Parent PLUS vs. Private Student Loan, FIGHT! | 03.25.10
As a recent graduate, I know first hand how frustrating it can be to find out that there is a remaining balance on your tuition bill after your financial aid package is deducted. If you are going to a less expensive university of community college, the number may be more palatable… but if you go to a private four year, it could be will into the thousands.
During my junior year at Suffolk University, I found out that I had a $11,000 balance due on my student account. I came to find out this was because my parents’ income changed from the previous year. That’s a huge amount of money leftover to be paid through other means. Although scholarships and grants are definitely the preferred way to go when it comes to financial aid, sometimes you just can’t get enough of them.
So, if you have a big gap between your total cost of attendance and your financial aid, what do you do? Two potential answers to that question are Parent PLUS loans and private student loans.
Parent PLUS Loan
If you haven’t already read my blog on Parent PLUS loans, I highly recommend it; there is much more detailed information. One of the benefits of a PLUS loan is the fixed interest rate (which is pretty competitive for the current economy.) Another is the generous array of repayment terms set forth by the Department of Education’s Direct Loan program. With a PLUS loan, you can choose a plan like Income Based Repayment, that ensures you will be able to make your monthly payments without excessive financial hardship. Finally, the Parent PLUS loan requires what reportedly is a relaxed credit check that supposedly allows more diverse borrowers to qualify for the loans.
Private Student Loans
If I were to sum up a private student loan in one word, it would probably have to be versatility. You can use a PSL for pretty much anything school-related… be it rent for an apartment, buying a computer or anything in between. The downside to a private student loan is the credit check is often much deeper and a co-signer is almost always required to get approved and have a decent interest rate.
If you have a parent that is willing to co-sign for you, then do the Parent PLUS loan. Although it will be in their name, you can make the payments on it… and it is much less expensive than taking out a private student loan. However, if your parents have bad credit or just will not help, a private student loan is a solid alternative to cover the gap between financial aid and total cost of education.
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