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Categorized | Paying For College

Private Education Loans Better Than Parent PLUS Option?

Overture Technologies is a leading provider of private student loan options for students and families. Through their Private Student Loan Marketplace, they give students the power of choice by allowing them to compare the terms and rates of multiple education lenders all in one convenient location. In a way, Overture has become the “one-stop-shop” for private education loans.

Last month, Overture announced that families/students received an average interest rate of 6.12% for loans selected through its Private Student Loan Marketplace in 2010. Given this interest rate, a number of families may be wondering if the private education loan trumps the benefits of the Parent PLUS loan considering it carries a fixed rate of 7.9%. My quick response would be “no”, but my qualified answer would be “it depends”.

Benefits For Getting A Parent Plus Loan vs. a  Private Education Loan

  • The interest rate is fixed (7.9%)
  • If the parent becomes totally disabled, the loan can be forgiven
  • You don’t need a co-signer (however an endorser may be an option if you have an adverse credit history)
  • The loan is only reported on the parent’s credit bureau and not the student
  • The approval process for the PLUS loan is easier (I have witnessed some families with a bankruptcy in their past being approved – which is odd because bankruptcy in the past 7 years automatically precludes a family from being eligible?)

The only benefit I can see to choosing a private education loan program over the Parent PLUS is the current interest rate. However, you have to keep in mind that in almost all cases, the private loan interest rate is variable and it could very easily jump into double digits and surpass the fixed rate provided by the Parent PLUS program.

That being said, if you have exhausted all of your federal loan options (Student and Parent PLUS Direct Loans), a private education loan may be your only choice to covering your education expenses. And, if you have to go the route of a private education loan, you should definitely make use of all the tools and resources provided through Overture’s Student Loan Marketplace.

There is certainly some value to be gained (& dollars to be saved) by comparing APR, interest rate, total cost, monthly payment, borrower benefits, fees and repayment options all in one place before pulling the trigger and choosing the best private education loan for your situation.

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2 Responses to “Private Education Loans Better Than Parent PLUS Option?”

  1. Jordan says:

    Totally agree. As you say yourself, the current interest rate can change (increase), so I would always go for the parent plus option.


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