Even with scholarships, grants and work-study, many students and families still need to take out student loans to pay for college. Here’s an overview of your options and our recommendations.
When it comes to student loans, we recommend that students take out federal student loans, which may be called Direct Loans or Stafford Loans. These loans may be subsidized or unsubsidized.
However, there are limits on the amount of federal student loan dollars that students can take out. If students reach their borrowing limits and still have a gap in their college funding plan, families may need to consider federal parent PLUS loans.
Private student loans
Since federal loans have a ceiling on the amount that can be borrowed by the student, private student loans are an alternative way to fill in gaps in a student’s college funding package.
Unlike federal student loans, private student loans are credit-based, which means they require a credit check. Since college freshmen typically don’t have the credit history required to qualify, they typically need a parent or other responsible adult to be a co-signer. It’s important to shop several lenders to get your lowest interest rate.
Student loan refinancing
Students who have existing education loans may be able to refinance them in order to get a lower interest rate. Both federal Stafford loans and Plus Loans can be refinanced and may lower your interest rate and save thousands of dollars in payments over the life of the loan.
NOTE: Student loan refinancing is a process done only through private lenders. If you refinance federal student loans, they also become private loans and are no longer eligible for federal loan benefits including income-driven repayment and forgiveness programs.
Private parent loans
For parents who have decided against turning to Parent Plus Loans to help pay for college, private parent loans are an alternative way to help fill the gaps in their college funding package.
Unlike federal parent loans, private loans do take the parent’s income to debt ratio into consideration to determine qualification for the loan.
Mortgage loans and mortgage loan refinancing
Parent may also turn to home mortgage loans or mortgage loan refinancing to help pay for college. These loans are only available as an alternative way to pay for college and are often available at a lower interest rate. Since multiple lenders offer private student loans and student loan refinancing, the best way to find the lowest possible rate is to compare offers across lenders. We recommend Credible, which is a tool that helps you get multiple rate offers without affecting your credit. Get started by clicking on the buttons above.