Guide to Securing a Parent-Student Loan: Essential Information

Understanding How to Obtain a Parent-Student Loan

Thinking about applying for a parent-student loan? Here's what you should know

Student loans from banks or lenders are crucial tools for planning higher education. These loans assist students in overcoming financial hurdles and concentrating on their studies. Besides traditional student loans, there's a special type called a PLUS loan, which is a loan taken by parents for their child's education. Often referred to as a parent-student loan, it allows parents to support their child's college expenses effectively.

Eligibility Requirements for Parent-Student Loans

These loans are backed by the U.S. Department of Education. To qualify, consider the following:

Complete the FAFSA form—The Free Application for Federal Student Aid determines your eligibility based on the provided information.

Good credit history—Like other loans, creditworthiness is evaluated through credit scores, which influence approval.

Relationship with the student—The loan covers biological, adoptive, or step-children, provided the parent-student relationship and dependency status are met. The student must be dependent, relying on the parent for over half of their expenses.

Financial need—The loan amount is limited to the difference between the student's total college costs and other aid or loans. Parents can borrow only if the student’s tuition isn't fully covered otherwise.

Key Considerations Before Issuing a Parent-Student Loan

Debt obligation—Parent-student loans are liabilities you'll need to repay, with future earnings serving as collateral. Unlike student loans, which are linked to the student's earning potential, these are tied to the parent's financial stability.

Retirement timeline—Evaluate your impending retirement date and financial condition. Borrowing when nearing retirement may pose risks.

Loan types—Understand federal and private options—each with distinct advantages and disadvantages. Make informed decisions after comparing both.

Steps to Apply for a Parent-Student Loan

Fill out the FAFSA form.

For federal loans, visit studentloans.gov and select ‘Request a PLUS loan’.

One parent must apply and complete the Master Promissory Note with the Department of Education.

You can also apply directly online via the official website.

The application process takes approximately 20 minutes, and all instructions are available on the website.

Top 5 Providers of Parent-Student Loans

Leading private lenders include:

Citizens Bank

College Ave

LendKey

Connext

Sallie Mae

Before choosing a private lender, carefully compare the benefits and drawbacks of federal versus private loans for optimal financial planning.