Private Loans or Federal PLUS Loans: Which Option is Best for You?
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We all know the benefits of a college education, but figuring out how to pay for it can be confusing. With the rising cost of education, taking out student loans continues to be the most popular way of paying tuition bills.
But what is the best borrowing option for you?
Popular Borrowing Options
- The Federal Parent Loan for Undergraduate Students (PLUS) is a loan program for parents of dependent undergraduate students. Parents may borrow every year up to the cost of education minus any financial aid (government grants, college scholarships, etc.). There is no limit to the amount you can borrow, and the loans are based upon a parent's creditworthiness, not financial need.
- Private loans are often used to pay for college. They are available to eligible creditworthy students and co-signers attending eligible schools.
| Federal PLUS Loans | Private/Alternative Loans |
|---|---|
| Interest rate is fixed at 7.90% | Variable interest rates usually based on LIBOR (London Interbank Offered Rate) or Prime Rate plus a margin |
| May borrow up to the cost of education less other aid | Undergraduate students may borrow up to $40,000 per academic year and graduate/professional students may borrow up to $65,000 per academic year |
| Credit check based upon federal standards; no debt-to-income ratios or credit-scoring | Borrowers must pass a credit check |
| Federally insured against death and disability for both the parent and student | Not federally insured against death and disability |
| Deferment and forbearance options exist; limited consolidation options available | Limited forbearance and consolidation options available |
| A 0.25% interest rate reduction available for as long as payments are automatically deducted from any bank account | A 0.50% interest rate reduction available for as long as payments are automatically deducted from any bank account |
| Parent is responsible for payment, and the loan and payment history are listed on a parents' credit report |
Student is responsible for repayment; however, a co-signer (if any) is equally liable. The loan and payment history will be reflected on the student's and co-signer's credit report
A co-signer release option is avaliable after the initial 48 consecutive on-time monthly payments1 |
| Payments may be deferred while student is enrolled at least half time2 | Payments may usually be deferred while student is enrolled at least half time2 |
1 To release a co-signer, the borrower must request a co-signer release and pass a credit check.
2 Interest will accumulate during periods of deferment or forbearance.
PNC reserves the right to modify or discontinue any or all terms of this program at any time without notice.
