Paying the Family’s Share

Here are the loan options:

For Home Equity Line, you can compare the current interest rates to other loans. You can get usually get 80% of the equity. This would be a collateralized loan, backed by the equity in your home, which is preferred to not. In most cases, you can borrow against your retirement account (the value of your retirement account.

You’ll have to check with your benefits administrator to see what the provisions are. You usually have a period to replace the borrowed funds before they are treated as income. If you are not yet 59 1⁄2, it would also carry a 10% penalty for early withdrawal if you let it go to income. It is not advisable to put your retirement at risk.

The government’s parent PLUS loan allows you to borrow up to the total cost of education. The payoff period is ten years. The interest rate usually is lower than other personal loans. You can find any number of loan payment calculators to determine the monthly cost. This amount must be added to any amount you will include on a monthly basis (see above) to determine the effect on the family’s budget. With the PLUS loan, you have the option of just paying interest during the school years.

Sallie Mae has a private Smart Loan that the student takes out, co-signed by the parent. It can be variable or fixed, and the interest rates are lower but dependent on credit ratings, the amount borrowed, etc. You won’t know exactly until you apply. Submitting an application does not commit you to take the loan. The downside is that this is a private loan and is not as flexible or forgiving as a government loan.

In summary, looking at every other option before taking on debt is advisable. The exception would be if borrowing were a part of a strategic plan of investing an equivalent or greater amount during the college years, allowing for payoff options upon graduation. Market conditions must be considered.