College Loans

Parents who want to help pay for a child’s education can apply for several different kinds of education loans.The most popular education loan for parents is perhaps the PLUS loan, which is sponsored by the federal government. Other forms of education loans made to parents are home-equity loans and loans by private lenders.

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These loans have many of the same advantages as student loans but repayment is the responsibility of the parent instead of the student.

Private Education Loans &
Home Equity Loans or Lines of Credit

If you own a house, one form of an education loan is a home-equity loan. The interest on a home equity loan may deductible on your income taxes.

Home equity loans also offer interest rates and fees that are lower than private education loans, but those same costs also tend to be higher than the federal PLUS loans. In general it is better to maximize your eligibility of federal financial aid than to take out a home equity loan.

Private loans are also available to help pay for your student’s education. However, you should exhaust all other options of student financial aid before taking out a private student loan because private loans tend to charge higher interest rates and fees and have more stringent repayment plans.

PLUS Loans

PLUS loans are made to parents of undergraduate students. To qualify you must have a dependent undergraduate student enrolled in college at least halftime. Parents must also be a US citizen or legal resident and have good credit history. Currently, PLUS loans have a fixed interest rate at 8.5%. Once your application for a PLUS loan is completed and accepted, the lender sends the money to the student’s college or university.

Other advantages of a PLUS loan include:

There are really no disadvantages to a PLUS loan but here a few things to keep in mind: