Thoughts re: Parent Plus v.s HELOC

Paying for College
1

<p>With the interest rate on a Parent Plus loan @ 7.9%, I was wondering what people thought about using a HELOC - at a much lower intereste rate instead.</p>

<p>Any thought pros & cons would be appreciated.</p>

2

<p>Try reading through these posts</p>

<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1070718-using-home-equity-line-credit-fund-college.html?highlight=heloc[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1070718-using-home-equity-line-credit-fund-college.html?highlight=heloc&lt;/a&gt;&lt;/p&gt;

3

<p>The big risk to HELOC now is that the interest rates may go back up and you would see that higher payment. Of course, it may take a long time to raise above 8%</p>

4

<p>The other issue to consider is that a standard PLUS loan is amortized to be paid off in 10 years, whereas minimum payments on a HELOC are often less but will not pay down the loan nearly as quickly. Of course you have the option of making higher payments on your own – but if you don’t, you could end up paying a lot more in interest costs over the life of the loan. </p>

<p>I took PLUS loans but always planned to pay them off early as soon as my d. graduated, and I am on track to do that, within a year or so after her graduation. </p>

<p>Also keep in mind other expenses – will you be charged points for the HELOC? Will you have to pay for an appraisal or other loan generation costs? Is there a prepayment penalty?</p>

5

<p>If you have a very good to excellent credit score, you may also want to consider taking out a private loan - we got a rate of 5.75% for 2009-2010 and 4.74% for the current school year. I’ve heard that banks are tightening down a LOT in terms of the availability of HELOCs.
Here are some threads on private loans vs PLUS loans:</p>

<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/972592-what-am-i-not-getting.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/972592-what-am-i-not-getting.html&lt;/a&gt; See my post #9 in this thread for links to earlier threads on the subject from summer of 2009.</p>

<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/974958-private-loans-w-parent-cosigner-vs-plus-loans-pays-shop-around.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/974958-private-loans-w-parent-cosigner-vs-plus-loans-pays-shop-around.html&lt;/a&gt;&lt;/p&gt;

<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1051880-discover-rate-through-roof.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1051880-discover-rate-through-roof.html&lt;/a&gt;&lt;/p&gt;