So you got your kid into college – and it’s a great college – and the financial reality smacks you in the head when you get your first college bill. Yikes! Unless you have the funds to pay for your child’s college safely tucked away under your mattress, you’re going to need money fast.
Be careful when looking at loans. They’re not all the same and the rules have changed. Check out many options before signing any contracts. I read this great article in Money Magazine (August 2017).
Federal Plus Loans (fixed APR: 8%)
Plus loans are the easiest to get – even with bad credit (except bankruptcy). Be careful how much you actually borrow because it’s easy to take more than you really need and then set yourself up for difficulty in repaying the loan later.
Private Loans (fixed APR: starting at 5.4% and up)
Private loan lenders seek clients with good credit history. So if you have excellent credit, you’ll probably get a great deal at a low APR. But if your credit is less than stellar, you may end up paying upwards of 12%! Yikes!
Home Equity (fixed APR: starting at 5.4% and up)
By using your home (that you own) as collateral, you can qualify for good loans at low APR. But, be careful of hidden costs – make sure your quotes include all costs such as appraisal fees. Because your home is probably one of your biggest investments, make sure you have enough funds to cover your retirement, kids’ weddings, and other expenses in the future.
Remember, education loans are almost impossible to escape – even in bankruptcy – so only borrow what you actually need.