this answer may lie in the many posts about Parent Plus loans, but I havent found it yet. Is there a maximum amount of loan you can take for The Parent Plus loan? By year and By total. For instance, if I want to take out $10,000 each year…is that possible…or is there a max total? (total at end of 4 years would be $40,000…if taking $10,000 each year separately) If I wanted to take out $40,000 freshman year (which I dont, just asking as an example) is there a max per year?
The limit is the amount of COA that isn’t already covered by merit or FA.
So, if a school’s COA is $50k
And you received $30k in various aid, then you could borrow $20k for that year.
Are you the parent?
Yes I am the parent…just starting to figure out this whole process…probably too late as my child is a senior. So in your scenario, each year taking $20,000…the parents could take that out each year and wind up with $80,000 in parent plus loans? (Im not doing this…just asking…trying to figure out ways to pay out of pocket and finance some of this.)
here’s a scenario at one school for freshman year:
$40,000 COA (from a previous post I started, I am not adding in “other”)
$10,000 merit money
$5,500 student loan in childs name
so the parent could take out $24,500 in a parent plus loan EACH year???
I believe they would also have to qualify for the Plus loan every year.
Yes, but it is very easy to qualify. If you qualify, you qualify for the COA-grants/loans amount unlike a home mortgage when you qualify for a specific amount based on your ability to repay. Also remember that interest is not subsidized for the PLus loans, so at the end of 4 years you’ll owe the amount borrowed plus the interest (and there was an origination fee charged at the time of the loan). Some people try to pay the interest as they go along, but if you are also trying to pay some of the tuition out of current income, that becomes harder to do.
But they will do a credit check every year, correct?
^ It would seem so. http://www.studentloanborrowerassistance.org/new-rules-plus-loan-credit-checks/
from the link @“Erin’s Dad” shared…“Under the new rules effective March 29, in determining whether there is an adverse credit history, the Department will consider whether the applicant has one or more debts with a total outstanding balance greater than $2,085,”
ummm…$2085 in debt? is that correct…I would think if you have a mortgage and car payment, most woudl have an outstanding debt of $2085??
This is the definition from Department of Ed regarding the outstanding balance: “You have one or more debts with a total combined outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or charged off (written off) during the two years preceding the date of the credit report.”
https://studentaid.ed.gov/sa/sites/default/files/plus-adverse-credit.pdf
^^which is different than having debt, or just having any debt that is more than 90 days past due. The standard is even LOWER, as the debt that is 90 days past due has to be over that $2085, so an old electric bill that was missed won’t keep you from qualifying.
They may pull a credit check, but it is not used in the same way as it would for qualifying for a car loan or mortgage. The three factors to qualify for a Plus loan are 1) is there a debt (now a $2085 debt) that is more than 90 days past due; 2) has the applicant filed bankruptcy in the last 5 years; and 3) is the applicant in default on any federal loan obligations? Most people who can answer No to those questions will be approved for a Plus loan even if there is no income, loan to debt ratio is large, age of applicant, etc.
On CC people often talk about qualifying for bigger and bigger loans as the student continues in school. That may matter for a private loan (again, the loan to debt ratio may not be a big factor) but for a Plus loan it’s not a factor.
The future value of $20000 per year for 4 years at 5% (no payments made during college) is around $86k.