for College: Navigating Private Loans, Co-Signing a Private Student Loan, or Taking Parent PLUS Loans

You've done the FAFSA. You've reviewed the financial aid award letters. After scholarships, grants, and federal student loans, there's still a gap to fill. Now what?

For many families, the next step has been either a federal Parent PLUS Loan or a private loan (either for the parent or cosigning in the student’s name). But this isn't always a straightforward choice, especially in 2026, with new federal rules coming into effect that will change how much parents can borrow under the PLUS program. Before exploring private options, it’s worth understanding what’s changing with Parent PLUS loans and why.

What Federal Loan Options are Available to Parents?

A Parent PLUS loan is a federal loan available to biological or adoptive parents of dependent undergraduate students. Unlike other federal student loans, which go to the student, a Parent PLUS loan is in the parent's name, and the parent is solely responsible for repayment. Grandparents and legal guardians do not qualify unless they have legally adopted the student.

What's changing in 2026: As of July 1, 2026, Parent PLUS loans are capped at $20,000 per year per student, with a lifetime limit of $65,000 per student. These are maximum caps; a PLUS loan cannot exceed the student's cost of attendance minus other financial aid. Parents will also not be able to borrow until the student has first maxed out their federal Direct Loan limit. Previously, parents could borrow up to the full cost of attendance minus other aid received. Married or divorced, each eligible parent may apply separately for a Parent PLUS loan for the same student. Because these loans are capped per student, if more than one eligible parent is applying for a Parent PLUS loan for the same student, they will not be allowed to exceed these totals.

Get the latest Parent PLUS rates and terms at studentaid.gov.

Pros of Parent PLUS Loans

• Access to income-driven repayment (if consolidated into a Direct Consolidation Loan)
• Potentially eligible for Public Service Loan Forgiveness (PSLF) through consolidation
• No credit score requirement (only an adverse credit history check)

Cons of Parent PLUS Loans

• Origination fee (currently 4.228% for loans disbursed until Oct. 1, 2026, per the Department of Education) reduces the amount received — a $10,000 loan yields roughly a $9,577 disbursement.
• Interest rate is fixed and federally set; it won't improve based on strong credit (currently 8.94% through July 1, 2026. Get the latest rates here.)
• Annual and lifetime borrowing caps of $20,000 per year and $65,000 per student as of July 1, 2026

For a deeper look at how parent loans work and what to consider before applying, see College Ave's guide: What Is a Parent Loan?

Closing the Remaining Gap: Private Loan Options

Once federal loan options are maximized, private loans can help fill what's left. There are two main paths, and the right one for your family depends on who takes on the legal obligation — the student, the parent, or both.

Path 1: Cosigning A Private Student Loan (The Loan is in the Student’s Name)

Most college students have a limited credit history, and many private lenders may require a cosigner to qualify or to secure a competitive rate. When a parent cosigns, both the student and parent take equal responsibility for the loan. It appears on both of their credit reports.

This matters in both directions because both parties share equal legal responsibility for repayment. On-time payments help to build the student's credit history from day one. Missed payments affect both the student's and the cosigner's credit scores.

The practical upside of cosigning, compared to a parent loan, is that a portion of the obligation lives in the student's name, giving them a direct stake in repayment. Some loans also offer a cosigner release, so that once a student has shown themselves to be financially responsible by demonstrating a consistent payment history, and meets other lender-specific requirements, the parent can remove themselves from the loan.

For a detailed side-by-side look at cosigning vs. taking out a parent loan, see College Ave's guide: Cosigning a Loan vs. Taking Out a Parent Loan.

Pros of Cosigning a Private Student Loan

• The student has a direct stake in repayment; on-time payments help build the student’s credit history.
• A creditworthy cosigner helps the student qualify and may secure a lower interest rate than the student would on their own
• Cosigner release is available on most private student loans

Cons of Cosigning a Private Student Loan

• The cosigner is responsible for the entire balance of the loan in the case where a student cannot make payments
• A missed payment affects both the student's and the cosigner's credit
• Some private loan providers may charge an origination fee ††

Explore Private Student Loans from College Ave

Path 2: Taking a Private Parent Loan (The Loan Is in The Parent’s Name)

If a parent prefers to directly take on the borrowing responsibility without involving the student’s credit, a private parent loan may be the right fit. Like a Parent PLUS loan, a private parent loan is taken out entirely in the parent’s name. The student has no legal repayment obligation, and the loan does not appear on their credit report.

What Is a Private Parent Loan?

Private parent loans are offered by banks, credit unions, and private student loan lenders, and can be used to cover tuition, housing, books, and other school-related costs.

Private parent loans are credit-based. Interest rates, which can be fixed or variable, are determined by the lender based on credit history and income review. Borrowers with strong credit may find that private parent loans offer more competitive rates than the federal Parent PLUS loan, particularly once the Parent PLUS loan origination fee is factored in. According to College Ave, their parent loan rates currently range from 2.59%–17.99% APR, which includes an autopay discount. Get the latest rates here. † To gauge whether a private student loan rate is competitive, apply with multiple competitors and compare each offered APR, which includes interest and fees. You should also take into account any rate discounts offered and repayment terms when comparing competitors. 

Pros of Private Parent Loans

• Potentially lower interest rates than the federal Parent PLUS loan fixed interest rate, for creditworthy borrowers
• Flexible repayment term options, allowing you to choose the length of repayment, potentially saving you on total interest over the life of the loan

Cons of Private Parent Loans

• No access to federal income-driven repayment plans, loan forgiveness programs, or federal borrower protections
• Does not help build students’ credit scores
  
  

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Side-by-Side Comparison

How to Choose: Questions to Ask Your Family

Your best choice depends on your credit profile, financial goals, retirement timeline, and how students and parents plan to share repayment responsibility. These questions can help frame the conversation:

• Is building the student’s credit a priority? Cosigning a private student loan puts some of the obligation on the student's credit report and gives them a direct role in their financial future. If that matters to your family, it's a meaningful advantage.
• Do you have strong credit? A private loan, whether a cosigned student loan or a parent loan, may offer better rates than the federal Parent PLUS loan, especially once the origination fee is factored in.
• For parent borrowers, do you work in public service? If you're pursuing Public Service Loan Forgiveness, a Parent PLUS loan (consolidated into a Direct Consolidation Loan) keeps that door open. Private loans do not.
• How much do you need to borrow? Starting July 1, 2026, Parent PLUS loans are capped at $20,000 per year and $65,000 maximum lifetime borrowing per student. Families at higher-cost schools may need to supplement with private loans regardless of which path they choose.
• How will this impact your family’s finances? Taking on a parent loan—federal or private—means the repayment obligation falls entirely on the parent. If that puts pressure on other financial priorities, whether retirement savings, a mortgage, or an existing debt, a cosigned loan may be worth considering. It keeps the student in the equation and shares the responsibility between parent and student.

The Bottom Line

Start with federal loans in the student’s name first — they offer fixed rates, borrower protections, and access to repayment programs that private loans don't. Once those are maximized, private loans or Parent PLUS loans can help close what's left. Whether a parent cosigns a private student loan or takes out a parent loan option, going in with a clear understanding of who is responsible, what the true cost is, and how it fits into the family's broader financial picture makes all the difference. With new federal borrowing changes taking effect in 2026, it's worth comparing all your options well before the school year begins.

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Key Takeaways

• Federal Parent PLUS loan limits are changing in 2026. New rules cap annual borrowing at $20,000 per student, with a $65,000 lifetime limit. Understanding all your options has never been more important.
• Cosigning a Private Student Loan puts the loan in the student's name, helping them build credit history. Both parent and student share equal repayment responsibility, but with most lenders, cosigner release is available.
• Private Parent Loans offer flexibility and can carry competitive interest rates for families with strong credit, but do not include federal borrower protections.

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† College Ave rate ranges (2.59%–17.99% APR) reflect rates current at time of drafting and include an autopay discount. Rates are subject to change.

†† College Ave does not charge origination fees.