Parents invest in their children. We invest time, attention, money, knowledge, …more money. And for many parents, investing in their child’s college (or other post-secondary) education is no different – they see it as their responsibility.
If you feel that way, then fine. But perhaps you should reconsider the idea of taking out loans to pay for your child’s education.
Rob Farrington, a contributor at Forbes, breaks it down:
Ways Parents Borrow For Their Children’s Education
Parents can borrow for their children’s education in a variety of ways. The most common way parents borrow money is to take out student loans themselves – Parent PLUS Loans. These are loans that are taken out in the parent’s name to be used for their child’s education.
Beyond PLUS Loans, parents sometimes take out private student loans as well. Once again, in most cases these are in the parent’s name, or the parent is a cosigner on the student loan. Either way, the parent is 100% responsible for the debt.
Finally, some parents even resort to taking out home equity loans to pay for their children’s education. Rather than having a student loan, these parents use the equity in their home to pay for college. While this may seem beneficial in the short term, there are complications financially when using this method.
The Cost of Student Loans For Parents
What parents don’t realize is that there is a cost for them for taking on student loans, and it doesn’t usually make the most sense for them to take on this cost.
First, when parents take on Parent PLUS Loans, there are a lot less student loan forgiveness options. Parent PLUS Loans are not allowed to be forgiven under the Federal Teacher Student Loan Forgiveness Program, and for a variety of technical reasons, borrowers won’t get relief under the Public Service Loan Forgiveness Program.
Along with not being eligible for student loan forgiveness, Parent PLUS Loans are not eligible for the income-contingent, or pay-as-you-earn repayment plans, so the only qualifying option is to repay the loans under standard repayment (which can include graduated or extended plans). This could be difficult for parents since it doesn’t allow much flexibility.
If parents borrow private student loans, they will typically pay higher interest rates and fees than Federal student loans. And again, there are limited options for forgiveness and repayment.
Go over to source, Forbes, to read the rest of the article.
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