When families sit down to talk about how to pay for college, one assumption often leads the conversation:

“The parents will handle the loans.”

On the surface, it makes sense. Parents want to protect their kids from debt. They likely have stronger credit and a steady source of income. And the idea of giving their child a fresh start feels right. But what feels right in the moment can sometimes create problems down the road.

When Protection Backfires

Take Kayla’s story.

Her parents took out federal Parent PLUS loans to cover her college education—about $85,000 over four years. Kayla graduated without any student debt in her name.

But that clean slate came at a cost.

When Kayla applied to rent her first apartment after college, she had no credit history and needed a co-signer. When she applied for a car loan, her limited credit profile led to higher interest rates. By the time she wanted to buy a home in her late 20s, she had a very limited financial track record.

In shielding their daughter from debt, her parents unintentionally blocked her from building the credit she would need as an adult.

The Parent Trap

Now let’s look at the other side.

Mike and Lisa borrowed over $80,000 in Parent PLUS loans to support their daughter Emily. Today, their monthly payment is almost $1,000. They’re in their early 60s, facing delayed retirement and have limited financial flexibility. Their debt-to-income ratio now makes refinancing their home or qualifying for other loans more difficult.

Meanwhile, Emily is thriving – but unaware her success is tied to debt her parents are quietly carrying.

Unfortunately, this isn’t rare. As of 2024, more than 3.7 million Parent PLUS borrowers owed over $111 billion in federal education loans.

The True Cost of Parent PLUS Loans

For the 2025-26 academic year, federal Parent PLUS loans carry a fixed interest rate of 8.94% plus a 4.228% origination fee. That means borrowing $10,000 comes with an upfront cost of $423, plus nearly 9% annual interest starting immediately.

In contrast, private student loans for creditworthy borrowers may offer lower interest rates and often no origination fees. That said, not all private loans are created equal, and borrowers must compare carefully.

But numbers only tell part of the story. The real decision is about who takes responsibility—and why.

A Smarter Framework for Family Loan Decisions

College financing shouldn’t rely on assumptions or guilt. Instead, families should have open conversations around three key questions:

1. Who benefits from the degree? Typically, it’s the student. They’ll see increased earnings, stronger job prospects, and long-term financial gains.
2. Who can realistically manage the debt? Parents might have more current income, but students may have future earning power. In many cases, a shared approach is best.
3. What skills are gained along the way? When students take on appropriate loan responsibility, they build credit, budgeting habits, and financial independence. That matters long after graduation.

The Power of Shared Responsibility

The best outcomes come when families approach borrowing as a team.

• Students can borrow in their name and begin building credit history.
• Parents can co-sign to unlock better terms, without taking full ownership of the debt.
• Some families split the difference—students cover tuition, parents cover housing or other expenses.

A multi-year education line of credit from a credit union can make this process smoother. Students apply once and access funds as needed throughout college*, with flexible borrowing and real-time support. Parents can co-sign when it adds value, without absorbing the full burden. Additionally, some lenders offer a co-signer release after a certain period of on-time payments.

*Subject to annual review and credit qualification. Must meet school’s Satisfactory Academic Progress (SAP) requirements.

Credit Unions Offer a Different Approach

Unlike traditional lenders, credit unions aren’t focused on maximizing revenue per borrower. They’re not-for-profit institutions owned by their members. That means they prioritize service, transparency, and long-term value – not just sales.

Student Choice developed its free finder tool to help connect families with these credit union-backed loan programs. Allowing you to compare personalized options quickly—without a credit check or commitment.

The Hidden Cost of Borrowing in a Parent’s Name

When parents carry too much loan responsibility, the long-term impact is real:

• Retirement contributions are delayed
• Emergency savings shrink
• Debt-to-income ratios increase
• Future lending power is reduced

Meanwhile, research shows that parents with their own student loans are 67% less likely to save for their children’s college – creating a cycle where each generation starts over.

Breaking that pattern starts with strategic, shared borrowing that protects the whole family.

Making a Smart Decision in 2025

There’s no universal answer. But there is a process:

• Compare Parent PLUS vs. private loan rates/terms
• Evaluate origination fees and repayment flexibility
• Talk openly about credit, income, and long-term goals
• Choose a solution that works for both generations – not just one

If your student is responsible, college-bound, and future-focused, they may be ready to carry the right kind of debt. And with support from a trusted partner like your local credit union, they don’t have to do it alone.

Final Thoughts

The student loan decision isn’t just about money. It’s about empowerment, partnership, and the kind of future your family wants to build.

Parents don’t have to shoulder the burden alone. And students don’t have to figure it out without support.

By understanding the real differences between private student loans and parent loans—and comparing your options honestly, you can make a better decision together.

Start with the Student Choice finder tool. It’s free, fast, and designed to help families discover their best-fit education line of credit.