As we’ve discussed in the last post, the difference
between a Subsidized Loan and an Unsubsidized Loan
is that a Subsidized Loan is an interest free loan
while the student is in school.

The Subsidized Loan is subsidized by the Federal Government
while an Unsubsidized Loan is not.

The other major difference between Subsidized and Unsubsidized
loans is that an Unsubsidized Loan is not based on need.

Even if your parents make a Million Dollars a year,
you still qualify for an unsubsidized loan.

Another loan that every student qualifies for is a Parent Loan
(if their credit is OK)

A Parent Loan is a parent borrowing to help their child
go to college. It is based on the amount of financial aid
the child is receiving plus the cost of the education.

As an example, let’s say the cost of the tuition is $20,000
and transportation, expenses and everything else is another
$10,000 for a total cost of $30,000.
(By the way, these numbers are pretty standard for most schools).

Now let’s suppose the student receives $20,000 in financial
aid in the form of schlorships, grants, work-study and loans.
$30,000 total cost minus $20,000 in financial aid leaves a
$10,000 shortage or gap.

The parent can borrow $10,000 from a Parent Loan.
The Parent Loan is more lenient than an individual bank loan
(but it is still based on a credit check).

If the parent’s credit is horrible or if the parent is defaulted
on a student loan of their own (like I was), the parent will NOT
qualify for the loan.

(If that happens your child automatically qualifies for a
Stafford Loan).

If the parent’s credit is OK, the parent goes throught the school
or to a bank and in essence can borrow the $10,000 shortage.
(It could be $20,000 or $30,000 depending on whatever the gap is).

The interest rate is approximately 8.5%.

The repayment begins 60 days after you borrow the loan.
So while the child is in school, the parent is paying on the loan.

NOTE:
You may be able to get a better rate through a Home Equity Loan,
but with the Parent Loan, you do not have to put your home up
as collateral and you don’t have to own a home to qualify.

This entry was posted on Tuesday, December 19th, 2006 at 2:28 pm and is filed under Student Loans. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.