College Loans Solutions and Answers

College Loans - Solutions and Answers
By: Student Loans.Net

Parents paying for their child’s higher education have a few funding avenues they can explore. Two popular ways parents pay for tuition and education expenses are through college loans and a home-equity line of credit or loan. While both methods have their pros and cons, deciding which one is best boils down to each situation.

College loans come in two main forms for parents. First there is the Federal Parent Plus Loan. This loan is awarded based on credit. Because the government mandates the program, loan limits and application deadlines are set in stone. On a positive note, the Parent Plus Loan features a relatively low interest rate and is insured in case of death or permanent disability. The second option in regards to college loans is private funding. Parents can take out private loans, again based on credit, through a private lender such as their bank or credit union. There are an abundance of private lenders looking to lend money to parents for college. Before selecting a lender, parents are encouraged to shop around for competitive interest rates and repayment plans.

Lastly, parents who own their home may consider a home-equity line of credit or loan versus college loans. With both types of funding, the borrower can benefit from tax deductions. Also, home-equity lines are less expensive because the parent doesn’t immediately pay interest on the entire cost of schooling. Equity lines are also established at a variable interest rate – which can be good or bad. Equity loans on the other hand are established at a fixed rate. The good thing about both the equity loan and credit line is the borrower doesn’t necessarily have to have outstanding credit to get the money for college.

Before parents consider taking out college loans or an equity loan of any sorts, they should have their child apply for federal college aid by using the Free Application For Federal Student Aid (FAFSA). This will tell them if their child qualifies for any grant money or even a subsidized loan.