School Loans
School Loans
Parents looking for school loans to help pay for their child’s education basically have two options – the Federal PLUS Loan and private school loans. Both loan programs require the borrower to have a solid credit history and require repayment directly after the first disbursement (sometimes repayment can be postponed for 60 days after disbursement).
The Federal PLUS Loan program requires the student to be enrolled at least half time and an accredited postsecondary institution. Parents have two options when applying for a PLUS Loan - Federal Family Education Loan or the William D. Ford Federal Direct Loan (you can’t qualify for both). Once approved, parents can borrow a predetermined amount of money annually. The limit on a PLUS Loan is equivalent to the student’s cost of attendance (COA) minus any grants, scholarships or other school loans the student has been awarded. Interest rates for PLUS Loans range in the 8.02 percent sector. Based on the loan program, interest is charged from the date of the first disbursement until the loan is paid in full. FFEL loans also require additional fees at the time of disbursement. Parents are responsible for a fee of up to 4 percent of the loan. The fee benefits the United States Department of Education with a share of it going to the guaranty agency that helps to reduce the cost of parent loans.
On the other end of the school loans spectrum is the private loan. Private loans can be taken out by the parent much in the same way as a PLUS Loan. Parents are again required to pass a credit check. Private loans can require a little more legwork on the borrower’s part. Before selecting a lender, experts recommend shopping around for the best interest rates, fee schedules, and repayment plans available.
