An education loan is a form of financial aid that must be repaid with interest. Education loans come in three major categories: federal student loans, federal parent loans, and private education loans.
The William D. Ford Federal Direct Loan program offers subsidized and unsubsidized loans to students who demonstrate financial need based on the results of the FAFSA. Subsidized loan interest is deferred while the student is in school. Unsubsidized loan interest is not deferred while the student is in school. Both loans offer an interest rate (2019-20 academic year) of 4.53%.
The Federal Direct Parent Loan for Undergraduate Students (PLUS) is a cost-effective solution for parents to help keep their student's debt burden as manageable as possible. Parents of dependent children may apply for these low-interst loans. Funds from PLUS can only be used to pay expenses such as tuition, room and board, books and supplies, and personal expenses related to attending college.
The PLUS loan may be borrowed up to the cost of attendance (COA) minus any other financial aid the student receives. The loan is subject to a credit check and other eligibility requirements, including US citizenship.
Private education (alternative) loans are offered by private banks to credit-worthy students or to credit-worthy students with a credit-worthy co-borrower. Students are encouraged to apply with a credit-worthy co-borrower to enhance their chances of having their loan approved and qualifying for the lowest interest rate possible.
Federal Direct Loans typically have a lower interest rate than private loans, so students are encouraged to complete the FAFSA to determine if they qualify for Federal Direct Loans before applying for private loans.
To compare a private education loan vs a parent PLUS loan, click here.
You can compare information and apply for some private education loans through the Great Lakes Higher Education Corporation FastChoice website.
The Cleveland Institute of Art does not endorse any private education loan lender.