What Is a Parent-Sponsored Loan?

Some students will not be taking loans in their own names but will elect parent-sponsored loans instead. These loans are given for the sole purpose of funding the education of a student. They are issued in the name of the parents and must be repaid by the parents. The PLUS loan program is the most common federal parent-sponsored loan option.

Advantages of Parent-Sponsored Loans

As a parent, you may want to provide your child with a college tuition despite not having the resources immediately at hand. Instead of asking your child to carry the expense of school on his or her own, you can pay for school on loans. You will be given a number of flexible options with the PLUS loan program, such as easy consolidation, refinancing or management of loans from year-to-year and child-to-child.

Problems with Parent-Sponsored Loans

Your income, not the income of your student, will be used to determine if a loan will be subsidized or unsubsidized. Subsidized loans are often less expensive and easier to manage, but they are given only to the neediest students. Students who receive financial aid without the assistance of parents may receive better options due to their increased need, reducing the cost of financing.

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