The cost of college continues to rise and with incomes staying relatively static or even worse, unexpected job loss, pay for your child’s college education can be a source of great anxiety. There is a little known option offered by the federal government that may help you. We’re going to take a look at the parent plus loan.
The parent plus loan is a loan taken out by a parent on behalf of a child to help pay for tuition and other school related expenses at a qualifying college or university, or by a graduate student for graduate school. Your child must be enrolled at least half time and your credit has to be good or excellent.
Keep in mind that this is not a needs based loan so if you have damaged or no credit and are looking for a way to finance your child’s college, you will be better off filling out the FASFA to qualify for one of the needs based grants or loans.
With the parent plus loan, you can borrow enough money to finance your child’s entire undergraduate education including housing, books, tuition, and any other eligible school expense at a federally guaranteed low interest rate.
It should be noted that it is recommended that this loan should be used in conjunction with student loans, grants and scholarships. It should not be used as the only form of payment if possible.
Remember that this is not a needs based loan. The federal government says this about the qualifications:
“Eligibility for the parent plus loan depends on a modest credit check that determines whether the parent has adverse credit. An adverse credit history is defined as being more than 90 days late on any debt or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off.”
As of June of 2006, the fixed interest rate is 8.5% with a .25% credit if an automatic withdrawal is set up and interest may be tax deductable.
While not widely known, the parent plus loan can be the perfect way to finance the rest of your child’s college education.