Parent Loan for College: Best Student Loans for Parents
Even when your child was still in diapers, you probably dreamed about what kind of adult they would become, which likely included where they would go to college. Would they want to attend your alma mater or forge their own path? Will they choose a career as a teacher or go to medical school? The possibilities seemed endless.
Fast forward 18 years and college is here. It's a very exciting time, but also a little scary when you start calculating the cost of college. You may have some money saved, and your child might be working part-time to save extra money for college.
Your family is doing everything it can, but the college your child plans to attend costs more than you have saved. Many families find themselves in this situation, and most use a combination of savings, financial aid, and loans to pay for college.
Apply for Free Money First
One of the most important things a family can do to help pay for college is to complete the Free Application for Federal Student Aid (FAFSA). The form becomes available on October 1 for the following academic year. FAFSA will determine your student's eligibility for grants, federal student loans, and other state aid. This is a valuable resource and needs to be completed each year your child plans to be in school.
Even if you think you make too much money to qualify for financial aid, you should still complete the FAFSA form. Many states and colleges use the information when giving out additional grants and scholarships.
Students should also research and apply for other scholarship opportunities. If a student is awarded a couple of scholarships worth $500 each, they could pay for books for an entire year. Every little bit helps!
Once you know how much financial aid, federal student loans, and private scholarships your student will receive, you can calculate how much additional money your family may need to pay for school. If you still need more money to cover the cost of attendance, you might want to consider a parent loan for college expenses. There are two types of loans for parents to consider, private/alternative loans from a bank or other lender, and federal Parent PLUS loans.
Federal Parent PLUS Loans
Federal Parent PLUS loans are offered by the U.S. Department of Education and are funded by the federal government. Before parents can apply for a PLUS loan, students need to complete the FAFSA to determine eligibility.
Parent PLUS loans are in the parent's name, and the parent is responsible for repayment. Interest rates are fixed for the life of the loan. For the 2021-2022 school year the interest rate is 6.28%, plus a loan fee of 4.228%. Payments begin once the loan is disbursed unless you request a deferment.
Your credit history is considered when applying for PLUS loans. Parents with poor credit may need to find a cosigner who agrees to be responsible for repaying the loan if you cannot. Your student can't be the cosigner, so you may need to reach out to a grandparent or other adult who can help.
Many private banks, credit unions, and state agencies also offer parent loans for college. Just like with the federal loan process, families should complete the FAFSA to make sure students can take advantage of all federal financial aid before parents apply for loans. And like PLUS loans, the repayment period begins as soon as the loan is disbursed.
Compare rates for all lenders you're considering, including federal and private loans. In some cases, a private loan may have better rates than a federal loan. It's also important to consider what kind of application, prepayment, and other fees each private lender will charge.
NC Assist Loans are offered by College Foundation, Inc. (CFI), a North Carolina-based nonprofit lender. CFI's mission is to provide services to North Carolina families to help them plan, apply, and pay for college. Currently, for loans from applications made on or after May 1, 2022, parent fixed rates are as low as 6.00 percent when in repayment using auto-draft.
The NC Parent Assist Loan is available to North Carolina residents to help bridge the gap when savings and financial aid are not enough to cover the cost of college. The loans can be used at any eligible in-state or out-of-state school.
Consider discussing your family's financial situation with your financial advisor before applying for any parent loans for college, and only borrow what you need. Student loan calculators can help families estimate payments, so you learn what you can afford.
Paying for college is definitely a team effort between parents and students. Make sure you choose a lender who will be a valuable member of your team.