The federal loan programs, particularly the PLUS-loan program, will probably provide you with all the borrowing power you need. But if you're looking for additional funds -- or would prefer a private lender to the federal government -- several not-for-profit organizations make education loans to students and parents at rates that in most cases are slightly higher than those on PLUS and Stafford loans. Loans for undergraduate education are described below. All three organizations also have loan programs for graduate students.
Nellie Mae. Besides making Stafford and PLUS loans, Nellie Mae (Braintree, Mass.; 800-367-8848; www.nelliemae.com) offers parents EXCEL education loans at variable rates that are calculated monthly or annually. The annual rate is prime plus 2 percentage points, calculated August 1, and the monthly rate is prime plus 0.75 percentage point, adjusted if necessary at the beginning of each month. You can borrow up to the full cost of college annually, minus any financial aid you receive.
If you're creditworthy, you qualify -- regardless of your financial need. You must have a clean credit history (with no major delinquencies) for at least two years, and your debt payments, including a mortgage and the EXCEL loan, cannot exceed 40% of your gross monthly income.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You pay an up-front guarantee fee of 6% (2% with a co-borrower), which goes into an insurance fund that covers loan defaults.
Sallie Mae. In addition to buying Stafford student loans (as described above), Sallie Mae makes its own supplemental student loans, called Signature Loans, for up to the full cost of college, less other financial aid. The interest rate is variable. (It equals the prime rate plus zero to two percentage points, depending on the creditworthiness of the borrower and whether or not there is a co-borrower.) A fee of 0% to 6% (depending on the same variables) is subtracted from the loan proceeds.
One nice thing about these loans is that your child can take them out at the same time as a Stafford loan at lenders that participate in the Signature Loan program. That means all of his or her loans will be serviced as one account. And borrowers are eligible for on-time repayment discounts.
The Education Resources Institute (TERI). TERI (800-255-8374; www.teri.org) makes its Alternative Loans for up to the annual cost of college, minus financial aid, to parents or to students, although most students need a parent as a co-borrower. Loan approval is based on creditworthiness, with criteria similar to those for Nellie Mae's EXCEL loans.
TERI offers the loans through several lenders who can serve Alternative Loan borrowers nationwide. They include Bank of America, Bank One, First Union and PNC Bank. The rate is prime minus 0.5 points. TERI charges a 5% to 6.5% origination fee, which is determined by the repayment schedule. The fee can be added to your loan balance.
-
Stock Market Today: President Trump Reboots the Tariff TradeA broad consensus that markets hate uncertainty more than anything else is being tested on an almost daily basis in 2025.
-
Electric Car Owners Can’t Avoid Road Taxes in 2025New Taxes Hawaii launched its new EV road usage fee in July. Here’s why some states are implementing similar new electric vehicle taxes across the nation.
-
AI’s Rapid Rise Sparks New Cyber ThreatsThe Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
Blue Collar Workers Add AI to Their ToolboxesThe Kiplinger Letter AI can’t fix a leak or install lighting, but more and more tradespeople are adopting artificial intelligence for back-office work and other tasks.
-
AI Goes To SchoolThe Kiplinger Letter Artificial intelligence is rapidly heading to K-12 classrooms nationwide. Expect tech companies to cash in on the fast-emerging trend.
-
What To Know if You’re in the Market for a New Car This YearThe Kiplinger Letter Buying a new car will get a little easier, but don’t expect many deals.
-
How Intrafamily Loans Can Bridge the Education Funding GapTo avoid triggering federal gift taxes, a family member can lend a student money for education at IRS-set interest rates. Here's what to keep in mind.
-
How an Irrevocable Trust Could Pay for EducationAn education trust can be set up for one person or multiple people, and the trust maker decides how the money should be used and at what age.
-
Will Lower Mortgage Rates Bring Relief to the Housing Market?The Kiplinger Letter As mortgage rates slowly come down here's what to expect in the housing market over the next year or so.
-
UTMA: A Flexible Alternative for Education Expenses and MoreThis custodial account can be used to pay for anything once the beneficiary is considered an adult in their state. There are some considerations, though.
