Students often take out student loans. Having family members to support you during this time can be incredibly helpful.
Involve Your Parents
Before you borrow funds, it is wise to speak to your family. Here are some of the ways your parents may be able to offer assistance:
- Deciphering the hard to comprehend language common on financial aid form paperwork
- Help you determine how much to borrow and which types of loans to pursue
- Preparing their tax returns early
Your parent’s tax information will be required before you fill out the Free Application for Federal Student Aid (FAFSA). This is a requirement for you or your parents to be eligible to receive federal loans. Typically, these loans have the most beneficial terms and they will be the ones you want to explore first.
Generally, private loans come with less favorable terms and higher interest rates in comparison to government loans. However, some people find private loans are necessary to top up their funds.
Take the following tips into consideration when discussing private loans:
Private student loans can be explored via banks and other lending institutions
The majority of private loans are taken out by students, and they will be responsible for repayment.
Students typically have non-established credit or any ability to prove to the bank that they will be able to repay their loans. Therefore, private loans typically require a co-signer who has a good credit rating. The co-signer agrees to take responsibility for repaying the loan if the student is unable to.
College Loans for Parents
There may be an option for your folks to take out a parent loan for educational costs. This is a common choice when there is a gap between the cost of college and your financial aid reward. The federal Parent Loan for Undergraduate Students (PLUS) is the most common loan in these circumstances. Only consider a PLUS loan if your family has no other federal loan options which cost less. Use the PLUS as a last resort.
Read up on some facts about PLUS:
- This loan may cover complete college expenses including living expenses, books and tuition, minus financial aid.
- Regardless of how much money your family has, this loan option is available.
- There is a fixed interest rate on the PLUS loan; therefore, the rate will remain unchanged during the life of the loan.
- There are many PLUS repayment plans available to meet the various needs of the borrowers.
- This loan needs a credit check before being approved. If your folks have a bad credit history, they may have issues; however, if they have a positive credit history, they will likely be able to borrow.
- Filling out the Free Application for Federal Student Aid (FAFSA) is the first step for the PLUS application process.