Parental Loans and Paying for College

8/12/2026

Advice for parents before they agree to take on college debt for their children.

The Perils of Parent PLUS

Many parents plan on contributing to their children’s education – according to Sallie Mae, parent income and savings covered 37% of the total cost of higher education in academic year 2023–2024. One significant source of that financial support comes through the federal Parent PLUS loan program, which lets parents take out student loans on behalf of their kids. While this loan program does provide parents with options and financial flexibility, it also has drawbacks you need to be aware of:

• Parent PLUS loans are often more expensive than other forms of student loans. Not only do Parent PLUS loans typically have higher interest rates, but they also have an origination fee greater than 4% and require a hard credit check.
• The parent is 100% responsible for the debt.  Unlike loans taken out in the student’s name, if a parent takes out a Direct PLUS loan, they are responsible for repaying the entirety of the loan, regardless of what educational and career choices the student makes.
• Forgiveness options are limited.  Parent PLUS Loans are not eligible for some forgiveness programs in the same way as loans taken out by students. Public Service Loan Forgiveness may be available only if the parent borrower works in qualifying public service and makes qualifying payments under an eligible repayment plan after consolidation. 
• There are fewer repayment plan options. Parent PLUS Loans borrowed by parents are generally not eligible for income-driven repayment plans unless they are first consolidated into a federal Direct Consolidation Loan, which may make them eligible for income-contingent repayment.
• There are new limitations to borrowing.  Beginning July 1, 2026, Parent PLUS Loans will be subject to new borrowing limits for parents who do not qualify for a limited exception. For each academic year, the maximum amount all parents may borrow on behalf of one dependent undergraduate student may not exceed $20,000, with an aggregate limit of $65,000 per child over the course of that student’s undergraduate study, regardless of amounts repaid, forgiven or discharged. Some parent borrowers may remain subject to the prior limits if their student was already enrolled in the same program at the same institution and had borrowed a Direct Loan, or had a Parent PLUS Loan borrowed on their behalf, before July 1, 2026.

BY THE NUMBERS

74%

That's the percentage of parents who paid for a portion of their child's education out-of-pocket in the 2023–2024 school year, according to a study by Sallie Mae.

Be Wary of Cosigning or Assuming Student Loans

Beyond Parent PLUS loans, parents might choose to cosign a private student loan for their child or assume payment altogether. While the amount of financial help parents decide to give their kids will vary from family to family, understand that you are offering your good credit on these loans – and you will ultimately be on the hook for repayment. Keep in mind that if a lending institution is requiring a cosigner, it is because they believe the applicant is too great a default risk without one.

You should use extra caution if you have other financial priorities as well, such as saving for retirement. Students have multiple options when it comes to college funding, including student aid, scholarships and grants, part-time jobs, work study programs, or even deferring college while they save money and build their work history. There are no Stafford loans or Pell grants for retirement, and the closer you get to leaving the workforce, the less time you have to make up lost income.

So What Are Your Options?

In many ways, the advice for parents financing their children’s education is similar to the advice we offer the students themselves.

• Make sure your child fills out the Free Application for Federal Student Aid (FAFSA) every year, even if you don’t think they will qualify for aid. At most colleges, the FAFSA is a prerequisite for receiving merit-based aid, such as scholarships and grants. In many cases, aid is awarded on a first-come, first-served basis, so the sooner you apply, the better.
• Prioritize aid that does not need to be paid back. Beyond scholarships and grants, this might include savings, support from family and friends, and earnings from part-time work during college. The less you or your child has to repay (with interest) upon graduation, the better.
• Some employers offer programs that help employees pay off student loan debt – something children considering post-graduate employment should investigate. 2019’s Employer Participation in Repayment Act lets employers give tax-free student loan assistance up to $5,250 per year, per employee. The number of companies that provide this benefit has more than tripled in the past five years, from 4% in 2019 to 14% in 2024, according to the Society for Human Resource Management’s 2024 Employee Benefits Report. Both federal and private loans are eligible.
• Similarly, the SECURE Act 2.0 included a new provision that allows employers to treat an employee's student loan payments as if they were a 401(k) contribution, making that employee eligible for a matching retirement contribution from the employer. If your child's employer offers this, your child can focus all their savings on paying down their loans while still receiving a retirement plan contribution from their employer.

So what if you decide Parent PLUS loans aren’t right for you, but you still want to help your kids or grandkids with their student debt? Fortunately, you have options. This article offers several strategies for helping a family member with money, from lending cash to assuming monthly bills to providing nonfinancial help with budgeting. And be sure to check out our four tips for supporting your kids in college to make sure you’re giving them the support they really need without sacrificing your own future plans.

BY THE NUMBERS

74%

That's the percentage of families who filed the FAFSA in the 2023–2024 school year, marking a steady increase year over year.

Editor’s Note: This article was originally published January 2021 and was updated August 2026 with more current data.

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