Paying Your Child’s College Bill

A few months before your student starts college, you’ll receive a bill for the first semester (or quarter) expenses.  The college will deduct any financial aid or scholarships, and the bill will show the amount you – the parents – will need to pay before school starts.

If you have enough on hand to pay the full amount, simply write a check and send it in by the specified date. If you can’t pay the full amount, or need to break the bill down into smaller payments, you have several other choices. Here are two common options, along with their pros and cons.

Installment Payment Plan. Many colleges offer deferred payment plans that let parents spread payments over the course of the school year. A typical plan divides payments over nine or ten months.  Before signing up for an installment payment plan, read the fine print carefully. Most plans include a service fee, which is usually under $100. Some plans may also tack on interest, and there may be added fees for late payments or for paying by credit card. 

Parent PLUS Loan:  Parent PLUS loans are federal loans to help parents pay college costs. Parents may borrow up to the total cost of attendance, minus any other financial assistance received by the student. Repayment begins 60 days after the loan is disbursed, although some parents may qualify to defer payments until after the student leaves college (note—interest continues to accrue during deferment).

The current interest rate on PLUS loans dropped recently as a result of Covid. There’s also a loan origination fee that is a percentage of the amount borrowed. To apply for a PLUS loan, your family will need to complete the FAFSA financial aid application. Some colleges require additional paperwork.

Although the interest rates on PLUS loans are usually lower than a loan from a bank or credit union, the interest rate is higher than for federal student loans. In general, it’s smart to let your child accept the maximum amount of any federal student loans they’ve been offered before taking on PLUS loans for yourself. Used wisely, parent PLUS loans can help families finance their child’s college costs.