With so many student loan options out there, it is easy to get turned around when it comes to researching and choosing the best option for you and your family. Among the many loan programs, there is the Parent PLUS loan, which carves its own place in the pack. Like any other loan program, the Parent PLUS loan has its own pros and cons to consider when filtering through your options.
The Parent PLUS Loan differs from some of the others for one main reason- this loan is made to the biological or adoptive parent of a dependent student rather than to the student directly. The loan cannot be made to grandparents unless they are the adoptive parent. This is also not a loan to the student with the addition of a cosigner. This loan is to the parent or parents only. Therefore, the burden of repayment will rest with the parent and affect their credit only. The parent plus loan can be more costly than other federal loan programs but is still likely cheaper than some of the other programs available if a student needs more help than is being offered. The interest rate can tend to be higher than some private loans and there is a hefty origination fee that is tacked on at the start of the loan as well. However, the Parent PLUS loan will come with some of the sought after protections that come with Federal Student Loan programs.
One of the great things about the Parent PLUS loan is the fact that it carries a fixed interest rate vs. a variable rate. Depending on your situation, a fixed rate can help ease the fear of the unknown as far as rate and payment fluctuations down the line. It does, however, have a fairly high origination fee that can push it in to a higher cost category. It is also not a subsidized loan, meaning that interest will start accruing as soon as funds are dispersed rather than being deferred until after graduation and a grace period. Parent PLUS loans are accessible and income is not a determining factor in how much can be borrowed. Whatever the cost of school comes to, a parent PLUS loan can help bridge the gap and assist the student in finding more opportunity for educational programs and degrees.
This accessibility also comes at a great cost to some. Because these loans are not tied to income, it can cause some people to get in over their heads as far as cost and the burden they are taking on out of the desire to help their children succeed. It is not hard to bite off more than you can chew by taking out student loan debt, especially for your own children. When a student graduates college, it is typically their hope that their degree will land a great paying job that will help them to pay back their student loans. However, when a parent takes out a loan, their career is typically set and they won’t be expecting to see a great increase in income. In addition, the time frame a parent would be taking a Parent PLUS loan out is also likely the same timeframe that saving for retirement is so vital. Paying back student loans over saving for retirement can spell disaster in the future if not carefully planned and coordinated.
When considering a Parent PLUS loan, be careful to identify any potential pitfalls for you and your situation and do not take on more debt than you can handle, especially if it means forgoing important savings for the future. If a program is too costly, consider a cheaper college, taking some time off to save money toward the program, or applying for a ton of scholarships to snag what is available. Your education should help provide for your future, not rob from it.
Don’t let money stand in the way of education and career goals! One of the most sought after forms of aid is an education grant. Education grants are Free money to help individuals pay for college.