Parent Loans or Federal Student Loans

When you are thinking about how to finance your college education you will be presented with a lot of options. Those options can be confusing until you understand what each of them means. Two of the common choices for financing your education is between federal students loans of a parent loan.

Federal student loans generally have the lowest interest rates and the best options for repaying the loan once you graduate. For these two reasons, if you qualify for federal loans then it would be a good first choice. In order to limit the amount of debt that your student loans cause you, always only borrow as much money as you need and don’t accept the abundant offers to take more.

The other big option for paying for a college education is for parents to assist their children in paying off their loans. Federal parent loans and PLUS loans (Parent Loan for Undergraduate Students) also tend to get good interest rates. Any parent who has a good credit history and a dependent child that is going to be starting college can apply for a PLUS loan. The biggest difference in these loans and federal student loans is that PLUS loans are not needs based, so you can get the loan for up to the total cost of undergraduate education. Another difference in PLUS loans is that generally the first repayment starts around 60 days after the loan is made. The loans also require an application fee. These differences are mainly because the loan is being made to the parent and not the student so the repayment period is not deferred.

The biggest decision to be made about financing your education is to determine which of these kinds of loans will work best for your situation. The first determination that needs to be made is how much money it will take for a degree to be obtained. Then the parent and student need to decide how much responsibility they are each going to take with the loan. No matter which loan is eventually chosen it is important for the parents and student to sit down and discuss the details and work out how the loan will be repaid.