Hello,
Question about PP loans:
- Is it available for the full COA no matter what is the income of the parents as long as parent’s credit score is good and there are no dis-qualifiers like bankruptcy, loan defaults etc. ?
Thanks.
@golfdude71 --that’s a good question. Hopefully someone will answer you.
Just the thought of any parent doing that makes me want to faint though. Please don’t do that.
If you Google “Parent PLUS loans” you’ll be able to find the rules. It appears to be possible now, but that doesn’t mean it will be possible in the future. I wouldn’t plan on borrowing $100k for each kid because you think both of them will be going into well paying STEM majors. Plans can change. I wouldn’t plan on borrowing rules staying the same either.
In another thread you said you earn $50k/year but you’ve saved $200k for college and can cash out assets for more. Since your business is based in CA and you have the option of moving back there before your children graduate from high school in India, you’re likely going to be better off financially if you do that instead of trying to borrow the entire COA for 2 kids.
Are you searching for name brand schools? They aren’t necessary, especially for engineering. The $25k/year you have saved and the ~$5500/year federal student loan gives each child a yearly budget of ~$30k. That’s roughly what a SUNY would cost for a nonresident. If either of your kids qualify for merit aid, that opens up even more options.
You can run the net price calculators for an estimate, but if you own your own business and the $50k/year salary is after deductions the NPCs may not be accurate for you. Trying to borrow the entire COA of an expensive school is risky. What’s your backup plan if your first kid gets part way through and you can no longer borrow?
the answer is yes to your question
Yes. Plus loan is available up to the cost of attendance.
BUT remember this is a PARENT loan and the PARENT is really responsible for,repayment.
IMHO…using a Plus to fund a full college education is not a good idea.
AND…you are asking if this is possible even for a lower income person? Yes…it is…but why would they do that?
To illustrate the level of risk: A friend of one of my kids attended a fairly ranked national private university (USNR ranked ~44) where the COA was $60k+/year. He was a Aeronautical Engineering student and completed his degree in 4.5 years, with total student loan debt of $230K! My kid graduated from the same school with no student loan debt, due mainly to the full-tuition scholarship (tuition = ~$47K/yr) he received from the university. To be honest, I did not know a student could rack-up that level of debt for an undergraduate degree.
His first job out of college paid less than $50K for an engineering-related position that was technically outside of his major (could not get an AE position). His job wasn’t located anywhere close to his parents, so he had to get an apartment. Post graduation, he struggled the first three years to pay back the student loan and is now in a better paying position, albeit, outside of his AE degree and with a high student loan burden. This student had predicted he would be making >$70K per year as an AE and only received a single employment offer of less than $50K.
Folks,
Thanks for the helpful answers.
My back up plan is to cash out my assets which are around $200k.
I am assuming that a STEM degree from one of the top 100 Universities (or more likely 50th to 100th ranked Universities) will fetch my kid a job with a starting salary of around $70k. If the loan is around $100k per kid($200k for two kids), each kid can help me pay it off in 4-5 years.
I could also cash out my assets and not take ANY loan, but then my kids will not have any kind of responsibility to help me pay off anything. With a loan, they will really become responsible in saving, helping me pay off the loans etc.
Also even after cashing out my assets worth $200k which I have kept exclusively for education, I can comfortably retire in India with my retirement savings, income from my business etc. So sending my kids to study in USA and we parents living in India is much more financially safe for us than relocating to California and again taking on the burden of the high expenses in California like house, rents, etc.
So I thought taking a full COA loan is Ok, Because I have assets to pay it off in case some unexpected thing happens and my kids are not in a position to help me to pay it off. But what if they actually land good jobs after graduation ?? Then I don’t have to sell my assets worth $200k at all and will be my bonus for retirement :))
Thanks.
Just FYI…Plus Loan is a PARENT Loan…and your student is under NO obligation to repay a loan you, the parent, choose to take.
At most they would have a moral responsibility to help you pay off the loans. I would think they’d have that whether it’s a loan or helping you to replenish your savings.
This is not a safe assumption.
@golfdude71, what about the less expensive approach of having your kids attend a engineering school in India and pursue a graduate engineering degree (1 - 1.5 year) at one of the top engineering schools in the US? Any decent engineering program in India would do. That is what my Indian friends from grad school did and are now working for top engineering firms in the US.
The graduate engineering programs are, IMHO, easy to get into than undergrad and are probably over 80 - 90% foreign students (excluding computer science/computer engineering).
I don’t think a STEM degree guarantees a $70k/yr salary. I’m seeing $50k-70k/yr, but in very expensive COL areas. You can’t even predict what your kids will do even if they do get a STEM degree in 4 years. Will they want to teach, travel, join a commune? You need to base YOUR borrowing on what YOU can do and repay, not on whether they will get a job and repay the loans. Children are unpredictable.
Your kids will have an investment in their educations because they should take the student loans before you take the Plus loans. The direct loans will be about $30k if they do a 4-year program and take the max each year.
Why not cash out the assets and loan the kids the money yourself? They can pay YOU interest, then.
Thanks folks for the insightful tips. Lot of points to ponder over for me now.