Parent Student Loan

Parent student loans are available to parents of students enrolled in a degree program through a college or university. These forms of financial aid are credit and income based and generally carry higher interest rates than traditional student-owned loans. A parent student loan is offered through participating lending institutions such as banks and credit unions and can be government guaranteed or private in nature. Both types are serviced by a traditional lender, the only difference being the interest rate and the amount limits. A private one usually has a $30k per year limit and can be used for any school-related purchases, including tuition, books, and living expenses.

Guaranteed parent student loans can be used only for specific school purchases, and the yearly limit is lower. Caution should be taken before agreeing to any type of repayment structure, of course. The parents must realize that they are responsible for satisfying the terms and are the main borrowers, so even if an agreement is made between mom or dad and the student, any late or missed payments will be recorded on the parent's credit report. Many families opt to help out their children with college expenses only after all other options are fully explored. Many people believe that the more responsible the student is for their own education, the more seriously the education will be pursued. Education is a high-priced investment. "Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal; But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal," (Matthew 6:19-20).

Many people opt to take out a home equity line of credit as an alternative to a parent student loan. Home equity loans carry similar interest rates that can benefit any borrower. Plus the tax advantages often benefit the homeowners as well. Parent student loans are given a deferment period for repayment, but the interest is not paid while the student is in school by the government, unlike a Stafford. There are many options when it comes to financing a child's higher education. Careful consideration should be taken when selecting which option best suits a particular family's needs.

Credit score is a determining factor in the interest rates offered for any type of loan. It is advised that parents receive a copy of their credit report prior to applying for a parent student loan to ensure that the interest rate quoted will remain the same at the closing. The monies are dispersed to the school and require the signature of both the parent and child before the school can utilize the funds for tuition or room and board. Those interested in learning more about parent student loans should contact the student's college financial aid adviser or any other financial aid professional.

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