What’s the rate?
Parents who borrow to help out their college-age children can expect to pay 7.6 percent, up from 7 percent, for the federal parent PLUS loans. The same rate applies to the Federal Grad PLUS loans. These are fixed rates for the life of the loan.
The family should maximize the Federal Stafford loan borrowing before the PLUS loan because the Stafford loan has a lower interest rate, Kantrowitz said.
As of July 1, the fixed interest rate on federal student loans increased to 5.045 percent, up from 4.45 percent for undergraduate Stafford loans.
Some lenders may offer a more competitive rate on private student loans offered to parents who have a credit score of 780 or higher, Kantrowitz said.
College students might get offers for private student loans sent directly to them, but the odds of a student being approved for a private loan on his or her own are slim. Most students need a cosigner.
A private student loan might have an effective rate that’s 1.5 percent lower than a Parent PLUS loan for top-flight borrowers. That’s because a loan fee of around 4.25 percent is charged and deducted from the PLUS loan amount when it is first disbursed. Over a 10-year loan, the fee would translate into an extra 1 percentage point on the rate, Kantrowitz said.
You need to shop around for rates, and keep in mind your credit score. Remember, rates on private student loans are wide-ranging, again, depending on creditworthiness.
For example, PNC’s undergraduate Solution Loan offers two options. Continue reading “What if you have a great credit history?”
