<p>My parents have a 200k$ loan on their head from our house. Will it be hard to get a loan from the bank if I go to an expensive college (where it will cost more than 30k$/year)? Are college loans taken out through a normal bank like BankOne or Chase? What are “Stafford Loans”? Are they special loans for paying off school fees?</p>
<p>Depends on a bunch of factors. Primarily income. Banks don’t want to see individuals with a large debt to income, because it increases the risk of it being payed back. This is usually reflected in higher loan interest rates.</p>
<p>The Staffords are federally guaranteed, and as such, the "default risk: is lower for lending institutions. But if you qualify for a Stafford, I’m not sure to what degree these other factors (income, other debt load) play into the equation. Perhaps someone else knows better.</p>
<p>Most likely, your parents’ debt-to-income ratio will not play a factor in their ability to take out a loan to pay for your education. Here is how it works:</p>
<p>You apply for financial aid as directed by your school of choice (definitely need to fill out the FAFSA, might need to do the CSS, might need to fill out additional paperwork for the school). </p>
<p>The school then comes up with a financial aid package for you based on the information from your FAFSA and other sources. Even if you are not eligible for any financial aid (your EFC exceeds your COA), you will still get an unsubsidized Stafford loan up to an amount that is dependent upon your class standing. 1st year is $3500, 2nd year is $4500, 3rd & 4th year is $5500. This loan is in your name, and does not require you to have any income. They could care less about your parents’ finances. The main requirements for this loan are to be a citizen or eligible non-citizen, and not be currently in default on a federal student loan. If this is enough to pay for your school, then you are set. Most likely, though, this won’t be it.</p>
<p>This is where the PLUS loan program kicks in. Your parents can borrow up to the full COA minus any other financial aid (including the Stafford & Perkins loans). When applying for this loan, the lender will check your parents’ payment history. If they were recently late on any payments, or some other anomalies show up, they may get denied, but it takes some serious items to be denied. Even being denied isn’t the be-all, end-all as they can file an appeal and explain any inconsistencies to the lender and sometimes a denial can be reversed (with a little work on your parents’ behalf). If they are denied, and it cannot be reversed, you gain additional unsubsidized Stafford loan eligibility ($4000 each for 1st & 2nd years, $5000 each for 3rd & 4th years). </p>
<p>Who you end up borrowing from for the above loans is dependent upon the type of school you go to. There are two types: Direct Lending or FFEL. Direct Lending means you borrow straight through the school, there are no choices or options. FFEL schools allow their students to choose any private lender they wish, so the banks compete to get your business by offering rebates, interest rate reductions, fee waivers, etc. A school might have a preferred lender list, but you can choose any lender you wish, even if they are not on the list. Each program has its pros and cons (that’s better left to another bulletin), but you are stuck with whatever your school offers (Direct or FFEL). </p>
<p>Most people meet their college costs in those programs listed above. Private loans are the last resort option, as they often require credit checks, co-signors, and they tend to have higher interest rates than those loans above. </p>
<p>Ultimately, my advice is to contact your school, and ask them about the loan programs you are eligible for and what you have to do in order to get these loans. Hope this helps.</p>