don't know loans, said I'd ask

Paying for College
1

<p>From a good friend of mine....please respond, I'll forward to him. Thanks in advance.</p>

<p>It looks like my child will be going to [good Tier 1 school] next year. They're offering us nothing in grant aid, several thousand in work-study and subsidized low-interest loans, and a humongous federal PLUS loan. I've looked up the PLUS loan interest rate, and it's like 8.5%--to which my response is **?! Is that really financial aid? I can get a home-equity line of credit for a rate of 4.67%. Why should I borrow from the government at 8.5% when my bank will give me the money for 4% less? What am I missing? *</p>

2

<p>They’re offering it because it’s a loan most parents can get. There’s no collateral involved so the rate is a bit higher, but it also is available to folks that don’t have home equity or high credit scores. Also, payments don’t have to start until after the student leaves school. </p>

<p>If you don’t want to take the PLUS, don’t do it! It’s completely your decision.</p>

3

<p>Most can’t get the 5% loan and I’m wondering if your friend’s equity loan info is pre crash.</p>

4

<p>IMO, FA award letters should be written in a way that says:</p>

<p>“We have calculated your *Family contribution to be to be $_________”. One option you can consider is a Plus loan. </p>

<p>*this number may or not be the EFC you get from the FAFSA. In MANY cases this will be the EFC + whatever ‘gap’ in aid there is from COA - scholarships and Federal/institutional grants that your child is eligible for from school Y</p>

5

<p>Thanks, compadres. Always good help, particularly in the FA section. I’ll pass this info along.</p>

6

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<p>Nothing. Just because a bank offers you a credit card with an interest rate of 18% doesn’t mean you have to use it. The PLUS loan is just one more option you have. Maybe you don’t have enough equity for the 4 years. Maybe you want to save the equity incase your next kid needs it and you don’t qualify for PLUS loans then.</p>