Should I choose GradPLUS or a private loan?
You might want to choose a private loan if:
- You are comfortable with the possibility of interest rates increasing beyond the interest rate cap of the GradPLUS loan
- You have top-tier credit - at this point in time, these borrowers will presently be charged less interest, but if interest rates continue to climb, this benefit decreases or disappears altogether
- You believe that there is very little possibility that you may use the deferment or forbearance options
- You plan to only borrow the loan for a short time
You might want to choose a GradPLUS loan if:
- You like the certainty that a fixed-rate loan provides
- If your credit is good, fair, or poor, your cost will likely be lower
- You like the protection that the greater deferment and forbearance options provide
- The repayment incentives offered may bring the repayment interest rate cost to 7.25% or lower
What is a PLUS Loan?
The Parent Loan for Undergraduate Students, or PLUS, is a low-interest federally backed loan that parents can take out on behalf of their undergraduate children to pay for educational costs.
How do I choose the right student loan for me?
You have many options when it comes to student loans for higher education. A few things to keep in mind:
- Fill out the Free Application for Federal Student Aid (or FAFSA). Without it, you won’t have access to federal student loans – many of which are not based on need or your income.
- Always use federal loans first, such as the Perkins, Stafford, and PLUS loans. They carry lower, fixed interest rates and often have more favorable terms than private (or alternative) loans.
- If you need to use private loans, consider all of the costs. Private loans can have origination fees, different ways of compounding interest, and higher interest rates or APRs.
- Know your credit score. The lower your score, the higher your rate will likely be on a private loan. Most student borrowers will need a credit-worthy co-signer to be approved for a private student loan. Most private loans have variable interest rates (meaning they will fluctuate over time), while government-backed (or federal) loans have fixed interest rates and more lenient repayment terms.
Investigate your loan options carefully by considering the following:
- Total cost of the loan (after all of the interest and fees are taken into account)
- APR or annual percentage rate
- Borrower benefits (such as cash back or interest rate reductions for making on-time payments)
- Monthly payment
- Deferment options
I'm only in school part-time. Can I get a student loan?
Yes. Federal student loans, such as the Stafford Loan, and many private student loans are available for students enrolled half-time at qualified institutions. If you are enrolled less than half-time, you may be eligible for a continuing education loan or other financial aid programs from your college or university. Talk with your financial aid administrator to learn about more options.
Why is a federal student loan better than a private student loan?
Federal student loans are guaranteed and regulated by the U.S. government and have fixed interest rates that are lower than most private student loans. Unlike private student loans, most federal student loans do not require a credit check. Private student loans are not subsidized by the government, and therefore are not regulated as closely. They may have variable interest rates and fees that are based on the credit profile of the borrower and the borrower’s co-signer. Borrowers should always maximize their federal loan options before using private loans.
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Understanding Student Loans
Student loans are used expressly for paying for college costs such as tuition, room & board, and other expenses. Federal student loans are backed by the U.S. Government and require the student to fill out the FAFSA (Free Application for Federal Student Aid).
There are several options for filing a FAFSA. Review the options and choose the one that best suits you:
- Do it yourself by using the Federal government's online application. Go to www.fafsa.ed.gov and fill out a FAFSA online, or call 1-800-4FEDAID (1-800-433-3243).
- Get some help by using a FAFSA preparation service. Go to www.fafsa.com or call (866) 514-6757 to speak with a Student Aid Advisor. For a low fee, you can spend quality time on the phone completing your application and getting answers to all your questions, as well as peace of mind with a full error check. Using this option also allows you to complete the FAFSA application prior to January 1st and gets you an early estimate of the EFC (Estimated Family Contribution).
- File a paper FAFSA. This is not recommended for most, as there is an extremely high rejection rate. Well over 90% of all FAFSAs are filed electronically. Paper FAFSA forms are available at most guidance counselor and college financial aid offices.
Federal student loans include the following:
- Stafford Loans have low, fixed interest rates but lower borrowing limits, so students often need to find funding from other sources to meet their needs. They come in two forms:
- Subsidized. No interest accrues on subsidized Stafford Loans while the student is enrolled, but the student must qualify by demonstrating financial need through the FAFSA.
- Unsubsidized. Interest does accrue on unsubsidized Stafford Loans while the student is enrolled, but nearly every student is able to borrow through the Stafford program regardless of need.
- Perkins Loans are obtained directly through the school, and have very limited availability. They have low, fixed interest rates but lower borrowing limits, so students often need to find funding from other sources to meet their needs.
- PLUS (Parent Loan for Undergraduate Students) are federal student loans for parents of undergraduate students. PLUS loans have a fixed interest rate and higher borrowing limits than other federal loans.
- Graduate PLUS Loans are federal student loans for Graduate or Professional Program Students that also have a fixed interest rate and higher borrowing limits than other federal loans. Grad PLUS loans are meant to supplement Stafford Loans. Make sure to borrow the maximum in Stafford Loans before using Grad PLUS.
How to Use the Student Loan Comparison Tools
Save time, energy and money by comparing multiple student loan options from a variety of leading lenders. Simply enter the amount you need to borrow and a little bit about when you need the money and where you go to school to see a customized list of student loan options.
What to Look for in a Student Loan
Use the comparison tools on this site to consider all of the costs of a student loan, including fees and rates. Students should always borrow the most they can in federal loans first (such as Perkins and Stafford) and then compare private student loans for the best rates, fees and costs.
Examine all of the attributes of each loan, such as:- the annual percentage rate (APR)
- the total cost of the loan
- the monthly payment
- the loan's borrower rewards
- student loan deferment options
FAQs
Should I choose GradPLUS or a private loan?
You might want to choose a private loan if:
- You are comfortable with the possibility of interest rates increasing beyond the interest rate cap of the GradPLUS loan
- You have top-tier credit - at this point in time, these borrowers will presently be charged less interest, but if interest rates continue to climb, this benefit decreases or disappears altogether
- You believe that there is very little possibility that you may use the deferment or forbearance options
- You plan to only borrow the loan for a short time
You might want to choose a GradPLUS loan if:
- You like the certainty that a fixed-rate loan provides
- If your credit is good, fair, or poor, your cost will likely be lower
- You like the protection that the greater deferment and forbearance options provide
- The repayment incentives offered may bring the repayment interest rate cost to 7.25% or lower
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Useful information and insights on student loans, financial aid, college funding and student loan consolidation
Tips
Always fill out the FAFSA, even if you think you won't qualify for financial aid.
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