Getting a university education is an expensive proposition. In fact,

about 20 per cent of college students will need some form of financial

help in order to pay for the expenses they will incur in school. With the

alarmingly high rate of students needing a loan for university, it

means that a large number of students will graduate from college with a

debt load that could even reach unmanageable levels. One way to work

around not having to get a student loan is for the parents themselves to

take out a “parent loan”. The question though is which among student loans

or parent loans are better.

Parent loans and student loans have their own set of advantages and

disadvantages:

Federal student loans possess the lowest interest rates as well as the

best repayment options. If you have any need to apply for a loan and

you can qualify for federal loans then make this the top choice for the

loan you want to apply for. As a way of limiting your loan

responsibilities only get the funds that you will need and refuse any other offers

to raise it. Parents can opt to extend assistance to their children in

paying off the loans when it comes time to repay the loan after

graduation

Federal parent loans or PLUS loans (Parent Loan for Undergraduate

Students) can be considered as another option in getting a loan that offers

lower interest rates. Parents that have dependent children who are

going to start their university education and have a good credit history

can apply for the PLUS loan. PLUS loans are not needs-based so you can

draw up a loan up to the total cost of your undergraduate education

expenses with the other financial aids that you have received deducted from

the actual total. One peculiar characteristic of a PLUS loan though is

that the first payment for the loan starts about 60 days after the loan

is granted. This is different from a student loan where the first loan

payment is deferred until after graduation. PLUS loans also require an

application fee.

Private loans can be taken by both students and parents in funding

university education expenses. The terms given for private loans are the

same as the federal-type loans. However, students can negotiate for the

repayment to commence after graduation. One way for students to gain a

good credit history is by taking out small private loans. They will need

to cosign though in order to get private student loans.

The big decision to be made is to determine which kind of loan will be

the best option for the individual. This boils down to a personal

decision. When deciding on which loan to get you should first determine the

amount of debt that your child will need in order to graduate from his

studies. You should also ask yourself the level of responsibility you

want your child to assume in paying off the loan. Finally you should sit

down with your child and try to work out a repayment plan in paying for

the loan.