Help for parents with kids in college

For any parent looking for loan options to help them put their recent high school graduate through college, a federal direct PLUS loan is an option to consider, especially if the student is planning on attending a state school.

Amount and rate of PLUS loans

A federal direct PLUS loan allows the parent to borrow up to $20,000 in financial aid on behalf of the student, but unlike other federal loan programs, the interest rate on federal direct PLUS loans is a variable rate that is adjusted annually; however, there is no need to worry about the interest rate getting so high that it becomes impossible to pay back the loan because by law the rate is not allowed to get higher than 9%.

Immediate but flexible repayment

Just like any other federal loan programs, interest begins accruing on the day of the first loan disbursement and continues to accrue until the loan is paid back. There is no grace period. Parents must begin repaying the loan within the first 60 days of the initial disbursement and will be required to make monthly payment from that point on until the loan is paid back, which could be done within a time span that ranges from 10 to 30 years depending on the repayment schedule the parents choose. There is also no penalty for paying the loan back quicker if the parents are fortunate enough to have this option.

Federal direct PLUS loans are strict

Even though federal direct PLUS loans offer a more convenient way for a parent to fund their child's education, it is important that parents treat them as they would any other loan. It is the practice of the Department of Education (the loan agency) to report the status of unpaid loans to the three national credit bureaus, so it is important that the monthly loan payments are paid on time to avoid late fees or penalties or poor marks on their credit report.

Only death can erase the loan

When you take out any type of federal education loan you have to pay it back. Filing for bankruptcy won't get it erased. The only way out of it is the parents or the child who was receiving the benefits of the loan must die. Deciding not to finish school is not a valid reason either. Federal direct PLUS loans are a beneficial option for parents wanting to help their kids make a better life for themselves. They should be taken advantage of, but in a proper way, or credit problems can plague the parents for years to come.