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Will you control the loans you and/or your student take out for college? Or will the loans control you?
There are only three primary ways to pay for college - (1) Cash (from monthly cash flow), (2) Liquidate assets (savings and/or investments that would otherwise go toward providing a secure and comfortable future retirement) or (3) Borrow.
Once parents consider that they can borrow for college but not for retirement, the question often becomes, "What is our best choice for borrowing?" Here again, there are limited options, with some choices being far better than others.
College Loan options are limited to (a) Student Loans, (b) Parent Loans (PLUS Program), (c) 401-k Loans, (d) Life Insurance Policy Loans, (e) Private (Alternative) Loans and (f) Home Equity Loans. For a quick Pros and Cons list for each, click here. For a FREE analysis of what you will pay in total charges (principal PLUS interest) on your college loans - i.e. what college will really cost you - please click here.
"Control" is an important consideration as you decide the best way for your family to finance college education(s). If you finance with a Fixed-Rate loan, you'll have control over what you'll pay because nothing can change (rate and monthly payment). If you choose a variable-rate loan, you really have no idea what you'll pay back on the loan, over and above the principal and therefore, you'll have no idea how much college will cost you - the cost will be out of your control.
Among the available loan options, only two are truly fixed-rate and both use the best funding source for college: (1) A second mortgage and (2) A cash-out refinance. If you use a Home Equity Line of Credit (Heloc), you have a variable-rate loan with an uncertain payoff date and uncertain payoff amount. PLUS rates - currently 7.9% plus 4 Points - are set annually by The Congress. Stafford Loan rates - currently 6.8% plus 4 points - are likewise changeable at the whim of Congress. 401-k Loan rates are set by your Plan provider and can change at any time; the rules on 401-k payback are subject to the whims of Congress. And Private/Alternative student/parent loans are ALL variable-rate with NO caps on how high the rate can go. If you choose any of these variable-rate options, you do not know how much college will cost you or when you will have the loans repaid.
edCelerator™ client families know EXACTLY how much college will cost them and exactly when college will be paid off. Contact us for details.