Parent PLUS Loans

Paying for College
1

When are interest capitalization amounts added to Parent PLUS loan balances? I thought they were added after the student graduates. Also, how many times is interest capitalization added to the balance? Student graduated in foru years in 2012 - interest capitalization was added in July 2011, October 2012 and October 2013 on one loan and September 2011,
October 2012, and twice in October 2013.

Is that correct?

2

Just to be clear - I took out loans for two academic years which were mu child’s freshman and sophomore years.

3

Interest starts accruing for unsubsidized Stafford loans and Plus loan, when they are dispersed.
There is also a loan fee, depending on when the loan originates.
http://www.direct.ed.gov/dlq-a.html

4

Interest runs on PLUS loans as soon as they are disbursed. When taking these loans, it’s best to begin making payments immediately. The payments can be deferred until later, but that is a bad idea because interest is accumulating from the beginning. If you can’t afford to make the loan payments, that’s probably a good indication that you can’t afford the loan.

5

Regarding capitalization, I believe all accrued interest capitalizes after the 6 month grace period from when the student graduates. After that grace period is over, the interest accrued should have been added to each individual loan principle.

6

“If you can’t afford to make the loan payments, that’s probably a good indication that you can’t afford the loan.” Tell that to the judge that ordered me to take them out. My question was when capitalized interest is posted to the loan.

7

My guess is a judge ordered you to make college payments. You needed to take a PLUS to do so.

Regardless…the terms of that loan should have been made available when you took out the loan.

Here is the Info you were given in your 2012 thread on the same topic.

http://talk.collegeconfidential.com/financial-aid-scholarships/1413697-parent-plus-loans.html#latest

And clearly…on other threads, you are posting as a student. Which are you…the student or the parent?

8

thumper - take a look at all my posts and your question will be answered - unfortunately, due to my disability and cognitive impairments, I can’t be as quick and thorough as you. Is guessing the same as assuming?

9

There is no grace period for PLUS loans – the first payment is due the semester following disbursement - so if the loans are taken in September, first payment is due the following February or March. Interest begins to accrue as of the date of disbursement, even before the first payment is due. Parents can ask to defer payment while the student remains in school, but interest will continue to run and definitely is added to the loan balance from the start.

See: http://www.direct.ed.gov/parent.html

10

@calmom you are right on the disbursement, but capitalization shouldn’t begin until the parent starts repayment. OP should contact their servicer to get more clarification.

11

https://studentaid.ed.gov/types/loans/plus

The deferment isn’t automatic for parents – it has to be requested.

12

OP double check and see if you requested a deferment on your original application. If so, capitalization shouldn’t happen until the grace period is over.

13

@leiqeltk‌

Your previous posts are confusing. In some, the poster appears to be the student, saying that the courts have ordered the student to take max student loans towards college (state of NJ). Why/how were students ordered to take out loans?

In some posts, like this one, it appears that the parent is posting. Was the parent ALSO ordered to take out loans? (If so, why? Why would a parent be ordered to take out loans for a child’s education when the very affluent exH has been allowed to pay nothing? That seems a bit crazy.)

At another point, a parent appears to have a rather highish EFC, despite a low income. If so, is it correct to assume that the parent has high assets (maybe the result of splitting assets after divorce from a very high income spouse?)

Who has been doing all the postings? A parent??? A student?? or both??

14

Also, over the past few years, you’ve made several threads that seem to ask the same/similar questions about loan interest. I’m not sure what hasn’t been answered…or what is even your question.

Plus loans are like many loans and they start accumulating interest as soon as they start. When they capitalize interest may depend on the loan, when it was taken out. You’ll need to contact the servicer of the loans.

But, really, what difference does it make. You have a few Plus loans for a few different kids/years. They’re all drawing interest while you make payments.

But I am curious…why would a low income single parent be ordered to take out these loans when the exH was not ordered to pay for college? It would be one thing if the divorce agreement said that both parents must pay, and you then had to borrow to pay your share. I’m also curious as to why an exH who earns $500k per year is “off the hook”, but the low income single mom is “on the hook”.

Were you left sizeable assets in lieu of the exH having to pay? Were you given a larger share of the marital assets so that your exH wouldn’t have to deal with college costs?