| August, 2006
College loans just got more expensive. Interest
rates on new government sponsored Stafford loans
jumped from 5.3% to 68%, and new PLUS loans for
parents went from 6.1% to 8.5% this month. Families
with college age kids need to shop the options
wisely.
Guaranteed Education Tuition
Many states now offer '529' plans, where you can buy
College Credits now at a guaranteed rate, and use
when your child is ready to attend college. College
credits are usable in most states, not just those
where you reside. Visit the
Saving for College
web site, select a state and click 'Go', you will
then see a list of 529 plans sorted by plan name.
Home Equity Credit Lines
Although
borrowing against your home is risky, in this
case, it can make sense. In fact, a recent check on
Bankrate,com found many banks were offering credit
lines at rates far lower than PLUS rates. Also, all
interest payments are tax deductible. (PLUS loan
deductions are capped at $2,500 a year, and the
deduction phases out for high-income families.
Roth IRAS
Withdrawals for education costs are allowed without
penalty. Do this only if you have been diligent
about your own retirement savings. Your child can
borrow the cost of college, with years to repay, but
you can't borrow money to pay your rent in your old
age. So be cautious with this option.
Government Grants
Don't assume you won't qualify. Many students
eligible for PELL grants (a form of non-repayable
financial aid) do not even apply. To see if your
child qualifies, visit
StudentAid.org. Financial Management for
the Future
If your child is a student, now is the best time to
help them learn how to manage their good credit. If
they learn early the responsibility of 'charge &
pay' they can enjoy good credit the rest of their
lives. Several companies offer
low-rate student credit cards and are perfect
for them to start with. |
