College Loan Parent Student
There are a number of students who wish to pursue higher education but are hesitant because of monetary difficulties. Most of the students apply for federal student loans that are limited in number and made available according to the financial situation of the student. Also these loans at times are not enough to meet the complete requirements of the course. As a result students either do not qualify for these loans or their needs are not met with.
In such a situation you can always take the help of your parents who can be applicable for both government as well as private college student loans. For parents qualifying for these loans is not a difficulty and they can easily sponsor your education.
Here we will be discussing the different options that are available for borrowing loans to fulfill the needs of their children attending college education.
The federal loan option
The government makes loans available to parents who wish to sponsor their child's college education However, for sponsoring their child's education it is required that the child should be dependent on the parent and should be an undergraduate student who should be enrolled half time in an approved college or university. These loans are called as the federal PLUS loans.
With these loans the parents can borrow the total cost of the education including tuition, room and board, supplies, lab expenses, travel less any other aid. These loans are given out regardless of the need criteria in contrast to the other federal student loans. These loans do not require any kind of collateral and the interest on these loans at times is tax deductible.
Eligibility for these loans
For being eligible for these loans the parent is required to have a good credit score Credit is one of the main criteria for applying for these loans. Besides this the student for whom the loan is being borrowed should be enrolled for at least one-half time, which means that you should be enrolled for at least 6 recognition hours each semester.
Also for applying for these loans the parent should be a legal citizen of the United States. For qualifying for these loans you should submit a Free Application for Federal Student Aid (FAFSA) available at the college that your child attends. You should make sure that the college provides this application and takes part in the federal program. The interest rate on the federal PLUS loans is fixed at 8.5%
How much can you borrow?
With the federal PLUS loans the amount given out is equal to the cost of attendance deducting any other form of financial aid that you have taken. E.g.: if the cost of attendance is $8,000 and you have already borrowed $3,000 financial aid then your parents can borrow $5,000 from federal PLUS loans.
These loans are of two types Direct Federal PLUS loans and the FFEL PLUS loans Depending on which loan you have taken the funds are directly sent to the college by either the federal department of education or by the lender from whom the parent has borrowed. The college might require the parent to acknowledge the check and send it back to them The money is usually given out in two installments and each of these is not more than half of the loan amount disbursed. If any fund is remaining then the parents can get it is the form of cash or check.
In case you wish to cancel the loan then it is possible. The college is required to inform the parents when the amount is credited in the form of PLUS loan. This notice is to be sent not earlier than 30 days before or 30 days after the account is credited. The parents can cancel the whole or a part of the loan within 14 days of getting this notice. In case the payment if received by check then the parent can cancel the check by not endorsing it.
Option other than federal loans
In case you do not qualify for a federal PLUS loan or it does not fulfill the requirement then you can always go in for a private loan The private loans for parents sponsoring the education of their children are widely available in the form of either home equity loans or personal loans. You can also go in for a cash-out refinancing that would give you extra money that can be used to sponsor the education of your child.
Most of the times these private loans taken by parents for sponsoring college education need to be secured. If you take a home equity loan then you can enjoy the benefit of tax deduction on the interest applicable on these loans. Besides, you can borrow a big amount and your payments can be extended over a long period ranging from 5-20 years depending on the amount that you borrow.
These loans are also given out to parents who might be facing credit problems. However, they might be charged higher interest rates. When you compare the federal loans with the private loans then you would see in most cases the federal loan takes an upper hand but on the same side the private loans also have advantages of their own.
Now that you are aware of what are the options available for you taking a decision might not be difficult. However, when taking the private loan you should make sure that you compare the offers from different lenders so that you are able to qualify for the best loan.
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