After students have exhausted their federal student loans parents oftentimes try to help to make up the difference. Parents who feel they do not have many choices look to credit cards as a quick fix since the cards are so readily available.
Credit Card Interest Risks
It is important for parents of college students to know the financial risks of using credit cards to pay for college costs. Additionally, parents should know their options before making the decision to charge thousands of dollars on credit cards.
Surely credit cards or cash advances from credit cards can be used to help pay for tuition and fees, books and other education costs. They can be a quick, easy solution to a problem that needs solving. However, parents must take into consideration the high price of using credit cards.
With credit cards the cardholder typically is faced with high interest rates. Most APRs can start anywhere from 14 percent and go upwards of 20 percent. When a cardholder takes out a cash advance the APR usually is higher, sometimes as much as 23 percent, in addition to a cash advance fee. Depending on how much parents charge, the monthly payments can be exorbitant. Remember, there are additional charges with some credit cards when a late payment is made or if the cardholder goes over the credit limit.
PLUS Loans Help Students, Parents
When taking out a PLUS Loan- Parent Loans for Undergraduate Students, parents can avoid high interest rates and can receive funds throughout the year to help their children pay for college, according to NextStudent.
Federal PLUS Loans are available to parents throughout the year with rates as low as 6.25 percent when coupled with benefits such as a rate reduction of 2 percent following the first 48 months of on-time payments and an additional rate reduction of .25 percent with repayment through Auto Debit.
Up to 100 percent of a child's college education costs can be borrowed, less any received financial aid, and the PLUS Loans also can reimburse parents who already paid for education expenses. If parents charged the expenses using credit cards, they can contact NextStudent to receive a PLUS Loan to get reimbursed and then pay off their credit cards.
Benefits of a Great Program
Preapproval for federal PLUS Loans is fast and easy and the loans are not based on financial need. The loans are disbursed quickly and can cover tuition and fees, housing, books and supplies.
Featured benefits and incentives that make PLUS Loans even more appealing include a 3 percent cash rebate on the remaining principal balance after the first 12 months of consecutive on-time payments. Parent borrowers have a choice of repayment options, including deferred repayment when a student is enrolled in school at least half time. In addition, there are no prepayment penalties.
NextStudent, federal lender code 834051, is dedicated to helping students and their families find affordable ways to pay for college. NextStudent offers one-on-one education finance counseling
and has a portfolio of highly competitive education finance products and
services including a free online scholarship search engine, federally guaranteed
parent and student loans, private student loans, both federal and private
student loan consolidation programs, and college savings plans.
The NextStudent Scholarship Search Engine, one of the nation's oldest and largest scholarship search engines, is updated daily, available free of charge, completely private - and represents 2.4 million scholarships worth $3.4 billion.
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