K-12 Student Loans Gaining Popularity
CORNELIUS, N.C. - Before her kids were even born, Sonya Ashburn knew they'd go to private school. "The nice thing about my daughter's school is that they do offer financial aid and they offer a monthly payment plan," she says.
Ashburn, who prefers private school's smaller classes and individualized attention, has been putting aside money for years. She hasn't needed to borrow, but says she would if she had to. "I would go and get a loan and do my best to make sure [my daughter will] get that quality education that I received when I went to a Christian private school," she says.
A recent article in SmartMoney.com reports that loans for kindergarten through 12th grade are becoming more popular. One lender says they were up 10% in March compared to one year ago.
Education isn't necessarily a bad investment, but, "It could be the next big problem," says Sandra Cummings. She is a bankruptcy attorney in Charlotte. Student loans typically cannot be discharged, and Cummings has a word of warning. "If you're someone who is borrowing money for a minor child to get a K-12 education...you should take time to think about the fact that in 10 years from now, you may be disabled, the economy could have tanked," she says.
Or, she points out, you may have to dip into retirement funds to pay down your child's primary education. Interest rates on the K thru 12 loans range between 4 and 20%, according to SmartMoney. Cummings suggests parents look at alternatives like home schooling or taking an active role in the public school system before signing up for a loan.
Cummings says, "You need to sit down and go through the options and see what you can reasonably afford on the income you have. Unfortunately, we're all limited by the income we have."
Ashburn is comfortable with her family's finances for now. But when it comes to college, she figures loans will be part of the plan. "If you're passionate about your child's education, then you'll no know bounds on getting them what they need," she says.
Bank of America does not offer student loans of any type. Wells Fargo does, but not for K through 12.
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