Parent or Student Loans Which is the Best Option

Getting a university education is an expensive proposal. In fact, about 20 percent of college students need some form of financial help to pay for the expenses they incur in school. With the alarmingly high students need a loan for university, it means that a large number of students will graduate from college with a debt load that could even reach unmanageable levels. One way to circumvent not having to get a student loan is for parents to sign a "parental" loan. The question whether there is student loans or parent loans are better.

Parent loans and student loans have their own set of advantages and disadvantages:

Federal student loans have the lowest rates and best repayment options. If you need to apply for a loan, and you can qualify for federal loans so make this the best choice for the loans you wish to apply for. As a way to reduce your loan responsibilities, few resources that you need and refuse any other offers to highlight it. Parents may choose to extend assistance to their children in paying off the loan when it comes time to repay the loan after graduation.

Federal parent loans or PLUS loans (Parent Loans for Students) can be considered as another option in getting a loan offering a lower interest rate. Parents who have dependent children who will begin their university education and have a good credit history may apply for a PLUS loan. PLUS loans are not need-based so you can prepare a loan up to the total cost of your undergraduate education expenses with the other financial aid you received subtracted from the actual total. A peculiar characteristic of a PLUS loan, however, that the first payment on the loan begins around 60 days after the loan is granted. This differs from a student loan, the first loan payment is deferred until after graduation. PLUS loans also require an application fee.

Private loans can be taken by both students and parents in financing university education costs. Concepts for private loans are the same as the federal-type loans. However, students can negotiate repayment to begin after graduation. One way for students to get a good credit history is by drawing small private loans. They will have to cosign even to get private student loans.

The big decision has to be done is to determine what kind of loans will be the best solution for the individual. This boils down to a personal decision. When deciding on which loan to get you should first determine the size of the debt that your child will need to move up from his studies. You should also ask themselves the level of responsibility you want your child to take on paying off the loan. Finally, you should sit down with your child and try to develop a plan for repayment to pay for the loan.