Parent Plus School Loan Consolidation - The Bills.com Blog
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Parent Plus School Loan Consolidation
Question: Just wondering if it is more beneficial to do a home equity loan to pay off student loans that we currently have through the Parent Plus Program?
Answer: The answer to your question will depend on several factors, including your current payments, current interest rates and balance on your Parent PLUS loans, the interest rate being offered on a home equity loan, and the amount of equity in your home. If you are able to obtain a lower interest rate and lower payments on a home equity loan than you are currently paying on your PLUS loans (which will be tax deductible as well, so the effective rate could be much lower), then paying off the PLUS loans with an equity loan may be a wise financial decision.
Currently, the annual interest rate being charged on PLUS loans is 8.5%, while the average interest rate being charged on home equity loans varies between 8.29% and 8.09%, depending on the amount of the loan, with larger loans charging lower interest rates.
I can also offer you the advice to consolidate (and dramatically lower your monthly payment) any existing Parent Plus student loans. If you want to compare rates and terms to consolidate your student loans, you can get matched with several pre-approved lenders, by applying here:
Parent Plus Student Loan Consolidation Quote
You can also check out firms that specialize in this type of consultation, including:
www.consolidateplus.com
www.freedomstudentloans.com
If you have good credit, you may be able to obtain a home equity loan that can save you money on your PLUS loans. However, since the average interest rates charged on these two types of loans are so close to each other, if your credit score is less than perfect, the interest rate charged on a home equity loan could actually be higher than the rate you
are currently paying on your PLUS loans. On the other hand, if you have excellent credit, the interest rate available on a home equity loan could be significantly less than the rate you are paying on the PLUS loans. You should shop around with several different lenders to discuss the interest rates and payment amounts they can offer you.
Visit the Bills.com Home Equity Resources page at http://www.bills.com/home-equity-loan/ to read more about the home equity loan options available to you. If you enter your contact information in the Bills.com Savings Center at the top of the page, we can have several pre-screened lenders contact you to discuss the loan options available to you. You can easily determine if the home equity loan you are considering will save you money by calculating the total amount the loan will cost you based on the interest rate and fees quoted by the lenders. You can use the amortization calculator at http://ray.met.fsu.edu/~bret/amortize.html to compare the total cost of a new home equity loan with the total cost of your current PLUS loan.
You should think carefully before you borrow money against your home to pay off your unsecured PLUS loans; you are converting what was previously unsecured debt into secured debt. This could cause you problems down the road if for some reason you are unable to make your payments, or if life circumstances force you to file bankruptcy. However, home equity loans
help many people in paying off more expensive debt, so this is an option to consider. If you decide to obtain a home equity loan to repay your PLUS loans, make sure that you are able to meet all payments due on the loan in a timely manner, as the new home equity loan will be secured on your home, and could lead to foreclosure if you are unable to make your payments.
Another option to consider in reducing your loan payments on your PLUS loans is a student loan consolidation. I invite you to visit the Bills.com Student Loan Resources page at http://www.bills.com/student-loans/ to learn more about student loans and student loan consolidation.
In addition, you should visit the Sallie Mae PLUS loan website to read more about other repayment options available on PLUS loans such as Income-Sensitive Repayment and Extended Repayment plans. For example, if you have had a reduction in your income, you may qualify for an income-sensitive repayment program, which could lower your payments based on your current monthly income. Since the repayment of PLUS loans is guaranteed by the federal government, the government places significant pressure on lenders to work hard to make repayment possible for borrowers who are struggling to make their payments.
I wish you the best of luck in finding the most cost-effective way to repay your Parent PLUS loans, and hope that the information I have provided you helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!
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