Despite the availability of scholarships and grants, not to mention student loans from sources like federal and private lenders, there are college students who are either in a position where they need further financial aid but may have exhausted all of the open avenues for their situation or some parents feel that they may be better able to handle student loan debt at the present time, and wish to help their college student in the area of loans. While there are private and federal parent loans available to help these men and women meet college costs for their child, there are also responsibilities, benefits, and even drawbacks that must all be considered before a parent enters into any type of college loan agreement.
One of the first places that parents need to start their research is in the area of interest rates on both federal and private loans. Ideally, students will be able to find enough funding through free sources of aid like scholarships and grants so that no debt will be required at all, but in cases where students do have to borrow to pay for tuition, fees, and personal expenses, it has been the case that student loans are usually more affordable in terms of the interest rate than parent loans, and this would be one area where consideration is needed. If parents are determined to help their child repay student loan debts, which can be quite admirable and helpful, they could potentially be in a position to spend a smaller overall amount if their student takes on these debts and they help with repayments after graduation.
Yet, some parents may be in a unique situation where, because of their financial standing and credit score, they may benefit more from a private loan simply because they could get a comparable rate that may make the interest costs on a federal student loan or a private parent loan similar. This situation will depend on the personal position in which a student’s parents happen to be in, but there are some private student loan lenders who are attempting to compete with federal loans by offering fixed rates and even reward programs when timely payments are made.
Some parents may be able to benefit from federal programs that offer repayment assistance if financial troubles arise, as not only are students seeing a great deal of difficulty in the job market but there are some parents who may be having trouble in terms of their employment situation and income as well. There are parents who may qualify for loan forgiveness options or could potentially qualify for payment reduction plans, like income-based repayment or income contingent repayment programs, so the opportunities within federal parent loans may also be worth considering.
Again, some student loans do offer a lower interest rate, but parents may also find more options from private student loans as well, yet what parents are urged to consider when making the decision to borrow is what rates will be available, what the overall repayment costs will be, and if there are any assistance options available to parents who may have financial issues arise that could make repaying these debts difficult at the present time. In the end, the decision to borrow will be one only a parent can make, but better understanding these options will hopefully aid parents by allowing them to see the pros and cons of college loan options.