My daughter is in her secnod year at UCSB and the college savings is running low. What is the best way to get college load. We will not qualify for any low income support programs.
Dan
Does your daughter have the Direct Loan already in a financial aid package?
How much of a loan do you need?
Are you instate for CA?
No Direct Loan. I assume we will need 15k per year. We are instate
She can take the direct loan (6500 this year/7500 next year). As you don’t qualify for any FA, you must be able to leverage a HELOC?
Yes, if she hasn’t taken the direct loan this year, you still have time. Bank it for next year, plus she can take loan for next, so she’d have about $14k. It would be easy for her to earn $1k more.
If that works for you, you’re only looking for $15k for the final year. You should compare private loans with the PLUS loan. Some like the lower interest rate of the Plus loan but it does have an origination fee. Some people can find good short term loans at their banks or credit unions, or at SoFi. A lot depends on if the loan is in the student’s name with the parents as co-signers or if the parents have a good credit rating.
And her fourth year, she will get a $7500 Direct Loan, leaving a $7500 balance.
But again, if you can take a HELOC it might be a lower rate than direct loans (>6.6% AFAIKS). You might be closer to 3%.
Do,you want the loans in the parent name or in the student name?
The Direct Loans are in the student name only.
HELOC belongs to the homeowner.
Maybe split the loan responsibility.
A HELOC could also have a lot of costs associated with it, like an appraisal. Sometimes for small amounts, the PLUS is easier and cheaper, or a private loan.
What are the rates and conditions for a plus loan?
There is an origination fee of 5% (which is steep) and the current rate is 8.5%.
I haven’t seen 3% rates on HELOCs for a long time. There is also often a minimum on HELOCs, and it puts a lien on the home.
People have different reasons for using different types of loans. For me, if I only needed $7,500 I’d probably use a credit card and then keep shifting the balance on to 0% cards for a year, and paying it as fast as I could. No origination fee, no appraisal fees, no lien on the primary residence. It would force me to work hard to pay off that $7500.