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How do I know if I qualify for a Federal PLUS college loan to finance my daughter’s college education? I live in California. Do I have a state-based alternative?


A Federal Parent PLUS Loan allows parents to borrow on behalf of their children to cover any or all of the costs of higher education, including tuition, room and board, books, supplies, related transportation costs and so forth. Eligibility requirements for Parent PLUS loans are straightforward:
  1. Borrowers must be U.S. citizens or green card holders.
  2. Students who are intended to benefit from the loans must be dependent children. (If your daughter is out on her own already, she’ll have to fend for herself with lenders.)
  3. Borrowers must have sound credit histories.
Parent PLUS loans are guaranteed by the federal government. That should keep interest rates lower than those of conventional bank loans. However, the feds also set the rates, and they have set them fairly high: 8.5 percent. Stafford loans, offered under another federal program and made to students, not parents, may be a better option than Parent PLUS or anything available under a state program. Stafford loan interest rates are variable; these days they are running at barely more than 3 percent and cannot exceed 8.25 percent. And because the loans are made to students, you won’t be out of pocket if your daughter decides to pursue an honors degree in partying and then drops out.
-Conrad de Aenlle