Due to the rising financial burden that college is causing some students, parents have begun getting involved when it comes to helping their children find financing opportunities that may go beyond scholarships and grants as there are those who have cosigned for a private student loan that may, in some instances, be an affordable option that can help pay for college tuition, fees, and more. Also, some parents see benefits to these private student loans as they may be released from any responsibility after a set number of payments have been made, which is a policy that some private student loan lenders have, however questions as to whether this is still the most cost-efficient form of student loans remains.
Parents may be able to get an affordable rate on student loans simply because of their credit score and history when cosigning but there are arguments that if a student must borrow federal loans are the most optimal choice simply because they come with lower rates, in many cases, which are fixed and also offer opportunities for repayment assistance if financial distress arises. Currently, rates on popular student loans are around 6%, with some consolidation loans for students coming in much lower, and Parent PLUS Loan rates are around 8.5%, which may be lower than a cosigner will receive if they help their child get a private student loan to help pay college costs.
What this means is that even though parents may stand to be released from this debt obligation after these payments have been made, and in some cases parents are going to be able to help students get the financing they need for college but also escape any dangers that come when being associated with this particular debt throughout the entirety of the repayment lifetime, costs may be more affordable in some instances if alternatives to private loans are used. Obviously, students are in a position where borrowing has become a major problem over the past months, and over the recent years, and graduates will likely benefit even more so if they avoid student loans altogether, as debt used to pay for college is no longer guaranteed to be easily repaid after graduation.
In the past we saw students in a position where they could borrow a small amount to pay college costs, get a good job after school, and pay back their debt without much adverse effects in their life, but we are now seeing students who are struggling to make minimum payments on their debts, parents having to shoulder these debt burdens as well, and there are even some students doing damage to their credit by defaulting after graduation.
While it may be attractive for some parents to cosign a private student loan, which may come at a low rate, and offer them the opportunity to be released from this debt potentially after helping their child make a set number of payments, this can still be one type of debt that is not only problematic to a student borrower but their parents as well. Again, it’s been heavily stressed especially here in recent months as we have seen student loan debt become even worse for some, but getting scholarships and loans should be the absolute first priority for any student and, if loans are necessary after all other avenues have been explored, students are still being urged to carefully consider the advantages and disadvantages of both federal and private loans in terms of affordability and repayment options.