Parent college loans can be the best way for parents to fund their child’s college tuition in order to maintain a consistency in the lives of the parents and the student. There are many companies offering low cost student loans for parents, it’s just a matter of deciding if this is the route that you wish to take.
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Getting your child ready for college is a difficult enough task without having to worry about how you will pay for it. The first step is to apply for financial aid, which will give you an idea of what costs remain to be paid by the parents or student.
College tuition aside, there is also the expense of books, supplies, food if they will be living away from home, and of course an emergency fund which is necessary for students who are going away to attend college. For these types of expenses, there are student credit cards which are a good way for your child to have some independence, but it will not provide a solution if the main concern is the tuition.
What Are Parent Loans? Parent loans or PLUS loans are available to parents, and can be used to pay remaining fees that are left after financial aide or scholarship payments. This type of parent college loan allows you the flexibility of affording the college expense as a whole without taking a second mortgage out on your home.
When Should You Consider A Parent Loan?
Federal student loans are a great option, however, this type of loan is calculated by the school your child will be attending, and takes in to consideration any financial aide payments that your child may have received or will be receiving. Many times, the amount set by the school is much less that what is actually required to pay the fees and tuition. Parent loans can be borrowed as a supplement for the difference between what is paid by a Federal loan and your child’s actual expenses that remain unpaid. Private student loans are another option if a Federal loan does not interest you. This type of loan is one offered by private banks or financial institutions, and your child will need a good credit score in order to receive the loan. Parents can co-sign for the loan should the child’s credit score not meet the requirements, which much of the time is the case.
What Type Of Parent Loans Are Available?
PLUS loans offered as a student loan are granted through the Federal Government. There are also Parent Loans granted by private lenders that are similar in nature to the PLUS loans. Loan Application Requirements Any type of Federal or private parent loans require a good credit history to be eligible. If you want to apply for a PLUS loan, you will need to complete the PLUS loan application and sign a promissory note. If you will by applying for a private parent loan, other documentation may be required depending on the lender.
Amount You Can Borrow?
A PLUS loan allows you to borrow up to the estimated annual education cost after any other aide has been applied. For example, if your child’s annual tuition is $7,000, and your child has a Federal student loan worth $3,500, you may be entitled to borrow up to $3,500 yearly from a PLUS loan. If you decide to apply for a private loan through your financial institution, the loan limits are set by the bank according to your credit score.
Loan Repayment
The conditions for repaying a PLUS loan generally begin sixty days after the disbursement has been made. Obviously, this means that you must begin repaying the loan while your child is attending college. Private loans offer different types of repayment options but sometimes results in a higher interest rate. If you co-sign for a loan that is in your child’s name, repayment of the loan would not begin until your child has graduated from college. The upside is that you have longer to plan the repayment; however, you pay more in interest.
