Dear Dr. Don,
My daughter is starting graduate school in the fall. She had scholarships and a prepaid tuition program for her undergraduate degree. Now she is going to have to take out student loans for graduate school.

She filled out her Free Application for Federal Student Aid, or FAFSA, and will be getting a federal Stafford loan, but it is not enough to cover the expense. For the rest, which is better: one of the federal government’s PLUS loans for graduate and professional degree students, or a private loan?

Thank you,
— Shonda Scholar

Dear Shonda,
The financing strategy is to exhaust the loans available under the federal programs before looking to private student loans. The federal programs have a measure of flexibility that the private loans just don’t have in terms of loan deferments, loan forbearance and loan consolidation. She can get Stafford and PLUS graduate loans in her name without you co-signing the loans.

Work with your daughter to put together a financial plan to cover her graduate school expenses. Be explicit about what you’re willing to contribute, and make clear to her what she’s expected to contribute as well.

Don’t co-sign a student loan for her if you’re not willing to accept the risk that you may be making some (or all) of the loan payments. She’s making an investment in her human capital. Ideally, it will pay off in the form of a rewarding career for her. Make sure she has some skin in the game by having her Stafford and PLUS student loans solely in her name. If you decide to take out parent PLUS loans to help with the cost of her education, make sure she understands that you’re sacrificing some part of your future to fund hers.

Ask the adviser

To ask a question of Dr. Don, go to the “Ask the Experts” page and select one of these topics: “Financing a home,” “Saving & Investing” or “Money.” Read more Dr. Don columns for additional personal finance advice.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.