May 6, 2010

Parent PLUS or a Private Student Loan? What should I pick?

Posted in Parent PLUS Loans, Private Loans tagged , at 1:38 PM by plusloans


If your child received their financial aid award letter and there weren’t enough digits on the page to cover tuition, you are definitely not alone. The cost of college continues to steadily grow every year, but financial aid has not kept the same pace. As a result, the gap between aid and cost continues to grow.

Once your child has exhausted the annual maximum for Stafford loans, the next step is to look at credit-based options to bridge the financial aid gap. Fortunately for you, there are quite a few lenders that all must compete with each other to make money and therefore give you an opportunity to minimize the interest rate on a new loan.

If you’ve read a few posts on this blog, you know the score on Parent PLUS loans, but what about private student loans? There are a few notable differences… and in some cases they can become more attractive than their federal counterpart.

Major Differences:

  • Private student loans have variable interest rates (meaning they change with the index they are associated with… most commonly LIBOR or the Prime)
  • They come from banks instead of the Department of Education
  • Many banks offer special incentives to make a private student loan more worthwhile

At the moment, interest rates are quite low due to the Fed attempting to put the economy back on a growth track out of the recession. This means that the indices are at historical lows and with a creditworthy borrower, you can secure a great interest rate that can be as much as 5% lower than a Parent PLUS loan.

If you want to learn more about some of the incentives that private lenders offer, check out this blog on the Student Loan Network.

The bottom line is just do some research before you take out a loan. In many cases, you can save thousands of dollars in interest if you shop around.

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4 Comments »

  1. boy this is some good info about student loans, I really want to find the right one, so this has been helpful, thanks!!

  2. […] full post on Student Loan Info for Parents Categories : student loan Best Daily Loan Tips Copyright © 2010 All Rights […]

  3. I was very pleased to find this site. I wanted to thank you for this great read!! I definitely enjoying every little bit of it and I have you bookmarked to check out new stuff you post. Kudos!

  4. Andy Amero said,

    The answer is both. I’m afraid Parent PLUS is not going to be enough.


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