PLUS Loan, Private Loan, Stafford Loan(Sub-Unsub)? and Gift House Loans

PLUS Loan, Private Loan, Stafford Loan(Sub-Unsub)?

Okay I from a community college student transferring to a university. Universities are over priced education, so I will need to take a loan to be able to pay my tuition fees.

On my student account I was offered 3 loans - Federal Subsidized, Federal Unsubsidized, PLUS Loan

Can someone give me a very good explanation (please make it layman's term - just imagine you are talking to a child) for the three loans?

I already accepted the Federal Subsidized loan, but I still need more.

Also, I need information about private loan? and what organizations can offer a better loan.

I heard unsubsidized loans are not good because of the interest or something.

I was offered a PLUS loan and what does it mean? My parents are the one's borrowing money to pay for my tuition? What happens if they die? Am I the one responsible paying for this loan?

Help!


loan best answer:

Answer by spalmer
Federal subsidized loans have a fixed interest rate that is lower than the unsubsidized loans. These loans are offered to students with financial need, and there is a maximum to the amount of subsidized you can receive each year. These loans accrue interest; however, the government pays the interest while you're in-school and during deferment. Once your grace period ends, you will begin paying the interest and principle. There is no credit check for this type of loan.

Federal Unsubsidized loans have a fixed interest rate. These loans are offered to all students who are eligible for financial aid. There are maximum yearly limits for what you can borrow. These loans accrue interest. You have the option to make interest-only payments while you're in school so that your loans do not increase from interest. For example, if you didn't make interest payments and you borrow $ 25,000, when you graduate, you might actually owe $ 28,000 due to interest. There is no credit check for this type of loan.

PLUS loans are a loan that your parents take out and they are responsible for repayment. PLUS loans have a fixed interest rate, but it is higher than the subsidized and unsubsidized loans. Your parents will begin repayment while you're in school -- there is no in-school deferment. Your parents are not required to take this loan out, and a credit check is required... so, it's possible that they could be denied a PLUS loan (although this loan is very lenient with credit scores compared to private loans).

Private student loans should be avoided in my opinion. Federal loans have benefits that private loans do not offer -- deferment options, forgiveness options, a variety of repayment methods, etc. Private loans do not offer fixed interest rates, so your payment may be different each month, and could vary by a few hundred dollars (depending on your total debt). Private loans are based on credit, so it's likely that you'll require a credit-worthy cosigner if you're under the age of 24 (simply do to length of accounts).

If you're offered subsidized, always take those first, then unsubsidized. The PLUS loan should be forgiven if your parents were to die because it's a federal loan -- you may want to check on this though. I know that federal stafford loans are forgiven if a student dies; however, the PLUS loan may be different. If it's not forgiven, then your parents' estate would have to pay this debt off (like all other debts) prior to any inheritances being given out. Private student loans are not forgiven if you die -- your estate must pay for them, if you have an estate.

This is the stafford loan information site: http://www.staffordloan.com/stafford-loan-info/
It will tell you the maximum borrowing limits and interest rates, plus some general information. There is a link on the left regarding PLUS loans.

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