PLUS Loans

A PLUS loan (Parents Loans for Undergraduate Students) is a federal direct loan designed to help parents fill in the holes that may be left by other types of student loan financing. For a parent this is an excellent option for financing your child’s education. The PLUS loan is through the government and you can borrow up to the total cost of your child’s tuition minus any other loans they may receive.

PLUS loans are not need based and can be used to pay for tuition, room and board, books, fees, transportation and other education related expenses. The loan can also be used to cover expenses incurred prior to obtaining the loan.

Most parents will have some type of college fund for their child, but rarely is it enough to foot the whole bill for all four years. Parents may choose to liquidate assets or take some of the equity out of their home with a home equity line of credit or a second mortgage. The interest on the home equity line of credit and the PLUS loan are tax deductible.

The interest rate on the PLUS loan is currently fixed at 7.9 percent. The interest rate on you home equity line of credit can vary depending on many factors. The other big drawback of the home equity line of credit is that it is secured with your home. If something would happen and you were not able to make your payments your lender could foreclose on your home.

The following requirements are needed for a parent to quality for a PLUS loan:
• be a natural, step or adoptive parent of a dependent student
• be a US Citizen, a qualified non-citizen and have a valid Social Security number
• have credit that qualifies

Your child must meet the following requirements:
• be less than 24 years of age
• be single
• have no dependents
• be enrolled half-time

If you are having financial problems, the government has deferments and hardship programs that they are able to offer you and in the case of the death of the borrower, the loan is forgiven. For this reason a PLUS loan should never be consolidated or refinanced into a secured loan of any type. There will be companies out there that will try to talk you into it.

For a parent wanting to help their child through college, a PLUS loan is one of the best loan options going today.

Alternative Student Loans

Alternative student loans are available through a large number of financial institutions. Alternative student loans are private student loans that can be used to fund education for just about anything at any type of educational facility. Alternative student loans will also pay for a larger number of education related expenses than government student loans.

There are many financial institutions that specialize in alternative student loans. The interest rates on these loans are reasonable, although they will not be as low as the interest on a government loan. The term on this type of student loan can be as long as twenty years. Private student loans are also unsecured, so you do not have to be concerned about losing your home if you have difficulty keeping up with the loan financially.

There are no government forms involved with private student loans and they can be co-signed for by the student allowing them to establish a credit history. It depends on the loan and the financial institution whether your alternative loan will have a deferment period. In some cases you will have to start paying the loan back immediately.

These loans are good for filling the gaps that may be left by government financing. Many alternative student loan issuers also offer student loan consolidation and combination loans that consist of consolidated loans and new loans. These types of loans are usually very flexible. You can find alternative education financing offered through any number of major financial institutions.

It is estimated that a college education pays for itself many times over, so a student loan is a wise investment. If it takes getting an alternative student loan to put your child through school, it is a good investment in their future and it will help them reach the goals they have set for themselves.

Private Student Loans

Private student loans, sometimes referred to as alternative student loans are unsecured, credit based non-federal student loans. Private student loans can be used to pay for almost any type of college expense and can be gotten in almost any amount. Private student loans are used to bridge the gap left after scholarships, grants and federal student loans have been exhausted.

The interest rates are slightly higher on private student loans than they are on unsecured conventional loans, credit cards or home equity loans. Most private student loans payments are deferred until the student leaves school.

Listed below are some of the benefits of private student loans:
• Interest rates that are lower than conventional loans, credit cards or home equity loans.
• Larger borrowing limits than federal student loan programs.
• Interest rate discount payment, such as; .25 discount on automatic debits, on consecutive on time payments, etc…
• Most interest on private student loans is tax deductible.
• No payments until after graduation and some are deferred for an additional six months.
• There is no prepayment penalty; the loan can be paid in full at any time.
• The FASFA is not required for a private student loan.
• Private student loans can be used for any type of education.
• It may be possible to consolidate a private student loan.

As you can see, if it gets to the point where additional education financing is needed, private student loans are a good option. There are several options you can choose from to meet your needs. Private student loans are where students turn when they have exhausted all other options for paying for college. They are the least desirable option for college financing because they will most likely be the most expensive.