Ask Terry Questions College loans – alternative to ParentPlus?

College loans – alternative to ParentPlus?

By Terry Savage on January 29, 2020 | College Savings / Student Loans

Hi Terry –
We have triplets who are freshmen in college at three different universities. We were able to save enough to cover the first year of school for each of them in combination with their merit scholarships, and we plan to give them each $10K per year for the next three years to put toward their tuition. As we plan for the next three years, they are each taking advantage of the FAFSA loan and scholarships, but because my husband and I combined make what is considered ‘too much’ money our EFC is the balance of their tuition.

What is our best approach for covering this balance while they are still enrolled full-time in school? I have heard you say that the Parent Plus loan is not a good option – but I’m unsure if our kids would qualify for personal loans. Our plan was to utilize Parent Plus and then ask our kids to begin making payments once they graduate and are employed. Our retirement savings (401K, investments, Roth IRA) is in a good place so we did not want to use these funds to cover the difference. What are our options for borrowing enough to cover the balance of three college tuitions at the same time? We appreciate any advice you can provide!
~College Parents x3

Terry Says

OMG — I don’t know how to begin to advise you! Are you sure you filled out the FAFSA correctly? I can’t believe that with three — THREE –in college at once you didn’t qualify for additional aid from each school. I’m going to suggest you contact the network of accredited and experienced private college counselors. If anyone can figure a way out for you, they can.

ParentPlus loans not only carry the highest rate of interest (6.84%), but ALSO a 4% disbursement fee! That’s why I always suggest parents avoid them. Could you refi your mortgage at a rate below 4%? As of the current law, you wouldn’t be able to deduct the interest on the portion withdrawn for college since it is not used to purchase or “improve” your home. But the rate would be a lot cheaper.

I do hope you’ll get independent counseling. These experts know all the possibilities.

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