There are several loan options available to help pay for college, including federal and private loans. Here is a brief overview of some of the main loan options:
- Federal student loans: Federal student loans are loans provided by the government to help students pay for college. They are generally considered to be a more affordable option, as they often have lower interest rates and more flexible repayment terms than private loans. There are several types of federal student loans, including Direct Subsidized Loans, Direct Unsubsidized Loans. For subsidized loans, the interest is paid by the government while the child is in college. For unsubsidized loans, the interest is paid by the student or it is compounded. Current rates are 4.99% with a 1.057% origination fee (2022-2023).
- Private student loans: Private student loans are loans provided by private lenders, such as banks, credit unions, and online lenders. They are generally more expensive than federal student loans and may have higher interest rates and less flexible repayment terms. It’s important to carefully compare different private loan options and understand the terms and conditions before taking out a private student loan. Rates are 5% – 15%.
- Parent PLUS loans: Parent PLUS loans are federal loans that are available to parents of dependent undergraduate students. They allow parents to borrow money to help pay for their child’s education. Rates are 7.54% with a 4.228% origination fee (2022-2023).
- Private parent loans: Private parent loans are similar to Parent PLUS loans, but they are provided by private lenders rather than the government. They can be used to help pay for a child’s education, but they may have higher interest rates and less flexible repayment terms than federal loans. Rates are 5% – 15%.
It’s important to carefully consider all of your loan options before taking out a loan to pay for college. Make sure to compare the terms and conditions.