Federal Student Loans Vs. Parent Loans
Federal student loans have the lowest interest rates and the best repayment options. If you need to apply for a loan and you can qualify for federal loans then make this the top choice. As a way of limiting your loan responsibilities, only get the funds that you will need and refuse any other offers to raise it. Parents can opt to help their children pay off the loans after graduation.
Federal parent loans or PLUS loans (Parent Loan for Undergraduate Students) can be considered as another option in getting a loan that offers lower interest rates. Parents that have dependent children who are going to start their university education and have a good credit history can apply for the PLUS loan. PLUS loans are not needs based so you can draw up a loan up to the total cost of your undergraduate education expenses with the other financial aids that you have received deducted from the actual total. One peculiar characteristic of a PLUS loan though is that the first payment for the loan starts about 60 days after the loan is granted. This is different from a student loan where the first loan payment is deferred until after graduation. PLUS loans also require an application fee.
The big decision to be made is to determine which kind of loan will be the best option for the individual. When deciding on which loan to get you should first determine the amount of debt that your child will need in order to graduate from his studies. You should also ask yourself the level of responsibility you want your child to assume in paying off the loan. Finally you should sit down with your child and try to work out a repayment plan in paying for the loan.
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