This article is reprinted by permission from NerdWallet. Malik Lee, a Georgia-based certified financial planner and managing principal of Felton & Peel Wealth Management, thinks back to being accepted to Morehouse College in 1999 and facing around $20,000 per year in college costs. While his friends’ parents took out loans to cover education costs, Lee’s grandmother — his legal guardian — declined.
Her response may seem harsh, but looking back with his perspective as a financial professional, Lee describes it as one of the best decisions she’s ever made. Many of those parents who took out loans for their kid’s education struggled to repay them, Lee says. In some cases, the children are covering the loan payments because the parents can no longer afford them. Lee imagines his grandmother, now 90 years old, still paying on a loan for his education when retirement should be her priority. Her saying “no” was an amazing decision, he says.Parent PLUS loans can be harder to repay Federal parent PLUS loans are available to parents of dependents attending college and are intended to fund education expenses not covered by other federal student aid. But these loans differ from federal loans taken out by student borrowers in ways that make them harder to repay:
Higher interest rates. The interest rate on parent PLUS loans is 8.05%, compared with 5.5% for federal student loans.
No grace period. Federal student loan borrowers have a six-month grace period before they begin repayment. Repayment for parent PLUS loans begins after the loan is fully paid out.
Fewer repayment options. Parent PLUS loans don’t qualify for the government’s more generou …
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