Parental

Parental Loans to Finance College

If a student’s federal financial aid award, combined with savings, grants and scholarships is not going to be enough to cover expenses, there are loans designed for parents to help.

The Federal PLUS Loan for Parents

The Federal PLUS loan for Parents is an excellent way to complete a student’s financing. If your child is still a dependent, you can borrow up to the balance of the cost of attendance, and there is no cumulative limit. The debt is the parent’s responsibility, not the student’s, and the debt cannot later be changed to the child’s name.  A credit check is part of the application process, but the credit standards are much looser than they are for a private loan. With a credit-worthy co-signor, most parents can qualify.

The Parent PLUS should be one of the first options a family considers if there is a financial aid shortfall because it has all the benefits of a federal student loan except a grace period: low interest rate, flexible repayment terms, consolidation options and options if you run into financial difficulties. The details are at www.direct.ed.gov/parent.

Some parents do not like the fact that this loan is in the parent’s name and cannot to switched to the child’s. For these families, other options may be more appropiate.

Private Parent Loans for College Financing

Private banks and student loan providers have a range of products for parents facing educational expenses. These loans are all credit-based, and they have the usual disadvantages of private students loans: high and variable interest rates, high fees and more rigid repayment rules. One feature many parent will like, however, is the co-signor release feature. If they co-sign with a student, many private loan products enable the parent to be released of responsibility after the student has made on-time payments for a certain period of time.

The guidelines for these loans is the same as those for private student loans: be sure to run the numbers through an online calculator to ascertain exactly what the loan is going to cost in different repayment scenarios, and be sure you understand all the interest, fee and repayment terms.

  • Sallie Mae offers the Smart Option Student Loan, which is designed for students who will use a parent as co-signor.
  • Wells Fargo has a well-known parent student loan program. Details are available at www.wellsfargo.com/student/loans/parent/privatestudentloans