by Applying for a Parent-Student Loan? Here’s What You Need to Know
A student loan from a bank or lender is typically the best way to plan and start your career. Student loans are taken by aspiring college students for a brighter future. They alleviate financial troubles and enable students to focus more on their academics. However, there is another type of loan, different from a student loan, known as a PLUS loan or parent-student loan, which is taken by either parents or students.
What Are the Eligibility Criteria to Apply for a Parent-Student Loan?
These loans are funded by the U.S. Department of Education. To be eligible, certain requirements must be met:
- FAFSA Application: You need to fill out the Free Application for Federal Student Aid (FAFSA) for evaluation.
- Good Credit History: As with any loan, a decent to good credit history is necessary to secure a parent-student loan. The credit score plays a crucial role in the loan approval process.
- Parent-Child Relationship: The loan can be taken for a biological, adoptive, or stepchild, as long as the parent-child relationship is established. The child must also be financially dependent on the parent, with the parent covering more than half of their expenses.
- Funds Requirement: The maximum loan amount is determined by the difference between the parent’s financial aid and the cost of the college or school. The parent is eligible only if the child’s college fees cannot be covered by their own student loan or other financial aid.
Things to Know Before Taking a Parent-Student Loan
- Loan as Debt: Parent-student loans are considered debts that must be repaid. Your future earnings will serve as collateral for this type of loan. It is different from when a student takes a student loan, as that loan is backed by the potential future earnings of the student.
- Consider Retirement Timeline: Parents should consider their earnings and savings, especially if they are nearing retirement age when their child enters college. Taking a loan when close to retirement can be a financial risk.
- Understanding Loan Types: There are federal and private parent-student loans, each with its own pros and cons. Parents should thoroughly research and understand both types before deciding which loan to pursue.
How to Apply for a Parent-Student Loan
- Fill out the FAFSA application.
- If applying for a federal loan, visit studentloans.gov and complete the “Request a PLUS loan” option.
- Only one parent can apply for the loan and must complete the Master Promissory Note with the Department of Education.
- Alternatively, you can apply directly through the aforementioned website.
- All guidelines and instructions can be found on the website, and the application form must be completed in one session, taking approximately 20 minutes.
What Are the Top 5 Parent-Student Loan Providers?
The top 5 private parent-student loan providers are:
- Citizens Bank
- College Ave
- LendKey
- Connext
- Sallie Mae
Prior to selecting a private loan provider, it is crucial to evaluate the advantages and disadvantages of both private and federal loans.
