November 4, 2009
Is Getting a Parent Plus Loan a Plus?
Parent Plus loans serve as an excellent loan option for parents today looking to aid their student with the cost of higher education. That said, Parent Plus loans are not the only option that parents have. Here are the most common three options that parents consider when helping out their student(s) with school.
1. Parent Plus loan: A federally back loan with an 8.5% fixed interest rate for the life of the loan. This loan is fully deferrable while the student is in school but will remain in the parents name until the loan is paid in full.
2. Private student loan: This is a loan type that parents will co-sign for their son or daughter. The primary responsibility for repayment falls on the student, though the co-signers credit can still be damaged if payments are not made. This loan type is fully deferred while the student is in school. The interest rates are variable and are dependent on the index the lender is using and the credit of the applicant. In some instances after a designated amount of on time payments from the student (36-48 months) is reached the parent can be removed from the loan application with a written request.
3. Home equity lines: With rates at 20-year lows many parents have elected to take out a home equity loan. For some this is the lowest interest rate of the three with the opportunity to fix this rate. There is no deferment time and the loan repayment would begin within 30-60 days. This loan would be the parents responsibility to repay as the student would not be attached to the application.