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Sometimes, alternative educational听loans are a quick answer as they place the burden of additional loan borrowing on the student v. the parent. While non-federal loans do offer this feature, a more complete comparison of听Federal Direct Parent PLUS Loan听惫.听alternative educational loan borrowing听is wise.听

Additionally, comparisons show why听Federal Direct Graduate PLUS Loans听may be preferred over alternative educational loan borrowing for graduate students.

Most students seeking a non-federal loan to finance their education will need a co-signer. In most cases, the co-signer will be a parent.

Co-signers, of course, assume the loan in the event that a primary borrower is not making payment or otherwise meeting the terms of the loan. Their obligation can also carry with it additional fees or costs that have been added to the loan while the lender is looking to get payment from the primary borrower.

For parents and step-parents of dependent students who feel the loan borrowing should be in the student's name only, keep in mind repayment must remain in good standing to avoid co-signer obligation. Consider taking out the听Federal Direct Parent PLUS Loan听in the parent's name and having the student make repayment on the parent's behalf if this is the听family's overall desire.听Setting up this arrangement automatically听alerts the parent if payments are not being made and provides the safety net听that the co-signer feature has but places the controls听within the family rather than with the lender.听

In cases of graduate students, a听Federal Direct Graduate PLUS Loan听is in the student's name but may still require an endorser. Overall, terms of the Graduate PLUS Loan should be compared closely with any alternative loan.

Federal Direct Parent and Graduate PLUS Loans are available at a competitive听interest rate听that compounds annually.听Non-federal loan interest rates are more likely to be determined by your credit history so may carry a higher interest rate or a lower one. As well, non-federal loans may compound interest quarterly so the cost of borrowing may be higher.

To get a true comparison, utilize听听to show the amount fully repaid under the terms of a听Direct PLUS Loan v. the alternative educational loan.听This full comparison will give you a more complete picture of the cumulative interest costs associated with each loan program.

Federal Direct PLUS Loans offer a deferred repayment until 6 months after the student graduates or drops below half-time. Even if this may not be an option to automatically exercise for Federal Parent PLUS Loan borrowers, it does help a family with some repayment timing relief when needed.

Federal loans offer no pre-payment/early repayment penalties. Always inquire when taking out other types of loans.

While no one wants to think of the unthinkable, federal loans offer听forbearance programs under听specific economic hardships and听forgiveness of remaining repayments when a death occurs.听In the case of a Federal PLUS Loan, further repayment can be ended should the borrower or the student die before the loan is paid off.

Alternative educational borrowing typically are basic consumer loans that require repayment as scheduled, no matter the economic situation of the borrower and in cases of death.听Co-signers assume responsibility for the loan when conditions dictate.

Of course, with all loan borrowing, take the time to read and understand the fine print on the documents you sign.

To assist families consider options, basic items are compared between Federal Direct PLUS or Grad PLUS Loans and non-federal loan programs.

Borrowing money for college is a reality for most families today.听But utilizing the federal aid programs听to exhaustion and tapping into alternative听loans rarely is the advice that financial aid offices and听lenders would jointly听give听most families.

Take the time to look at the long-range and cost-effective ways to borrow within the family to meet costs that cannot otherwise be met.听Researching听options and exploring ways to manage听debt within the family can be critical for both parents and students when covering the costs of going to school and preparing for the听costs associated with loan repayment.
Of course, the best advise to all families and students is to听live frugally听while in school and reduce reliance on any loan borrowing when possible.听Limiting any type of borrowing now will reduce repayment costs听in the听future.