Unlike federal student loans, the Federal Parent PLUS loan does require a credit check. Requirements are less strict for this loan compared to private parent loans, but borrowers must not have an adverse credit history. No credit scores are required. Students and parents must also not be in default on a federal student loan.
The Federal Parent PLUS Loan is available to parents of dependent undergraduate students. Interest rates are fixed and will remain the same for the life of the loan. This loan is unsubsidized and interest starts accruing immediately. Repayment may be deferred while the student is enrolled in college on at least a half-time basis and for six months afterwards.
Federal parent loans are loans made by the U.S. federal government and private loans are made by a private lender, such as a bank or a credit union. The federal loan for parents is called the Federal Parent PLUS Loan. Federal loans, including this one, offer better benefits than private loans, including the possibility of student loan forgiveness, an option to make payments based on your income, and options to postpone payments during times of unemployment and economic hards
Saving for college is a great solution to reducing parent loans, and you can consider opening a 529 college savings plan account. If you haven’t been able to save enough for your child’s college, you can encourage them to apply for as many scholarships as they can. Assist with filling out the FAFSA to apply for grants and work-study opportunities. Talk to your children about choosing an affordable college, staying on track to graduate and reducing expenses as much as possible while they are in school.
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How do parent loans work?
Once you and your child exhaust college savings and all other resources (e.g., scholarships, grants, etc.), you may need to borrow a student loan to pay for college costs. A parent loan, like a student loan, enables you to borrow money to help pay for your child’s college costs. You will pay back the total amount at a later date, plus fees and interest. For example, if you borrow a $10,000 parent loan with a 5% interest rate and plan to pay it off over 10 years, you will pay $2,728 in interest over the 10 years that you repay the loan, in addition to repaying the $10,000 principal balance. There are two main types of student loans. Federal student loans are loans made by the U.S. federal government that come with many benefits. Private loans are made by a private lender, such as a bank or a credit union. It is often recommended that you turn to federal student loans before private loans.
Student loan refinancing lenders do not generally charge origination fees or have prepayment penalties. Some charge fees for late payments. Be sure to review the fees charged by each lender before refinancing your loans.
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How can I get the best rates?
Lenders typically offer the lowest interest rates to borrowers with the highest income and best credit profiles. Before you apply, check your credit report to address any errors. If possible, pay down any other high-interest debt, such as a credit card. Increasing your income can also help. A cosigner with excellent credit can help you secure a lower interest rate, but there are many risks involved for the
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Can I use a cosigner to refinance?
Most lenders will allow you to refinance your loan with a cosigner. Having a responsible cosigner with good credit can increase your chances of approval as well as securing a lower interest rate. However, there are many risks and things the cosigner should consider. A cosigner is equally responsible for repaying the debt. That loan will impact the cosigner’s debt-to-income ratio and appear on their credit report, potentially making it more difficult for them to get approved for other loans.
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Will I save money if I refinance?
There are many factors that determine whether you will save money, including loan amounts, credit history, interest rates, and other factors. If your new interest rate is lower than your old interest rate, you might save over the life of the loan. If you are extending your payment term, it could mean a lower monthly payment but paying more on your loan overall. Use our student loan refinance calculator to estimate.
Refinancing is through a private lender with a new loan term and a new interest rate. Federal loan consolidation combines all of your loans together, and the interest rate is based on the current rates on your federal loans, not a new interest rate. Unlike refinancing, federal loan consolidation allows you to keep the federal benefits, such as income-driven repayment plans and the potential for loan forgiveness. However, keep in mind that if you consolidate your federal loans, it does reset the clock on any forgiveness for income-driven repayment plans or Public Service Loan Forgiveness.
