Many traditional students using private education loans need co-authors to qualify or get better rates. Parents are often the natural choice. Some parents are also considering taking out a loan on their own behalf to help fund their children’s education. If you think about it, we at ISL Education Lending recommend that you keep these six points in mind.
1. Loans are a financial decision, not an emotional one.
As a parent, you want your student to attend the institution of their choice, regardless of cost. But education loans are financial obligations that can affect your credit history and your student’s credit history for years to come.
2. The total repayment amount will be more than the original loan amount.
In addition to fees for disbursement of a loan, late payment or other payments, interest will be charged on the main balance during the entire term of the loan. Sometimes, unpaid accrued interest can be capitalized or added to the balance sheet. If you or your student are experiencing periods of financial difficulty, help cannot stop interest accrual. Smaller payments may not be enough to pay a significant amount of the principal.
Federal PLUS Parent Loans disbursed from July 1, 2021 to June 30, 2022 have a fixed interest rate of 6.28 percent with a prepayment of 4.228 percent. ISL Education Lending offers a college family loan with a fixed annual interest rate of 4.60 percent to 7.40 percent with no commission.
3. Federal loans offer different functions than private loans.
The PLUS Federal Parent Loan is only available to biological parents, foster parents and, in some cases, foster parents. Borrowers can choose from one of the repayment plans and can qualify for repayment assistance options. The PLUS loan approval does not take into account the applicant’s income, outstanding debt, assets or years before retirement, so the borrower needs to predict if they can afford to pay off the debt.
Private parent loans, such as the college family loans offered by ISL Education Lending, may be available to parents or other family members or people who wish to help the student. You can also prequalify to see your rate based on underwriting criteria before you apply. You can also choose one of the repayment options according to your situation.
4. You can be responsible for paying off the debt.
A federal parental loan PLUS or a private loan that you borrow for your student is your duty, regardless of your understanding with your student as to who will pay it back.
When you apply for a student loan, you are equally responsible for paying off the debt. This means that if your student does not make payments or makes late payments, that late and default will also affect your credit and the lender will try to contact you for payment. If the lender allows the borrower to release the co-author from the debt, pay particular attention to the requirements for obtaining this benefit.
5. You may be faced with changing circumstances.
It can take 10 years or more to pay off your student loan after your student leaves college. Think about what your circumstances will be at this time. Retirement, health problems, and other factors can change your financial situation.
6. You can take steps to ensure a successful repayment.
Do your research to understand the interest rates, terms and commissions, available assistance options and their impact on repayment, and the benefits to the borrower of the available loan options. Estimate a realistic starting salary for your student and how student loan payments will affect their budget. Encourage your student to make the right decisions throughout college to finish their studies on time, cut back on general loans, and get a well-paying job.
Tools to help you and your student with the above steps are available free of charge on our website at IowaStudentLoan.org…