Risky parent loans
Contrar y to the advice you will get from many financial aid officers, parents should not borrow money to pay for their kids’ college educations.
Locking eyes with that first financial breakdown for your son or your daughter’s first semester will be painful — even if he or she is attending a public college. If you opt to pay for some or all of the cost of college, at the very least you’ll be paying several thousand dollars per year. It’s not cheap.
WAYS PARENTS BORROW
Sadly, there are a number of ways that parents can sink their own financial ships by taking on debt for their children’s education. The most common is taking out student loans — Parent PLUS Loans. The problem with that? The federal PLUS loan program allows parents to borrow far more than they can comfortably — or ever — repay!
Some parents take out private student loans, usually in their own names but often as a co-signer on a student loan. Either way, the parent is 100 percent responsible for the debt . Parent PLUS loans allow parents (and graduate students) to borrow up to the full cost of an education. Only a basic credit check — no underwriting — is used to determine whether the borrower has the income or ability to repay the loans.
If parents strip the equity in their home using a variable-rate home equity line of credit, or HELOC, to pay for their children’s college education, they run the risk of losing their home through foreclosure if anything goes wrong and makes them unable to keep up with payments.
Parents need to look for options that don’t involve going into debt for their children’s education — ways to graduate college debt-free.