What Parents Need to Know Before Borrowing Money to Pay for College

"With college costs burgeoning, parents often consider taking on debt to help their children cover tuition. It could be a smart move. But it could also have a devastating financial impact, so parents should understand the pros and cons of each option."
Thanks to Cheryl Winokur Munk, writing in The Wall Street Journal, 11/1/19.

Federal Direct Plus loans

• "Graduate and professional students can use these loans, as well; when parents do, the loans are commonly known as Parent Plus loans."
• offer some protections that private loans don’t.
• can be consolidated into a federal Direct Consolidation loan to access an income-based repayment plan.
• eligible for economic-hardship deferments; disability or death discharge; graduated or extended repayment plans; and Public Service Loan Forgiveness.
• charge higher interest rates and fees than other federal student loans.
• "There is no annual percentage rate provided on these loans. But free online calculators such as the Experian APR Calculator can help families calculate the APR and better compare the costs with loans from private lenders."

Private Parent loans

• every lender has different rates, perks and requirements, and some have application, origination or disbursement fees.
• private loans don’t have the same types of consumer protections of federal Plus loans.  

Home-equity line of credit or home-equity loan

• Credit Line: floating interest rate, and 10 to 20 years to repay. 
• Home-equity loan is a one-time lump-sum with a fixed interest rate. 
• limited repayment options compared with other types of college loans, 
• loans must be repaid if the home is sold. 
• Any unspent proceeds are counted as an asset on the Free Application for Federal Student Aid (Fafsa)

It is more important for parents to invest for retirement than to help their children pay for a college that may be beyond their ability to afford. Children can find less expensive ways to attend college.