College Loan Advice Still Need to Secure Education Loans for Fall 2025? Here’s What You Need to Know Written by Michelle Smoleyon June 11th, 2025 I began my financial aid counseling career working in a community bank. I provided families with paper FAFSAs and assisted them in completing the application in person. Through the years, the process, products and regulations in the financial aid industry may have changed, but the reward I feel when I help students and families has not. During my tenure at the Mayo Clinic College of Medicine, I had the opportunity to work with a very diverse group of students working towards all types of degrees from certificate programs to doctoral degrees. From there, I worked in student loan finance and became very passionate about financial literacy. I love educating families about various financial vehicles and assisting them in determining what is the best financial strategy to pay for college. Learn More About Michelle college loans, parent plus loans, student loans, Summer has officially started, and many families are planning for beach days and cookouts. While fall may feel far away, college tuition bills will be arriving before you know it. If families require additional financing to cover a college’s directly billed costs, such as tuition, fees, and on-campus food and housing, they may consider two different types of higher education financing options. The first option is the Federal Parent Loan for Undergraduate Students (PLUS), which is a parent-owned liability until the loan is paid in full. There is no way to have the loan transferred to the student unless it is refinanced. Parents apply via www.studentaid.gov. A credit check will occur, and you can apply up to 180 days prior to when you need the loan funds. Credit underwriting standards are less stringent than typical lender requirements. The PLUS loan might be a good option for parents who have a credit score below 720 or have a history of late or missed payments. Parent PLUS loan underwriting does not look at a parent’s debt-to-income ratio (DTI) when determining credit approval. DTI ratios are calculated by dividing your total current monthly payments by your monthly gross income. Parents who have a DTI ratio over 36% may want to opt for this loan option. College is a multi-year expense and often parents need to borrow for each year, which may increase their debt-to-income ratio annually. Another option for college financing is a private higher education loan. Borrower options include the college student, along with a creditworthy cosigner or just the parent. If you want your dependent to have a loan in their name, this loan type is your only option outside of the federal direct student loan. You can research suggested lenders on sites like Nerd Wallet or on your college’s financial aid page. Lenders determine credit approval and interest rate at the time you apply for the loan. Private cosigned student loans may offer you a lower interest rate than a private parent loan. There is less lender risk since two people are legally obligated to repay the debt on the private cosigned option. Credit underwriting is stricter for private loans. Lenders often evaluate the applicant’s credit score along with DTI ratio. Remember, most college students have a limited credit history, hence the reason lenders require a creditworthy cosigner. Do not apply too early! When lenders pull your credit, the credit is good for typically up to 60 days. Since tuition bills are often due the end of August, you will not want to officially apply for a private loan until late June or early July. Allow for at least a month from credit application to disbursement date. Applicants can shop around for lenders and their corresponding interest rate by using sites such as credible.com. This private loan platform completes a soft credit inquiry, which does not negatively impact your credit score. No matter which loan options you choose, it’s important to plan and only borrow what your family truly needs each year. Consider paying the interest while the student is in college to lower your overall borrowing cost. While you can defer both principal and interest payments during college, this often results in a higher interest rate and higher payments after graduation. Calculate the monthly payment annually for each loan so you understand what the monthly payment amount will be. In short, borrow wisely and plan for future payments. Work with our college finance experts to help you determine the best way to pay for college. Find Out More Related Resources Read | Posted on May 7th, 2025 Breaking News: Student Loan Interest Rates Drop! Read | Posted on April 1st, 2025 Federal Student Loans: What You Need to Know Amidst Changes Read | Posted on November 4th, 2024 Recent Graduates: Time to Pay Student Loans, but… It’s Complicated
