Your child did everything right: got good grades, was accepted to a great school, and even scored some scholarships. But it still doesn’t cover the total cost of their education. That’s not surprising considering the average cost of attending a four-year private institution is $33,480.
Even if your child had a part-time job while in high school, they still might not be able to afford college. So that begs the question: Should parents pay for college tuition?
Here’s everything you need to know about how to get student loans for your child.
How to get student loans for your child
There are many ways you can assist your child in getting student loans. Some involve guidance, while others require more responsibility and commitment on your part. Here are three ways to help and what you need to know about them.
1. Help your child fill out the FAFSA
One of the very first things you should do with your child is help them fill out the Free Application for Federal Student Aid (FAFSA). This not only unlocks potential grants and work-study opportunities for them but also presents several federal loan options.
They can fill out the FAFSA on their own, but the paperwork can be quite complicated. Perhaps that’s why billions of dollars in financial aid went unclaimed last year. Helping them fill out the application can ensure they’ll get the most money possible from the government.
Also, if your child is considered a dependent, then you will have to fill out a portion of the form anyway, stating your financial information such as income and assets. With that info, the government could offer you a Parent PLUS Loan as an option.
2. Take out a Parent PLUS Loan
If you’ve helped your child fill out the FAFSA and entered your financial information, then the next step to consider would be taking out a Parent PLUS Loan if it is offered to you. Remember, there is no obligation on your part to do this; it’s just an option provided by the government.
Here are a few important things to know about the Parent PLUS Loan:
- You can take out an amount equivalent to the total cost of attendance, minus any other financial aid your child receives.
- It carries a fixed interest rate (7.00% for the 2017-2018 academic year).
- The government will run a credit check, so you can’t have an adverse credit history.
- The loans are in your name, meaning it’s your responsibility to pay them back once they’re fully dispersed.
- You can’t transfer the loan to your child.
This is the only federal loan available to parents, and it can be taken out in addition to other federal loans your child might receive, such as Direct Subsidized Loans or Direct Unsubsidized Loans. That way you aren’t responsible for covering as much of your child’s education.
3. Consider private student loans
There are two basic types of loans you should know about when looking into how to get student loans for your child: federal and private. We covered your federal options above, so you should know what’s involved with private student loans as well.
Even if both you and your child received federal loan offers, and your kid was awarded some scholarship money, it still might not cover the total cost of paying for college. Private student loans can help bridge that gap.
These types of loans are issued through private lenders, meaning there are no government regulations like there are with federal loans. Each lender determines eligibility, interest rates, and repayment terms. Your credit score, income, debt-to-income ratio, and assets are typically used to make this determination.
Federal loans, on the other hand, have fixed interest rates and more flexible repayment terms. With private student loans, your interest rates could be higher than a federal loan, but they could also be lower. That’s why it’s important to shop around and get quotes from different banks — you can compare rates from some of the major lenders by checking out our private student loan marketplace.
You can either take out the loan yourself or cosign your child’s loan. With the first, the loan will be in your name and not your child’s, so the responsibility lies with you to pay it back. If you cosign a loan, your child is the primary borrower and will have to pay it back. But if they are unable to pay, it becomes your responsibility.
Do parents have to cosign student loans?
With private student loans, cosigning is an option, but not required. Cosigning can be necessary when your child is attempting to take out a private loan but doesn’t have the credit score or income necessary to qualify. This is very common, considering many high school students don’t have much of a financial history.
As a cosigner, you will have to provide the same information you would if you were taking out the loan yourself (credit score, income, assets, etc.). This will still determine things such as the interest rate and repayment terms of the loan.
Since there is a lot on the line, it’s important to consider the pros and cons of cosigning a student loan before making any final decision.
College loans for parents with bad credit
Your child might not have a strong enough credit score to take out a loan, but what about college loans for parents with bad credit? Don’t worry. You have options for both federal and private loans.
How to get federal college loans for parents with bad credit
Just because you have bad credit doesn’t mean you can’t get a Parent PLUS Loan.
First of all, you might be eligible as long as you don’t have an adverse credit history. In the eyes of the government “an adverse credit history” means you have things on your financial record such as tax liens, bankruptcy, repossession, or a foreclosure in the last five years. You might have a bad credit score, but not fit the particular criteria of adverse credit history.
If you do have an adverse credit history, you can do two things to still get the loan:
- Get a cosigner. They will be responsible if you can’t pay back the loan. Your child cannot be the cosigner.
- Prove to the U.S. Department of Education that “there are extenuating circumstances relating to your adverse credit history.”
How to get private student loans for parents with bad credit
Just as with a federal loan, you could get a cosigner for a private student loan. Again, you are the primary borrower, but they would be on the hook if you couldn’t pay it back.
What’s different with private student loans is that your credit score is used to determine your interest rate. So you could have a low or bad score and still get a loan, but your interest rate might be higher.
You have options to help your child get student loans
Although the cost of college might seem daunting for both you and your child, there are many ways to fund a university education.
Having your child get free money through grants and scholarships is always the ideal first step, but loans might be necessary to make up the difference. In that case, it’s important to know the differences between federal and private student loans, and your role in each of them, to make sure you don’t stretch yourself too thin financially.
Need a student loan?Here are our top student loan lenders of 2018!
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2 = CollegeAve Autopay Disclaimer: All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
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