should your kiddo borrow a private alternative loan or should you take out a federal Parent
PLUS loan as a parent to help cover the financial aid gap that's leftover that's what I want to talk
about today I'm getting a lot of questions this time of year because financial aid award letters
are rolling out and there's gap that's owed to the school so a lot of families are wondering if
it's best to take a private education loan or a federal Parent PLUS loan and what their options
are so today I just want to talk to you a little bit about the differences so that you can make an
informed decision so there are a whole bunch of private education loans out there that students
can borrow to help cover the gap that they owe to the college and it can be the total gap so
let's say the college cost $50,000 and they got twenty five thousand dollars in financial
aid so they owe 25 thousand to the school they can actually borrow a private alternative or
education loan for this gap the kicker about these private education loans is that they are based on
credit so because students you know that are in a senior on high school don't have much credit
and are young in 99% of the cases they have to get a cosigner in order to take out the private
education loan and a lot of families and parents aren't aware of this they just kind of assume
that students can borrow these student loans on their own or these these private loans on their
own and that's not the case there is a federal direct subsidized or unsubsidized student loan
that you'll see in your kiddos financial aid award letter but this is something different
that's funded by the government it's not based on credit it's completely guaranteed that the
student will get that the private education loans are not guaranteed so there are a lot
out there they all have different terms different interest rates different perks a lot of them have
different requirements for like credit scores some are more lenient than others so you just have to
kind of make a decision as a family whether or not you want to go that route and co-sign a student
loan for your son or daughter or whether you want to take out what's called a federal Parent PLUS
loan which is a lot different because the federal Parent PLUS loan is a loan that's funded by the
government in the parents name only for as much as you want to cover up to the total gap that's
owed so again you can borrow you know if you owe $25,000 to the college you can borrow the full
twenty five thousand the big difference between the Parent PLUS loan and the private loan is that
the PLUS loan is alone in the parents name so your son or daughter's name would not be on the loan in
any way and that one is based on credit however it is more lenient in terms of credit standards
than any of the private loans our families tend to get approved easier for the Parent PLUS loan
than they do the private education loans there's also different terms with pair of Parent PLUS
loans because it's funded by the government in terms of like deferments and forbearance options
and putting payments off if you have a hard time making payments and things like that so those are
really the two main differences the other thing that a lot of families are not aware of is that if
you were to try to apply for a Parent PLUS loan and you're denied for credit race reasons then
your kiddo automatically becomes eligible for an additional four thousand or five thousand dollars
in the Federal Direct Loan that they should have been awarded in their financial aid award letter
so that initial fifty five hundred dollars that they get awarded could go up by four or
five thousand dollars depending on the year that they're in school just because you got denied a
Parent PLUS loan based on credit reasons so those are the differences I often you know have parents
ask me well what's what's better what's the better loan to take and it's really a personal
choice for families you know a lot of parents like they want their child to have some skin
in the game so they would rather co-sign a loan but have that loan be in their son or daughters
names versus you know other parents are okay with taking the loan out for their child and having the
loan in their name it's really a personal choice you can go online and do some searching there's
a ton of different like comparison charts for private education loans so you can of compare
and contrast all the different interest rates and terms and things like that those are really varied
in terms of interest rate with the federal Parent PLUS loan that changes each July the interest but
it will never go higher than nine point two five percent and with the Parent PLUS loan you can
actually choose to have the payments deferred while your kiddo is in school and not make any
payments and with some of the private alternative education loans you can do the same thing so you
just have to do your research figure out what might be a better option for you but hopefully
that helps clear things up a little bit remember I'm always here to help and answer any questions
that you might have if you want to do a phone consult and talk about the best option for your
family in terms of covering that gap and taking out a loan I'm happy to help thanks for watching