Parent PLUS Loans

<p>What do people think of these loans?</p>

<p>We have an EFC of 000. I would be shocked if we qualified for any loan. We are just barely off of food stamps and have had a rough few years. </p>

<p>But I read on other sites that these loans are ridiculously easy to get. What's the thinking about accepting these loans or not? About qualifying for them? </p>

<p>Do I have to apply for this loan in order to show that I did not qualify so my daughter can qualify for more financial aid? I thought that was the point of the FAFSA. </p>

<p>Thanks for any insight.</p>

<p>I dont know how easily you can get them. I am curious myself. I do know you can get more loans for her if you dont. Call the financial aid office they could tell you the numbers on that.</p>

<p>Direct Loans or PLUS are federal government loans that qualified parents of students can get if they pass the credit requirements. It’s easy to apply on line if you already have completed the FAFSA. You will be asked for your social security number and a credit report check will be done. Your income does not come into play. The requirement is that you cannot have bills that are 60-90 days over due on your credit report. The loans are no great deals at 8% interest that starts accruing as soon as the funds are released. If you or the student should die, the loans are forgiven. </p>

<p>If one parent applies and is declined, a student can get about $4K (freshman year) more in unsubsidized Stafford loans at about a 7% interest rate.</p>

<p>Please keep in mind that these loans have a high interest rate and have to be paid back starting immediately. You cannot get out of them even if you declare bankruptcy. </p>

<p>If you are turned down your daughter would be eligible for an additional $4,000 in Stafford loans this year but I discourage that strongly.</p>

<p>*I thought that was the point of the FAFSA. *</p>

<p>Not really. The point of FAFSA is not to have all costs covered, even with a 0 EFC. </p>

<p>If you apply for a Plus and are denied, then your D qualifies for $4k more of loans. If your Plus loans were for a lot more than $4k, then your D won’t have her costs covered.</p>

<p>How much were the Plus loans.</p>

<p>Frankly as a 0 EFC family, taking out Plus loans is a dangerous risk. YOU are obligated to pay those back, NOT your child…even if you have an “agreement” with your child. Your child will not likely be earning enough anyway to pay back your Plus loans in addition to her full loans.</p>

<p>How much was your child given in loans? Stafford/direct? Perkins?</p>

<p>Do I apply – zero income? Or should Dad apply – low income? Or both? We were both on the FAFSA, of course. </p>

<p>We have had many late bills over the past few years and have one medical bill still outstanding. But other than that one bill, everything is current right now, knock wood. </p>

<p>I really don’t want a loan but want to know if my credit history is bad enough to be disqualified and then have daughter eligible for additional Stafford loans. (Which don’t sound like such a bargain but I guess 7% is better than 8%.)</p>

<p>Frankly as a 0 EFC family, taking out Plus loans is a dangerous risk.</p>

<p>It all sounds dangerous to me, mom2collegekids. I’m trying to understand how it all fits together to do the least dangerous thing. Daughter may end up at a more affordable school – she has been accepted – but I’m trying to get all the info straight so we can make a sensible decision.</p>

<p>As for which parent should apply…income won’t matter, it’s the credit history. Who has the “worst” history (late payments, etc).</p>

<p>Oh, OK. Everything is pretty jointly held, some bills in my name, some in his. The one bad medical bill was from an injury Dad received so his is probably worse than mine. But it’s not about income at all? How odd. </p>

<p>Thanks for the input everyone! :)</p>

<p>How much in loans are you planning to take out? </p>

<p>Taking out parent plus loans could be a sign of over borrowing. A lot of times families will make an agreement to have their kid pay back the loan, but the kid is in no way required to do so. </p>

<p>If you could give us a breakdown of the financial aid award that would help.</p>

<p>Interested to know whether you end up getting it. </p>

<p>The criteria for getting Plus loan approval does not factor in your income – it looks at your credit history. </p>

<p>Here’s a story I wrote that might be helpful: [No</a> Income? No Problem! How the Gov?t Is Saddling Parents with College Loans They Can?t Afford - ProPublica](<a href=“http://www.propublica.org/article/how-the-govt-is-saddling-parents-with-college-loans-they-cant-afford]No”>No Income? No Problem! How the Gov't Is Saddling Parents with College Loans They Can't Afford — ProPublica)</p>

<p>It doesn’t sound like the parents really intend on taking the Plus loan. It sounds like they want to go thru the process to get denied, so D can borrow the extra $4k.</p>

<p>If they get approved, then don’t have to take it. And, it really sounds like they shouldn’t.</p>

<p>The D can economize, buy used books online, work as much as she can over the summer, work during the school year, etc, to help bridge the gap. If that’s still not enough, then a cheaper school may be the only option.</p>

<p>Mariancw, the government is NOT saddling parents with loans. It is the parent’s choice to take out the loans and send their children to schools they cannot possibly afford. No one is putting a gun to their head to do that! It’s called personal responsibility and we have to stop giving people an excuse out of it.</p>

<p>The example in the article of the student and their parents is a case in point. Without any money they tried to send their kid to one of the most expensive schools in the country. Totally irresponsible and their fault.</p>

<p>Yes I’d like to see the gov’t get rid of the PLUS loan program totally. But just like in housing the people taking out the loans have responsibility.</p>

<p>From the article:</p>

<p>Falling into delinquency on the loans [damaged the parent’s] credit, making her ineligible to borrow more when it came time for the student’s sister to go to college.</p>

<p>So, this parent still wanted to borrow MORE so that a sibling could attend an unaffordable university??? Ridiculous!</p>

<p>Exactly Dodgersmom. How stupid and irresponsible can you be?</p>

<p>While I agree that the gov’t is saddling anyone with anything that the person didn’t ASK for, I do think that because emotions run high during the college selection time, qualifying for these loans should take income and debt-ratios into acct.</p>

<p>Many low income people aren’t very money-savvy, so they can get themselves into trouble - especially if they think their future “highly paid child” can easily pay off the loans.</p>

<p>Watch out, be careful, warning Will Robinson… </p>

<p>From experience, these PLUS loans at 7.9% can compound incredibly fast, exponentially really. I did a spreadsheet on the loans for our two D’s educations, projecting only 5 years out, and the numbers are downright scary.</p>

<p>We are looking at different strategies to pay off as much of these loans as soon as possible, while earning as much as possible in the investment markets without incurring excessive risk. Just staying above 7.9% return isn’t nearly enough, especially when sheltered IRA money is involved. </p>

<p>It’s a balancing act for sure, and in the government’s favor. Of course, losing a fair amount of our home’s value hasn’t helped either. In 2005 (the 1st year we took out PLUS loans) I wasn’t expecting to be using equity to pay off loans, but I wasn’t expecting a 30% haircut either, which has vastly reduced our options.</p>

<p>As Hyman Roth said in Godfather Part II, “This is the business we’ve CHOSEN!”. Because the state of the economy today is totally different than nine years ago when we were planning how to pay for two undergraduate educations, I would discourage the usage of these vehicles if I were doing it today, which would have no doubt changed the collegiate venues for both D’s.</p>

<p>jnm123 - Yes, the numbers are scary . . . but, in this case, the OP has no intention of actually accepting the PLUS loan. She just wants to apply and be rejected so that her student can get the additional student loans that are available to students whose parents do not qualify for PLUS.</p>

<p>Apparently, as noted above, applying for a PLUS loan does not commit you to accepting the loan, so any parent can apply, regardless of ability to pay. In the unlikely case the loan application is approved, the parent just needs to say “thanks, but no thanks.” End of story.</p>