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Various types of education loans suitable for parents

September 06,2011 by: Dallas Browne

Every parent’s ultimate dream is to watch their children reach the pinnacle of professional and personal success by acquiring quality education. With the elevating cost of education, it is increasingly becoming difficult to pay for the college education. Sadly, not every parent is in a position to pay expensive college fee, and this inadequacy hinders their child’s development. The good news is that parents can easily avail loans to pay for their children’s college or university fee and other expenses.

Since, the cheapest colleges in the United States are not inexpensive by the standard norm, and for several families signing a check for the complete tuition amount is far from practical choice. However, a student’s loan acquired by the parents can help win the battle tremendously. Here are a few good options that can help you fulfil your child’s education dreams.

Parent Loans for Undergraduate Students (PLUS) enables parents to borrow money for paying the cost of college fee including lab fee, supplies and room costs. The amount of loan is calculated according to the total cost of the college expenses. The loan repayment starts immediately after 60 days of receiving the sanctioned loan amount. The loans are disbursed only after reviewing the credit history of the parents. The rate of interest on PLUS is adjusted yearly. The rate of interest is capped at 9% and is low. The PLUS eligibility criterion is that student must be attending the college at least a half-time.

Private Loan can be acquired through a lending institution or bank. Parents with good credit history and a reputable relationship with a bank can easily obtain a loan for education with affordable interest rates.

On the contrary, parents with high debt to income ratio or parents with poor credit history may find it difficult to acquire private loan.

Parents who have constructed a robust savings via their retirement plan can borrow education loan against it. Popularly referred as IRA Withdrawal, the loan amount extracted before the age of 59.6 years attracts 10% penalty and the federal and state governments impose a tax on it. Nonetheless, if parents are able to reflect the money borrowed is for meeting the expenses of higher education, the penalty is waived off. Yet the loan amount will be taxed.

Home Equity Loan is an ideal option for parents who carry a substantial percentage of equity on their home. On the flip side, home or the property becomes collateral for the borrowed amount. In the event of home loan remains unpaid the property is jeopardized.

Parents, eager to facilitate their children towards a brighter future by borrowing a loan for their children’s education can try out the above mentioned options. However, researching the Internet is the key to acquiring a feasible option. We advise you should meticulously investigate all available options before making up your mind, because you have to live with it for several years in the approaching future. Remember a wrong decision can cost your dreams; therefore, you should look before you leap!

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