Plus Loans

Getting over the trouble to pay for education bills.

Every autumn marks the beginning of new sessions of the school, and with it, for some families, comes the anxiety of arranging funds and paying for the educational bills. Thankfully the Federal government is quite considerate and has made provisions for several types of financial aid to help such families.

Some parents from the middle income group have high incomes which rule out there chances of getting a need based financial aid. But their income may not be high enough to take care of all the college expenses and so they pick up Federal education loans to get their educational bills reimbursed.

There are two main financial aid programs available for the parents, made available by the U.S. department of education. These are the unsubsidized Federal Stafford loan and Federal Plus loans. Those parents who have not used any need based or merit based financial aid for their childs further education are eligible for these Federal guarantee loans which come with a comparatively low rate of interest.

Both these loan programs can be used by the parents to cover up all kinds of expenses related to education such as books, living expenses or travel expenses, provided no other financial aid has been used for the purpose. A great advantage of using such loan programs is that tax deductions are available either for the complete amount or for some portion of the interest that you pay on these loans.

College loans are a confusing subject for most parents, especially so because theres not much of information available on the loan programs initiated by the U.S. department of education. Ignorant of the provisions made by the department of education, some of the parents use the wrong source of funds to pay for higher education. Quite often credit cards are used which usually carry a very high rate of interest of nearly 22 percent, also the parents go in for a refinance on their home or use some other expensive source of finance not knowing much about the programs offered by the Federal government. In the process they end up losing a lot of their hard earned money, which could have easily been saved had they used a federally guaranteed loan with a lower rate of interest.

Federal loans are any day a better option when compared with credit cards or refinance mortgages, for the reason that the rate of interest is usually low, there are no application fees and processing charges and tax deductions are also available for the interest paid over federally guaranteed loans.

Federal PLUS loans: with these loans the parents can borrow adequate funds to cover up the cost of education of their children. In case any other aid has been used, then they are eligible for a loan amount equal to the total cost of education less the received aids. The interest rates applicable on these loans usually changed on the first of July every year by the Federal department of education.

Of the two Federal guaranty loan options available for the parents the PLUS loans are the

most preferred and easily available, so you will find that this option has been covered up in detail in this article. Plus loans stands for Parent Loans for Undergraduate Students, and unlike most of the loans available for students, the parents can borrow much more under this loan program. Usually the amount that can be taken is good enough to cover up the entire cost of education. However, there is no provision for a grace period and repayment plan starts off immediately. Under this loan program the parents do not act as the cosigner, and the liability to pay back for these loans is entirely on the parents and not on the student.

If the parents default in such loans, the consequences would appear on their credit reports. While the parents have the option of paying back the loan within one year or over four years, it is advisable that they proceed with a four year loan so that the payments remain affordable and no problems arise.

There has been a slight amendment in the legislation and it is now possible even for the graduate students to pick up Plus loans in their own name. The rate of interest and the terms and conditions remain the same even for the students.

These loans are not need based, so can be picked up by any students parents and over the years they have emerged as the smartest way to manage the load of education. The total amount of loan that can be taken can encompass all types of education costs such as tuition fee, boarding and lodging charges, books and supplies, laboratory expenses and even travel expenses. These loans are federally insured and require no collateral to be furnished by the parents. A great benefit for the parents is that the interest paid on such loans gets them tax deductions. Also if the parents propose to pay back before the term there are no prepayment penalties applicable on these loans.

From the first of July, 2006 some changes have been made to the PLUS loan program and now these loans come on a fixed rate of interest. The currently prevailing rate of interest is around 8.5 percent; however price competition can get you somewhat lower rates and added incentives.

Federal Stafford loans: these are also federally guaranteed loans which can be used to cover up the total cost of education. These come with on a variable rate of interest and the interest that is charged during the grace period, the deferment period and the repayment period will all vary.

Both these Plus loans are available either directly from the department of education or through educational loan brokers, but it is advisable that you proceed directly because going through a broker will bring in a lot of added costs.

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