When comes a time for children to go to school or college, parents often opt for a loan that covers the cost of the tuition fully or partially. There is a reason why parent loan is the best option in certain circumstances. The bill for college includes not only the tuition itself but the cost of the books, living and accommodation expenses, the cost of additional lessons, fees and so on.
So, why parents loan is more beneficial? First of all, parents always can get the larger amount of the loan than students can. It is reasonable, as adults are more solvent comparing to teenagers, so lender takes fewer risks of not getting the money back.
Two types of loans are available for students and their parents – Federal loans and Private loans. Federal parent loans are cheaper and have more flexible terms of repayment, while private loans are easier to qualify for and parents have a huge choice of companies to pick the most suitable terms.
So, if you are a parent and you can’t just sign a check to pay the bill for your child’s scholarship, here is the review of loans you can apply for in accordance to your needs and eligibility.
Types of Parent Loans for undergraduate and graduate students
Parent PLUS loan
The most common type of parent loans that are offered by the government (the U.S. Department of Education to be exact) is Parent PLUS loan. It gives numerous benefits to parents who can borrow the whole needed amount up to the entire cost of the education.
This is a direct loan that parent of an undergraduate student can get after applying with the special form. The terms of eligibility are quite strict and a borrower must show an excellent credit history (the more paid off loans the better).
Parent PLUS loan is granted on a fixed interest rate of 7%.
Important advice: if you are not after the size of the loan, it is always better if your children first try to qualify for Direct Student loans. The thing is direct student loans are offered on much better terms with the significantly lower interest rate (4%-5%), plus the government pays the interest rate during the school time.
If your child (dependant) is not eligible for getting a direct Federal aid, then it is reasonable to apply for Parent PLUS loan.
Many colleges provide students with an option to get a special loan that colleges grant directly to parents. These types of loans are way more beneficial in terms of lower interest rate and more flexible repayment terms. Unfortunately, the number of colleges that can grant such loans is not that big, but it’s always reasonable to send a request to find out whether a college-sponsored loan is available for you.
Some colleges offer as low interest rate as 5%.
Private Parent loans
In a case parents are not eligible for PLUS loan and there is no way to get a college-sponsored loan, the full diversity of private parent loans is to their service.
Usually, private lenders, especially online companies do not have strict requirements to borrowers’ credit score and credit history, so private loans are available almost for everyone. The other side of that is that private loans have a considerably higher interest rate.
Nevertheless, parents can borrow any size of loans without being limited like they would be with the Federal Student’s aid.
Companies that provide the best terms of Parent Loans
Here are the TOP-3 lenders in the USA that provide private parent loans on really good terms.
One of the leading banks in the USA offers financing for education to parents who prefer to cover the whole cost of the tuition at once, without further worrying. Remarkably low interest rate of 4.99% with discount is available for eligible borrowers. Wells Fargo offers variable and fixed interest rates under flexible repayment options. There are no application and no origination fees as well as no charge for preterm loan’s repayment.
The bank is ready to grant private parents loans on very attractive terms with loans ceiling for undergraduates up to $90.000 and for graduate students up to $120.000. Multiple repayment options offer 5 or 10 years terms of paying the loan back, without any fee for early (or additional) payment. Eligibility requirements are pretty the same as at other major lenders, so students have to be enrolled at least half-time at a college or
University that is eligible to provide a degree-granting program.
The Company offers an impressive variety of repayments terms for parents of undergraduate and graduate students: 8, 10, 12, and 15 years with almost unbelievably low interest rate: 2,93% for variable interest rate and 5,46% for the fixed interest rate. The Company charges no fees for preterm loan’s repayment.