<p>Welcome, bassisity.</p>
<p>I understand the attraction of the PLUS loan to those who have little (or negative) home equity because it requires no collateral, but I wonder if a Home Equity Line of Credit (HELOC) might be a better way to go for those who are still well above water on their primary residence.</p>
<p>In both cases, the loan would be made to the parents rather than the student. The PLUS loan has a fixed rate (currently 8.5%) with a 10 year term and a 3% origination fee. HELOC’s mostly have variable rates that are in the 5.5% to 6% range these days and many have options to convert to a fixed rate that is only slightly higher than the current variable rate for a nominal fee ($100 to $250 is typical). Many HELOC’s do not have origination or maintenance fees and, if you shop around a bit, you can find banks that will pay any other closing costs like the appraisal fee just to get your business. With a little research, you could probably find a HELOC with no up front costs, then immediately convert it to a 10-year fixed rate loan at about a 6.5% interest rate for say $200. Compared to that, the PLUS does not look so great, particularly if you are borrowing in the $20K to $40K range (typical of a very good bass, but not the extreme high end.) Am I missing something here?</p>