Federal loans typically offer the best terms, but are often capped at relatively low amounts, said Adam S. Minsky, an attorney specializing in helping student loan borrowers.
Private loans or Parent Plus loans have more strings attached. Private loans frequently have interest rates that are high and variable. They often require a parent to co-sign the loan and offer very little flexibility if there’s a hardship.
Parent Plus loans require a parent to take on the debt burden. Though these loans are governed by federal law, they typically have higher interest rates than other federal loans, Minsky said. Parent Plus loans also have less flexibility in repayment, such as no income-driven repayment plan, and cannot be transferred to the child.
“There’s a lot of dangers there,” Minsky said.