Good news for families who have students in college or have students near college entrance age.
You can now borrow up to $5,500 a year through the old Guaranteed Student Loan Program and a new Parents Loan Program.
Congress has paved the way for more, low-cost loan money to help finance a college education. The whole student loan program has been revised to help families cope with raging inflation in college costs (rising at the rate of 12 percent a year).
In the old Guaranteed Student Loan Program, a student could borrow up to $2,500 a year at the low annual interest rate of 7 percent. And there was no limit to the income or assets a family could have.
The student didn't have to start paying off the loan until nine or 10 months after leaving college. The government picked up the interest charges until the student started mailing payments.
Graduate students could borrow up to $5,000 a year under the same conditions. There was a maximum borrowing limit of $7,500 on under-graduate loans and $15,000 on graduate loans.
Under the new setup passed by Congress, graduate students can borrow up to $25,000 over five years and undergraduates can borrown up to $12,500 over the same period.
But starting Jan. 1 (when the new rules go into effect), the interest rate on the loans will be 9 percent instead of 7 percent for students taking out their first loans. Students who already have loans on the books can continue borrowing at the 7 percent rate.
Of course, either rate -- 7 or 9 percent -- is far lower than you could get for any other type of loan. A real bargain.
On top of raising the loan limits, Congress also created an entirely new type of loan aimed at parents.
After Jan 1, parents may borrow up to $3,000 a year at 9 percent to help pay for their sons' and daughters' education. The limit for up to five years will be $15,000.
This means that a family could borrow up to $5,500 a year for each student in college. This parental borrowing, however, is limited to undergraduate studies, not graduate work. Unlike the student loans, parents have to start paying interest 60 days after their loans go into effect. There's no interest subsidy.
For families with two and three students in school at the same time, this new borrowing power can be a financial lifesaver. Think of it: You can borrow up to $66,000 to put three children through four years of college.
Many of these loans should be available through banks and credit unions in your area.
If you have trouble finding a bank that has money available for student and parent loans, get in touch with your state higher education loan program office.
You can get the name and address from any college or university financial aid officer. As a matter of fact, you should get in touch with a financial aid officer early on in the college finance game.
These professionals know where the money can be found. Anyone with any kind of income -- including millionaires -- can get guaranteed student loans and parent loans. But if you have a fairly substantial income, don't be shy about applying for other types of student grants and scholarships. Some of this low-cost or no-cost money is available to families who have incomes as high as $30,000 a year.
Q. Can parents take out the cash value of their children's life insurance policies if the policies are owned by the children?
A. First, you have to make sure who owns the policy. If you insured your children and paid all the premiums, you own the policy unless you specifically gave it away.
If the child owns the policy because you bought it years ago as a gift, you may need written permission from the child to remove the cash value for your own use. It depends a lot on whether the child is a minor or "of age." Better consult a lawyer on this. Before you cash in an insurance policy and cancel it, you might want to consider the future insurability of the child. It might be wise to keep a certain amount of coverage so the child will be able to buy insurance later on even if his or her health is bad.