Parent Student Loans and More: Your Guide to Subsidized, Unsubsidized, and Private Loans

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Your Guide to Student Loans: Federal vs. Private Options

Navigating student loan options is an important step for both students and parents. Informed borrowing decisions begin with understanding the choices, including federal PLUS loans and private loans. 

1. Start with the FAFSA

Before exploring any loans, the crucial first step is completing the Free Application for Federal Student Aid (FAFSA). The FAFSA is mandatory because it:

• Determines eligibility for various financial aid types, including grants, scholarships, work-study programs, and federal student loans.
• Facilitates a tailored financial aid package from schools, combining federal, state, and institutional aid.
• Provides a clear understanding of qualified aid, revealing financial gaps.

Don't skip this step, most students qualify for some form of aid. After aid is applied, you can explore loan options if necessary.

2. Student Loan Options for Students

Students generally have access to two main types of loans: federal and private. Interest rates and terms vary, so comparing options is key.

Federal Loans (Subsidized & Unsubsidized)

After the FAFSA, the U.S. Department of Education may offer these.

• Subsidized loans are need-based for undergraduates. The government pays the interest while the student is in school at least halftime, making them cost-effective.
• Unsubsidized loans are available to all students regardless of financial need. Interest accrues while the student is in school and during repayment.

Students should accept both subsidized and unsubsidized federal loans if offered, as they typically have the lowest interest rates and best terms. They have annual limits, and if a gap remains, private loans can be considered.

Private Student Loans

• Available from banks, credit unions, or non-profits. 
• Rates and terms vary by lender, requiring careful comparison shopping.
• Many students lack the credit history to qualify alone and will need a co-signer (like a parent) to get approved and secure the best rates.

3. Student Loan Options for Parents

Parents looking to help fund their child's education have two primary choices: federal Parent PLUS Loans and private parent loans.

Federal Parent PLUS Loans

• Provided by the U.S. Department of Education.
• Rates are generally higher than student federal loans and include a 4.228% origination fee deducted from the loan amount.
• Repayment and interest accrual start immediately after disbursement.
• A credit check for an adverse credit history is required.

Private Parent Loans

• Offered by various financial institutions and non-profits. 
• Can offer competitive rates and terms compared to PLUS loans.
• Repayment and interest accrual also start immediately.
• Some private loans, like the NC Parent Assist Loan, do not charge origination fees, meaning more money goes directly to the cost of attendance.

Changes coming to the federal student loan program under the "One Big Beautiful Bill Act" (OBBB Act) that take effect July 1, 2026.

Borrowing Limits: No longer tied to full cost of attendance.

• Annual Limit: $20,000 per student.
• Aggregate Limit: $65,000 total per student.

• Repayment Plan Options: New borrowers after July 1, 2026, will only be eligible for a new standard repayment plan and the new Repayment Assistance Plan (RAP). Existing income-driven repayment (IDR) plans like Income-Contingent Repayment (ICR) will no longer be available for new loans.
• Forbearance & Deferment: Some specific deferment and general forbearance options will be modified or shortened for loans first disbursed after this date.

Provisions for Existing Borrowers

• Existing borrowers (loans before July 1, 2026) can continue borrowing under current unlimited rules for up to three more academic years, or the remainder of their program, whichever is less.
• To keep access to IDR plans for existing loans, borrowers must meet specific requirements and transition to an eligible plan (ICR, IBR, or RAP) by July 1, 2028.
• Taking out one new Parent PLUS loan after July 1, 2026, makes all of a borrower's Parent PLUS loans ineligible for any IDR plans.

Parents should plan ahead and explore alternatives like private loans if the new limits create a funding gap.

In North Carolina, the NC Assist Loan, offered by the non-profit College Foundation, Inc. (CFI), provides an option for students and parents to cover remaining college costs.

• Eligibility: The loan is available to North Carolina residents attending an eligible in-state or out-of-state school, as well as out-of-state students attending an eligible North Carolina college or university.
• Rates and Fees: The loans feature competitive fixed rates and have no application, origination, or prepayment penalties.
• Application: Students and parents can apply for a loan at NCAssist.org.