Oklahoma Wesleyan University

You are not alone!

The cost of college continues to steadily grow every year, but financial aid has not kept the same pace. As a result, the gap between aid and cost continues to grow.

Once your child has exhausted the annual maximum for Stafford loans, the next step is to look at credit-based options to bridge the financial aid gap. Fortunately for you, there are quite a few lenders that all must compete with each other to make money and therefore give you an opportunity to minimize the interest rate on a new loan.

Major Differences between PLUS and Private student loans:

• Private student loans have variable interest rates (meaning they change with the index they are associated with… most commonly LIBOR or the Prime)
• They come from banks instead of the Department of Education
• Many banks offer special incentives to make a private student loan more worthwhile

At the moment, interest rates are quite low due to the Fed attempting to put the economy back on a growth track out of the recession. This means that the indices are at historical lows and with a creditworthy borrower, you can secure a great interest rate that can be as much as 5% lower than a Parent PLUS loan.

Repayment Options

You might be wondering what methods of repayment are available to you. While many parents opt for standard repayment, there are other options as well:

The Graduated Repayment Plan allows you to start out with lower monthly payments that gradually increase over time until the loan is paid in full. The required monthly payment is calculated based on your loan debt and interest rate.

The Income-Sensitive Repayment Plan bases your monthly payment on your yearly income and your loan amount. You are eligible for this plan only if you monthly loan payment is greater than ten percent of your annual gross income.

The Extended Repayment Plan provides eligible loan borrowers with payment relief through an expanded repayment term of up to 25 years.

Loan Consolidation:
Many times a student loan consolidation is a practical debt management tool that enables you to bundle all of the federal loans you received to finance your child’s college education into a single loan.

In addition to simplifying record keeping and check-writing chores, loan consolidation can significantly reduce your monthly payment burden. The lower payment means you’ll have more money available to meet other household expenses, including car payments, childcare, and career-related necessities.

excerpted from Student Loan Info for Parents: How to survive the Financial Aid process blog

Some things to think about:

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Co-Signing

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