Parents, Beware: College Lenders Now Targeting You

Photo (cc) by USDAgov

Private college loans made to parents — rather than to students — are a budding reality.

They can provide a cheaper way to finance a child’s education than federal student loans, CBS MoneyWatch reports. But they can also risk a parent’s retirement nest egg.

Lenders ranging from Sallie Mae, which is formally known as SLM Corp., to online lender Social Finance are either preparing to roll out or already have started offering private loans to parents.

They can be cheaper in terms of interest. The Wall Street Journal reports Sallie Mae will start offering a loan to parents next month that will have interest rates as low as 3.75 percent for parents with good credit scores. By contrast, federal PLUS loans have a rate of 6.84 percent.

However, CBS reports:

The bottom line for parents, though, may be unchanged: Focus on your own retirement, rather than financing your child’s college degree. After all, lenders aren’t interested in helping you out in retirement, and most Americans are already poorly prepared for their golden years.

Social Finance launched a private loan for parents in 2014 because of a request from Stanford University, which told The Wall Street Journal it was trying to provide other financing options for parents. Two other prestigious universities, Boston College and Carnegie Mellon University, are also among those that are referring parents to private loans.

Nate Matherson, co-founder and CEO of LendEDU, tells CBS:

“Only use these loan products if you can save money versus the federal PLUS loans. I don’t think student financial aid offices should be pushing these products. They should stay unbiased and act as an informational source.”

What’s your take on this news, parents? Would you consider taking out a private loan to spare your child the cost of taking out a federal student loan? Let us know what you think below or on Facebook.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Here’s the Average Retirement Age in Your State
Here’s the Average Retirement Age in Your State

Are you on track to retire at the same age as most residents of your state?

10 Products That Upgrade Your Home for Less Than $45
10 Products That Upgrade Your Home for Less Than $45

Make a fresh start with these affordable Amazon buys.

10 Things That Can Ding Your Social Security Payments
10 Things That Can Ding Your Social Security Payments

Here are 10 things that could mean less money in your pocket during retirement.

The 5 Most Expensive U.S. States for Retirees
The 5 Most Expensive U.S. States for Retirees

If you have or expect to have a modest retirement income, you may want to avoid spending your golden years here.

13 Smart Tricks to Organize Every Room of Your Home
13 Smart Tricks to Organize Every Room of Your Home

Get your household organized with these brilliant and inexpensive tricks.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

Why Cloth Masks May Increase Your Coronavirus Risk
Why Cloth Masks May Increase Your Coronavirus Risk

A new study finds that wearing a cloth mask can backfire if you don’t clean it properly.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.