If you have a child getting ready to go to college, you are probably both excited and nervous. If you want to help them afford their tuition, you may be considering taking out a PLUS loan to help them pay for college. It is important that you understand the loan in full before you sign on the dotted line.
Below, we will go over some of the ways that parents can get PLUS loans for their children and things to consider when you are looking into loans.
1. Decide if a PLUS Loan is the Best Choice
Before you apply for a PLUS loan, you want to make sure that it is the right choice for you and your family. Sometimes, there is a better alternative out there for you, but you must look around for it.
You need to determine if you are even eligible to receive the loan and then look into how much extra a month the payments are going to be. Some families are unable to make an additional monthly payment and you do not want to strap yourself or find yourself deep in debt because of the loan.
One of the good things about a PLUS loan is that you are able to start making payments back on it right away and you do not have to wait any length of time.
It is important to also keep in mind that there is interest on the loan so you want to consider possibly paying, at minimum, the interest payments each month.
2. Talk to Your Child’s College
Before you apply for a PLUS loan, make sure that you speak with your child’s financial aid office. You will learn what the requirements are to borrow and how much money you can borrow over the course of your child’s schooling.
You may be required to fill out a FAFSA as well, so it is essential that you discuss these things with your child’s financial aid counselor before you make any decisions or start applying.
3. Apply for the Loan
You will now need to apply for the PLUS loan. You will be required to provide information about yourself and your financials. Always pay attention to the instructions on the application and fill out the information in its entirety.
If your application is rejected, you should reconsider your child’s cost of tuition, school choice, and career choice. Typically, a rejection happens when your credit score is not high enough or when the cost of the degree or tuition is too expensive. In the case of bad credit, you can opt in for a cosigner and reapply for the loan. In the case of money being the issue, you need to determine how you plan to pay for the rest of college.
4. Don’t Blindly Accept
You do not want to blindly accept the PLUS loan if you are not ready to take on the debt. Sometimes, schools can look over your finances and override an approval if you do not want the loan. This will, in return, raise the amount of federal aid your student can receive. The school your child plans to attend can discuss this override option with you more in depth, if you do not want the loan.
Also, you should consider looking for alternative private student loans. There are a number of private student loan companies who offer rates below PLUS rates. In fact, we found that PNC offers rates better than PLUS rates. For more information about PNC’s student loans for parents, consider reading this PNC review. Unlike the Department of Education, PNC does not charge any origination fees to customers.
5. Only Accept What You Need
You do not want to accept an offered loan for $25,000 if you know you only need $15,000. It can be a burden to pay back the loan over an extended period of time, so limit the amount that you borrow so that you are able to manage your monthly payments and pay off the PLUS loan in a reasonable amount of time.
If you are considering a PLUS loan so that your child can go to college, make sure you are 100 percent sure it is something you want to do. You should sit down and think about your expenses and then play with the numbers to see if you can truly afford working in another monthly bill.
If you decide you want to pursue a PLUS loan, talk to your child’s financial aid office to get more information.