<p><a href=“http://talk.collegeconfidential.com/parents-forum/1402301-feds-crackdown-plus-loans.html[/url]”>http://talk.collegeconfidential.com/parents-forum/1402301-feds-crackdown-plus-loans.html</a></p>
<p>Pertinant to this subject, I thought.</p>
<p>After reading through this thread, I came to a conclusion that a quick fix should be that PP loan monthly payments are due as soon as the loan is disbursed. This fix will help both the families to avoid getting themselves too deep and the government/taxpayers to avoid approving non-solvent applicants.</p>
<p>Lerkin, that is an option availabe to those taking at a PP loan and one we took. I believe our first payments were due the month after funds were dispersed. I think that’s a good idea as those payments become part of the consideration for whether another loan should be made the following year. It would stop the borrowing quickly when repayments and meeting other expenses start going south.</p>
<p>cpt,</p>
<p>the problem is that it is an option, not a requirement. There is a reason why you are not in over your head with your PP loans - you have common sense, which manifested itself in you starting to make payments immediately. </p>
<p>For the most part people who are in trouble with student loans lack that common sense. So if we insist to have lax standards in approving the loans (i.e. no income verification), then we should at least protect the applicants and taxpayers/government by making it a requirement that PP payments start immediately. This requirement will at be a reality check for many parents. Even if those, who cannot afford those loans, proceed in acquiring them, they will realize their mistake much soon rather then later.</p>
<p>Alternatively, we can use M2ck suggestion that the government actually do their due diligence when they approve people for those loans. But I can only imagine the political backlash against that (in my universe sensible) idea.</p>
<p>I agree with you, Lerkin. By eliminating these loans or putting income requirements on them, you might as well say that they are for the well to do only. The terms of the loans can make them doable for low income families, especially if the student does also help pay them. We have a cousin who has just the one son and due to a number of issues including low income, have not saved much for college but are wiling to scrimp and what they can now. They are on time with their payments and with the kid gone for most of the year, they can be particularly frugal and are looking for a less expensive place to live. The PLUS allows them to stretch out 4 years of payments into 10 or more, which makes it doable for them. I think all of us here agree and they do as well, that would have been a lot better and probably better had they saved up front and done the stinting then, but … that’s a done deal.</p>
<p>I graduated only a single semester late. I attended a non-profit <em>public</em> school that had some of THE cheapest tuition/fees in the entire state. I lived on-campus (also one of the cheaper dorms in the state), always got the least expensive meal plan, and even used a senior-class meal plan exemption during the last three semesters and saved further. I worked very hard throughout my college career and won a few scholarships. My Estimated Family Contribution was ZERO. I lived more modestly than most college students throughout my time at college.</p>
<p>For me to graduate, I had to borrow ~25k in stafford loans and my parents had to borrow ~9k in PLUS loans, totaling 34k in student loan debt.</p>
<p>The whole system is definitely corrupt and broken from top to bottom, including this tiny PLUS loan part of it. But low-income people attending (without aid) NYU and other expensive schools are definitely a small minority of the problem, not the main problem as some of you “every man, woman, and child for him/herself” people make it out to be. College is expensive EVERYWHERE - don’t try to blame the unprivileged.</p>
<p>I’ve thought about starting another thread about PLUS loans as the title of this one is biased from the onset. </p>
<p>I know very well the pitfalls of overborrowing for college, and everything that is said about these loans has happened to families. They have caused a lot of hardship. I do not believe that they are the cause of those financial problems. The way the loans are structured, they allow those with a low income but responsible for their bills to borrow for their children’s education regardless of income level. The loans have a high enough interest rate (particularly in this low interest climate) that they are not bargains to be snapped up, and this allows for them to help pay for those who do fall behind, default or are forgiven the balances. One does pay for the convenience of this loan. </p>
<p>My feeling is that they do serve an important purpose. Yes, I do advocate community college and local state schools for those who don’t have the money, and those options should always be fully explored by anyone who wants to be financially responsible. However, those options are often not good. Where I live now, the residents have an embarassment of riches in terms of availibility of low cost programs within a commuting distance, but that is not always the case. I lived in the midwest for a number of years in an area where the community college was not worth beans, nor was the satellite branch of the flagship that was quite a distance away and required a car to get ther. I had friends who were enraged, in tears, frustrated and just held up by the system there. And if you somehow managed to get enough credits to transfer, you then had to come up with the funds for room and board at a four year school. To call that system second rate was a huge compliment. It was a disaster. </p>
<p>So, yes, PLUS would allow a family who has a good student that doesn’t have the test scores to get into the schools that would meet need or get a lot of merit money to stretch out. It could also not work out. I agree that low income people attending schools like NYU is a very tiny part of the picture. I can come up with many scenarios where PLUS makes it possible.</p>
<p>It still isn’t fair. Those who are in high income/asset families have a tremendous advantage over those who need PLUS. Even if such families use PLUS, it’s a heck of a lot easier to pay pack the money when you make a high salary than it does when you don’t make much, something I have to remind myself as I write the checks. But this gives such families some options that would otherwise be closed .</p>
<p>The risk of non payment on PLUS is small because the big grabbing hand of the governement can and will swoop down and take payments from non payers unlike non federal lenders who have to eat their loan papers when people don’t pay. To say we want to eliminate this program to save those with low income from themsleves doesn’t sit well with me.</p>
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<p>On this we disagree. :)</p>
<p>@GoalsOriented
I agree that PLUS loans should be available. But I also agree that they are dangerous and that people should be careful when getting these. You seem to imply that those who advocate limiting the PLUS loan are “every man, woman, and child for him/herself”.</p>
<p>Now, what about the Subprime Mortgage Loans, another dangerous financial product that could be helpful for some consumers. Who in this case are the “every man, woman, and child for him/herself”? Those who are in favor of it or those who want to limit it?</p>
<p>It’s not necessarily ‘every man, woman & child for himself’, but I definitely am for borrowers taking ownership of their financial responsibility, fiscally & morally, and dang it, know what they are getting into! Just because you CAN borrow up to the cost of admission does not mean you SHOULD. And this is where the correlation is to the mortgage mess lies, although that’s not what’s being discussed here.</p>
<p>Although they appear to be tightening up the PLUS application/approvals somewhat, it would probably be a good idea for borrowers to have to take a mandatory online course, maybe as long as what you have to go through for a traffic ticket. You must understand what this entails, rather than just plugging some numbers into a FAFSA form. But I suspect the government wants as many of these 6.9% loans out there as humanly possible–that’s a pretty sweet return for them.</p>
<p>PLUS loans are a vehicle for money now to pay back later. Too many forget that, and also don’t understand or don’t WANT to understand how compound interest works. Borrower beware.</p>
<p>Like subprime mortgages and other offerings that simply did not work out, these may well go away in time when more people get into trouble over these so that they are not worth having. </p>
<p>And, yes, the government will go after you social security checks, your income tax refunds and other such things for payback.</p>
<p>cpt:</p>
<p>just because the government can does not mean that the government will. </p>
<p>I’ll just leave it at that since anything on cc having to do with government policy (aka politics) is against the TOS.</p>
<p>Whether it will in the future I have no idea. It has been so doing from some recent articles that have shown up on this board. </p>
<p>I don’t know what the figures are for the Direct Loans are at all. I don’t know if they are in crisis. Many of the articles I’ve read refer to the private loans. My friend who is in a lot of trouble with these student loans took them as a cosigner with her daughter. She would not have qualified for PLUS as she was benind in payments to creditors. SOme of these private lenders will still give out the money, but make the terms harsher and the interest rate higher for those with poor credit. The PLUS loans have a lot of flexibility and a family in true financial crisis, can have the payments delayed.</p>
<p>There you go, cpt. Private lenders seem to have a bit of loan shark in them it seems. The thing that baffles me is…why, after being denied a PLUS loan because of bad credit, would a person even consider a loan with even worse terms?! Of course, we want to do the best for our children, but not at the risk of the whole house of cards caving in on you.</p>
<p>Some don’t even try the PLUS. THey like the idea that the kid is primary and that they are JUST cosigning. </p>
<p>There is no question that folly is the core of most unpaid debt that has gone into overdrive. Oh,yes, there are the stories of those who are truly blamesless, but for the vast majority of us who get into trouble this way, we are the primary cause. </p>
<p>I like Lerkin’s idea of making the payments start immediately as the impact of the loan becomes immediate. The 'later" element is more than a lot of folks can handle. Paying the piper is a most relevant expression.</p>
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<p>With all due respect, these two sentences are in direct conflict. </p>
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<p>Yeah, sure, but many of the private loans have disappeared, as the DoE assume lender of first resort.</p>
<p>Any loan institution that gives out loans without doing any kind of income verification is operating in a reckless manner. That is exactly the behavior that was partly responsible for the crash in the housing market a couple of years ago. Lenders seemed to be making the assumption that home values can only go UP so there was no need to verify someone’s income. We all know how badly that ended and the housing market is still recovering from that.</p>
<p>Bluebayou, I don’t know the statisitics regarding the PLUS and how many are underwater. I have read anecdotally of families whose federal checks such as tax returns and social security were taken by the government for repayment of loans that went into default status. So what I am saying is that though I do not know the specific numbers or even the magnitude of the problems with the PLUS program, I do know that there are cases where the long arm of government has reached in and gotten some funds due to them as they can do. THis was in response to your statement that the government can but hasn’t been doing so. They can and have. How often this is happeining and how close we are to a crisis in this regard, I don’t know.</p>
<p>When we read the articles about people in terrible trouble from these college loans, there is usually not an identification of the loans themselves. So, whehter the bulk of the problem is with the PLUS or with the private lenders, I don’t know. There are always problems with people not being able to repay loans. That is nothing new. The quesiton is how severe this problem with PLUS. Also how much of the problem was anticipated and built into the rates and recovery tactics and action.</p>
<p>FYI Parent Plus rate is 7.9% and I had to pay 4% up front. I haven’t received any document yet allowing me to start making payments now, but I’ll look for it because I like that idea. This is a loan I expect my S to pay back, but in reality, if he can’t or doesn’t I am equipped to do so.</p>
<p>I agree with jnm123.</p>
<p>If you are in favor of limiting access to some loans (because they are indeed dangerous) then you are labeled ‘every man, woman & child for himself’.</p>
<p>If you are in favor of allowing loans and letting people decide what is better for them (because you believe in personal responsibility) then you are labeled ‘in favor of predatory practices’.</p>
<p>Personaly, I am in favor of personal responsibility. And I do not appreciate when people claim for credit, but then when they have trouble paying the money back they blame everything on predatory practices.</p>