My daughter got into the theater program at her dream school and she is so excited! Unfortunately, even with financial aid, the total cost of the program is a bit more that we can afford to pay out-of-pocket right now. She has her heart set on studying theater in New York City, so I'm willing to take out some loans myself to make this a reality for her. Are Parent PLUS loans hard to get? Should I take out a private loan instead? What are the best options for parents who want to take out loans themselves to help their children pay for their college?
Congratulations to your daughter! You asked some great questions about college loans for parents. Let's take a look at them below.
The good news is, Parent PLUS loans offered by the federal government are not hard to get. The Parent PLUS option is often included in the financial award letter families receive from the university and the process to borrow using the Parent PLUS option is relatively straightforward. However, for those with good credit, it is not always the most affordable option.
Many parents qualify for private student loans, which, depending on their credit history, can be much more affordable than Parent PLUS loans. For starters, Parent PLUS loans come with a hefty 4.2 percent origination fee, and the interest rates are higher than other federal loans. For those with lower credit scores, Parent PLUS can be less expensive than private student loans. For those with higher (650+) credit scores, private student loans may offer lower interest rates and no origination fees.
Parent PLUS loans also don't offer all the same benefits as federal subsidized loans. The subsidized loans have more flexible repayment options and do not accrue interest while the student is in-school, while Parent PLUS loans accrue interest while the student is at university, meaning that the overall cost of a Parent PLUS loan can be much more expensive.
While the Parent PLUS loan is a great option for many families and can be easier to get, private loans may offer lower interest rates and fees, especially if you have good credit and an income. We encourage you to consider both options as you decide what's best for your family.
At Juno, we do the research to identify the best private student loans for you. We use the power of collective bargaining to give our community better rates than they could get by themselves.