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Parent Loans or Student Loans – what
is going to be best for my child?
by Vanessa McHooley
Parent Loans or Student Loans – what is going to be best for
my child?
At least 20% of college students need some type of loan to help pay for
their college education. Such a statistic can lead to students graduating
with an unmanageable debt load. An alternative is for parents to help
out by taking out loans themselves. But which is the better option –
student loans or parent loans? Each has distinct advantages and uses.
Federal student loans
Federal student loans have the lowest interest rates and best repayment
options. If you need to take out loans and you qualify for federal loans,
this is your best choice. Just be sure to accept only the funds you need,
even if you are offered much more. Parents can always help their children
pay off these loans once repayment begins after graduation.
Federal parent loans
PLUS Loans (Parent Loan for Undergraduate Students) are another loan option
that comes with low interest rates. If you are a parent with dependent
students attending college at least part-time and you have a good credit
history, you are eligible to receive a PLUS Loan. These loans are not
needs-based. You can borrow up to the total cost of undergraduate education
expenses, minus other financial aid already received. Unlike federal student
loans, payment is not deferred until after graduation; instead, your first
loan payment will be due about 60 days after the loan is disbursed. Also
unlike federal student loans, PLUS Loans require an application fee.
Private loans
Both students and parents can take out private loans to cover funding
gaps. Terms are basically the same for these loans, although students
may be able to have their repayment deferred until after graduation. Another
consideration is that students may wish to take out small loans to begin
to establish a credit history. You may need to cosign for private student
loans.
Other options
Parents do have some additional options for college funding, such as home
equity loans. These often have rates as good as private loans.
So which type of loan should I get?
This really comes down to a personal decision. Ask yourself these questions
as you are trying to decide:
-What level of debt do you feel is manageable for your child to graduate
with?
-How important is it to you that your child takes responsibility for paying
student loans?
-Will you and your child work out a repayment plan to repay PLUS Loans
and other parent loans?
This article is distributed by NextStudent. At NextStudent, we believe
that getting an education is the best investment you can make, and we're
dedicated to helping you pursue your education dreams by making college
funding as easy as possible. We invite you to learn more about Parent
Loans or Student Loans at http://www.NextStudent.com .
About the Author
My goal is to help every student succeed - education is one of hte most
important things a person can have, so I have made it my personal mission
to help every student pay for their education. Aside from that, I am just
a pretty average girl from SD.
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