College tuition is a common issue for American families. Factors that every family needs to consider is on how to pay it and how to budget for it.
According to USA Today College, a lot of families find themselves stuck in the middle. They are considered too rich to qualify for financial aid but they are also too tight in the budget to pay out of their own pockets.
The publication shared two options for parents who want to pay for their child's tuition. There are a lot of things to consider before going through with an option and it's best to consult with a financial adviser before making any decisions.
There's a federal student loan for parents
In its official website, the Federal Student Aid wrote the guidelines on how to apply for PLUS loans. These are loans that parents can use to help pay for their child's college tuition.
Parents must not have an adverse credit history in order to be eligible for the loan. Moreover, your child must also meet the eligibility requirements. One of the benefits of PLUS loans is having the choice to defer payments while your child is still studying. Another is flexible repayment plans as well as the discharge of loans when a parent or the child dies.
It does have a 6.31 percent fixed interest rate and a 4.28 percent loan fee. There is also a $2,500 annual tax deduction limit for student loans.
There's also your home equity
Kevin McKinley, a financial planner and principal/owner of McKinley Money LLC in Eau Claire, Wisc., said that it would be the best time to use your home equity now that home values are high and mortgage rates are low. According to Investopedia, home equity is the value of ownership on a home that represents today's market value of the house. This figure is still less any remaining mortgage payments. It means that as the owner pays off the mortgage, the market value of the property increases.
The pros of home equity are that it has low interest rates and that you get a tax deduction for the interest paid. It does increase the risk of foreclosure if the value of the home drops, though, or if you can't continue with the payments.
