Wells Fargo has introduced an alternative to federal loans for students who are enrolled less than half-time, or for cases in which a person other than a parent wants to help fund a student’s education.
Despite its name, the Student Loan for Parents can be taken out by any relative or family friend of a student, not just a parent, said Kirk Bare, head of education finance services for Wells Fargo.
Federal funding for parents of student beneficiaries — the Federal PLUS Loan for Parents — requires both half-time enrollment and that the signer be the parent or legal guardian of the student, said Kris Wright, University of Minnesota director of student finance.
Federal loans are available only when those conditions are met, Wright said.
The Wells Fargo loan is the only private loan aimed at parents, family friends or relatives, Bare said, and it carries no fees for application, processing or repayment. The loan has been available since May 15.
About $350 billion per year goes toward college education in the United States, Bare said, and 6 percent of that figure comes from family friends and relatives.
“Anyone that really wants to give the gift of education to someone special to them” can take out the loan, he said.
In all other cases, Wright stressed the favorability of federal funding. Federal programs offer “a number of forgiveness options … that the private loans do not,” she said.
Federal lending programs may also have more favorable payment deferment and forbearance terms, said Justin Draeger, president of the National Association of Student Financial Aid Administrators.
He cautioned those looking at private loan programs to look beyond basic terms and conditions.
“Generally it’s a good idea to look at the federal loan programs first,” Draeger said, as they are “a bit more flexible.”
The Wells Fargo loan may also serve as an alternative in cases where applicants do not meet federal age, dependency or citizenship requirements for federal PLUS loans, said Wells Fargo product manager Bonnie Wallace.
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