PLUS loan borrowers who run into trouble making payments also have fewer options than federal direct loan borrowers: PLUS borrowers can qualify for only one of the four income-driven repayment plans available to federal loan borrowers.
Make sure your child completes the FAFSA to get free aid first before turning to loans.
If your family needs to borrow, make sure your child maxes out subsidized and unsubsidized federal loans before borrowing money yourself.
Choose a fixed interest rate When borrowing a student loan for your child’s education, consider the type of interest rate a loan carries. PLUS loans have fixed interest rates, which will stay the same through the life of the loan, but many private loans do not. A variable interest rate may initially be lower than a fixed one, but it could fluctuate over time.
Stick with loans that have fixed interest rates so you can lock in lower rates before another increase.
If you have existing federal loans with a variable interest rate, which were last issued in 2006, you can consolidate them through a federal direct consolidation loan to lock in a fixed rate. If you have a private loan with a variable rate, you could refinance through a lender to get a fixed-rate loan. If you don’t opt to consolidate federal loans or refinance private ones, then make a plan to pay off your loans quickly.
Anna Helhoski is a staff writer at NerdWallet, a personal finance website.
The article Should Parents Pay for College? originally appeared on NerdWallet.
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