Another Thing About Parent (PLUS) Loans

Paying for College
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<p>Warning about these loans for all students, parents and anyone else that may see these in their financial aid packages.</p>

<p>These loans are NOT awards. They should NOT even be packaged with the awards, but a lot of schools do this. They are not guaranteed. They are simply a referral. Parents can APPLY for one and IF a parent passes the credit check, s/he can get the loan in any amount up to COA of the college selected minus other awards. </p>

<p>A major issue is that you may not know if the parent qualifys for that loan on May 1 which is the date that the student needs to make the commitment to a college. In fact, your application and promissory note has to be signed no earlier than a certain period of time (need to check that --maybe 90 days, I think) so that you can't apply in April and be good for that loan for the fall semester. So you had better be sure you don't have things on the credit record, such as foreclosures, bankruptcies, 90 late accounts, etc, or you won't be approved.</p>

<p>I know of two familes whose kids could not go to school as planned as the parents thought they were getting these loans and when they went through the process, were denied. </p>

<p>If a parent is denied, an additional $4500 is made available to the student in Stafford loans. Also, if a parent can get a cosigner that passes muster, that is an option, and also an appeal is possible depending on what the problem is on the credit report. Also one parent might "pass" whereas the other may not.</p>

<p>I just want to make it clear, that this is not an automatic "get" like the $5500 Stafford loans a student can get with the FAFSA. The approval is pretty much routine, though a questionnaire, info session and promissory notes have to be signed to get the money. The PLUS does NOT work that way. You have to apply and be approved. </p>

<p>Colleges should not be showing this as part of the aid package for that reason but should include it as an option along with private ledners, credit unions, HELOCs, Pension Plan loans, and other such possibilities. That is all it is; a possibility.</p>

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<p>This should be a sticky, cpt.</p>

<p>I think it is entirely plausible that as more & more parents get denied PLUS loans (which almost seemed an impossibility when I first applied for one in 2005) and more applicants have to bow out of attending as a result, colleges & universities might rethink this policy.</p>

<p>Or…maybe the financial aid sheet should be divided up between A) stuff we’re giving you (grants/scholarships), and B) stuff you have to apply for (loans).</p>

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<p>Thanks, cpt, good info.</p>

<p>Though I would like to believe that most families should know whether they would qualify for a loan or not. Credit rating reports and such are so easy to get now.</p>

<p>Which reminds me - just as an fyi those TV commercials for a so-called “free credit report” are not free. There is a sign-up fee.</p>

<p>Annual Credit Report is the only authorized free credit reporting site:</p>

<p>[The</a> Federal Trade Commission’s Information on Free Annual Credit Reports](<a href=“http://www.ftc.gov/bcp/edu/microsites/freereports/index.shtml]The”>http://www.ftc.gov/bcp/edu/microsites/freereports/index.shtml)</p>

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<p>Plus loans are often granted when other loans are not. Income is not considered so someone who may know full well that there is no way in the world s/he could get, say a $10K unsecured loan, could get one through PLUS if there are not big items on the credit report and not 90 overdue on any reported payments. Credit ratings are not takine into account, either for PLUS, just certain items in the report. You can get a PLUS with an abysmal credit rating, high debt to income ratio and low income. One can argue that this should not be, but for now it is. And colleges present it that way too. </p>

<p>Listing the PLUS as an option is fine, IMO, and so it should be reported because it is a possible option. Listing it as an award is downright misleading, given how confusing all of this is.</p>

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<p>I agree. I do not like PLUS listed as an award, but I do think it needs to be listed as an option … accompanied by a short explanation.</p>