Plus loans vs home equity/mortgage loans

calmom
Sun, 25 Apr 2010 03:45:06 +0000

Yes, of course. You simply tell them how much of a PLUS loan you want, and sign up for the payment plan. So lets say that you have to pay $15K – you opt to take a $5K PLUS loan and you sign up for the 10 month plan at $1000 per month. About February or march your PLUS loan payments kick in, but for a $5K loan you are looking at payments of roughly $60 - so no big deal.

Now, the following year because of the PLUS loan payments you might decide that you need a slightly larger loan, lower monthly payment. So, hypothetically, in year 2 you borrow $6K in PLUS loans, pay $900 a month to tuition (+ the $60 PLUS payment until March, when the 2nd year payments of, say, $70 kick in and you have a $130/month payment).

So lets just say, hypothetically, each year you borrow $1K more than the previous year. After 4 years you would have paid out in cash $10K + $9K + $8K + $7K ($34k total) – and you would have taken PLUS loans of $5K + $6K + $7K + $8K ($26K total). Your kid graduates, you’ve got a PLUS loan payment of ~$320/month. As opposed to borrowing $15K for all 4 years, $60K total, with a monthly payment in the end of ~$730.