Students can only receive so much financial aid in their own names for federal student loans. If they need money beyond the standard federal aid, the next step is applying for PLUS loans and private loans. But, in most cases, private student loans require a cosigner. The cosigner is usually a parent, but it can be any credit-worthy adult, including a grandparent.
Remember, student loans need to be repaid, plus interest. Before you borrow student loans, apply for scholarships and grants, consider employer tuition reimbursement, and other ways to reduce the cost of college.
Can grandparents borrow federal PLUS loans?
The full name of the federal PLUS loan is the Parent PLUS loan. Its function is right there in the name: this is a loan that your parents can borrow in order to help you pay for your education.
Still, a growing number of students each year ask if their grandparents can apply for PLUS loans on top of (or instead of) anything their parents have borrowed. The short answer, though, is that they cannot.
In fact, the only way your grandparent can get a PLUS loan is if they have formally adopted you. Simply being your legal guardian will not suffice.
Borrowing Private Student Loans
While there is no way that a grandparent can cosign a federal loan, they can cosign a private loan. Such loans are offered by a variety of lenders, and anyone can cosign with the student whether they have a family relation or not.
Keep in mind you should exhaust all federal student loans before you borrow private student loans. Federal loans are usually a lower interest rate, plus most offer the potential for forgiveness, the option for pausing payments during job loss, an option to make payments based on income, and some loans are subsidized.
Because private loans are available from so many lenders, your grandparent may want to start by asking their current bank about potential student loans. If they already have a relationship with the lender, the two of you may be able to cosign on a loan with a more competitive interest rate.