What is a Parent's Role in Financing Education?

College costs are up along with the cost of living—how are today’s families able to afford college?  With the cost of college rising faster than the rate of inflation, paying for college has become increasingly difficult for many students. The “pull-yourself-up-by-the-bootstraps” philosophy of previous generations is more difficult for a young person today without a boost from family. College, once seen as the great equalizer because anyone could attend and increase their earning potential, is now being called the great divider. 

Many middle class families find themselves in a predicament when it comes to paying for college. The government assumes that many families earn too much to qualify for loans. However, many of those families are struggling to pay steep mortgages and keep up with the sharply rising cost of living. 

The assumption that college costs are unaffordable has become so widespread, that many families don’t even attempt  the student loan channels. “I just figured that we made too much and that he wouldn’t qualify for student loans,” says Karen Reece. When her son Dustin graduated last spring, they planned on community college. “We can’t afford University tuition right now,” she says “but I just figured there wasn’t any other way.”

Enter the PLUS loan (Parent Loans for Undergraduate Students). These are low interest loans, guaranteed by the Federal Government, and don’t require collateral to secure. Repayment can be deferred until your child has finished school and once that time comes, PLUS loans offer flexible payment plans. 

PLUS loans are credit based loans and can be used to fund your child’s entire education. Instead of taking out a home equity loan or trying to secure a bank loan, Karen can apply for a PLUS loan and enjoy a fixed interest rate of 8.5%. Once Dustin is out of college, she’ll have between 10 and 30 years to repay the loan. 

So many of us intended to save for our child’s education, but with the strain of a fast-rising cost of living, real life doesn’t always play out the way we intend. PLUS loans are a smart way for parents to help their children through college without leaving them with debts that can be astronomical in proportion to starting wages in a new career.