Best Student Loan

By: EconomyWatch Content   Date: 3 December 2009

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If a student has a poor credit history, the parent may undertake a loan for funding the child’s education. The federal PLUS Loan is offered to parents on the basis of their credit history. However, parents with poor credit histories may succeed in obtaining the best student loan terms under a PLUS Loan program. This is done by introducing a financially sound co-signer.

Best Student Loan Alternatives for Parents

Parents failing to qualify for PLUS Loans may consider:

·        IRA (Individual Retirement Account) withdrawal: Parents with considerable savings in the retirement account can borrow against an IRA. Typically, IRA withdrawals before attaining 60 years accompany a penalty of 10 percent. Also, these withdrawals are subject to federal and state government taxes. However, IRA withdrawal for funding higher education is not subject to the penalty, though it may be taxed.

·        Home equity loan: Using the equity built on a home loan to finance higher education is an excellent strategy to fund a child’s higher education and obtain lower interest rates on the existing home loan. However, one must consider the risk associated with furnishing a home as collateral.

Best Student Loan Alternatives for Students

A student may utilize the following strategies for funding college education in the absence of scholarships and student loans:

Tuition reimbursement from an employer: A student may search for companies that pay for college; either as an upfront grant or in the form of reimbursement of costs each semester. Typically, a student must sign an agreement with the employer, promising to work with the company for a predetermined period.

Though it seems a beneficial agreement, one must bear in mind that a breaking such an agreement may result in grave legal repercussions. Hence, a student is obliged to work with the company for a fixed period, and forgo any lucrative offer than comes along during this period.

Attend college part-time: This helps to seek full-time employment. It eliminates the need to rely on external funding altogether. It takes longer to obtain a degree under part-time education programs. The clinch is that they minimize risks such as wage garnishment and bankruptcy which are associated with loan default. 

An added advantage is that students may consider working while attending a full-time college to fund their education expenses. To do this smartly, students must chart out their schedule to ensure optimum time management otherwise it may adversely impact the grades.


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