A parent should not cosign for a student loan under any circumstances in my opinion, regardless of potential salary, HS record or SAT scores. If the parent cannot afford to pay for college for his/her children, the last thing needed are non-dischargeable student loans. Nobody knows for sure how well or what kind of job their kid is going to get out of college, and additionally. if something happens to the child, the parent is still on the hook for the loan. A parent looking to retire or to cut back can find all of his planning ruined by the Student Loan quagmire.
To each his own.
We have made tremendous financial sacrifices to send our sons to private universities. It was the right decision for our family, but I would never impose my values on someone else. I see it as a lifetime gift that we have given our sons, others will beg to differ.
Debt is not the right choice for every family for sure. Much depends on the size of the family and what your in-state options are. Also depends on the parentâs age, health, income, etc.
Too complicated an issue for blanket one size fits all pronouncements.
@rockvillemom Very well said.
I get that, but everybody needs to understand the consequences of Student Loans. (1) Much higher interest rates than other forms of loans . . . car loans, mortgages, etc. (2) If the student can not pay it, whether through unemployment or even death, the Cosigner is still liable for it. It survives the death of the Student. (3) Maybe most important, it can not be discharged in Bankruptcy (except in very extenuating cases), and SS etc., can be garnished to help pay the loans back. (4) If the loans full on the shoulders of parents instead of students, it can cause lots of distress within the family. At any rate, I think its a huge burden on the student if they know they have created a huge financial burden on the parents.
@guyfromflorida The following information can be found at
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation
"Death Discharge
If you, the borrower, die, then your federal student loans will be discharged. If you are a parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies.
The loan will be discharged if a family member or other representative provides a certified copy of the death certificate to the school (for a Federal Perkins Loan) or to the loan servicer (for a Direct Loan or FFEL Program loan)."
Iâve been reading horror stories about parent plus loans and several things are quite clear. First, those who need it, can get it and can afford to make the payments are relieved the option is available to them (even as they take on the debt for 10 years).
Second, those who either donât need it, canât get it or canât afford the payment rail against it as being one of the worse options offered.
I especially love those who rail against it because they donât need it or their children were blessed with a full ride. Very easy and convenient to make sweeping statements when youâre in that position.
There are a number of students who would not be able to attend college if the parent plus loan option was not available. Those who take the parent plus loan without considering how doing so multiple times over a four year period will cause the payment to double/triple/quadruple have themselves to blame.
For those who need itâŠ.plan accordingly.
For those who donâtâŠâŠleave it alone.
You are right., my mistake. It is Private co-signed loans that are not discharged on death of the student, and even if not co-signed, can be a claim against the Studentâs Estate, assuming there is one. But, beware this: âHowever, there is one important thing to note about Parent PLUS loans. If the loan was discharged due to the studentâs death, parents will receive a 1099-C form from the IRS. This form shows the amount of remaining debt that was cancelled and is treated as taxable income. Parents in this situation may be hit with a large tax bill.â At any rate, I am not ârailingâ against these loans. If people choose to go into debt to send their kids to college, its their choice. They just need to know what they are buying. I know that if people ask me my advice, I always recommend against them, or advise against expensive private schools. In this economy, borrowing large amounts of money for a college degree is not necessarily a good bet. To each their own of course.
The IRS considers cancelled debt as taxable income. However, there may be exclusions and exceptions that allow you to exclude all or part of canceled debt from income. Exclusions and exceptions include if debt forgiven is a gift, a student loan or a deductible expense, or exclusions such as bankruptcy, insolvency or cancellation of debt on a qualified principal residence. The information is detailed in Publication 4681.
We were just denied the Parent PLUS loan for the second straight yearâŠhonestly feeling very relieved about it.
@LBad96 How will you cover the COA without the loan?
@HappyFace2018 we found a way last year, weâll find a way again.
@LBad96 Amen.
What exactly disqualifies people from parent plus loans? I thought they were very lenient with no restrictions on how much you could borrow(up to COA) which could easily get out of hand.
@Classof2017
"Who is eligible to borrow a Federal Direct PLUS Loan on behalf of a dependent student?
To borrow a PLUS loan for a dependent student, the parent must be the studentâs biological or adoptive mother or father. Both parents may get a PLUS loan as long as the total aid package does not exceed the studentâs cost of attendance. A stepparent is also eligible to borrow a PLUS loan if his/her income and assets were listed on the FAFSA. A legal guardian or grandparent is not eligible to borrow a Federal Direct PLUS Loan.
The parent borrower will undergo a credit check with the U.S. Department of Education. Parents with adverse credit, a defaulted Federal student loan, or who owe an overpayment on a Federal Student Aid grant are not eligible. You are considered to have an adverse credit history if you have one or more debts with a total combined outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or charged off (written off) during the two years preceding the date of the credit report; or during the last five years preceding the date of the credit report, you have been subject to a default determination, discharged or debts in bankruptcy, foreclosure, repossession, tax lien, wage garnishment, or write-off of a federal student aid debt. For more information, please visit http://studentaid.gov."
One of the stranger aspects of the Parent Plus loan is the lack of info/notification on upcoming required pymts. Son graduated in May - my 6 month deferment ends in November. I have 2 loans - both approximately $24,000 - one is at 6.8% and one at 7.2%. I have been paying the interest. I have yet to receive any notification of when the first payment on each loan is due and the amount! I do not see anything on the website with this info - it just shows no required pymt due at this time.
Donât you think a letter with the first due date and the monthly amount would be appropriate. I estimate each will be about $250/month ballpark - but I wonder if the first pymt is due in November? December?
Son also has a federal student loan - just a $14,600 balance. I recall from older son that pymt on his Federal student loan actually did not start until February after May graduation. I figure this loan will be about $150/month - I have been paying voluntarily on this one - started at $15,500. But again - nothing rvcd on when the first required pymt will be due and the amount. Nothing on the website with this info.
I just keep paying what I can voluntarily and figure at some point I will receive notification of the official required pymt start date. But when they wonder why people have difficulty with student loan pymts, hereâs a clue.
@rockvillemom did your son complete exit counseling online? I did and the letter came explaining when the first payment was due, amount, how much had been paid in interest and everything. There is an online login you can ask for when if you call. Hope this helps.
Ok, I will have to check on that for his. Thanks. I did do exit counseling for the PP loans and rcvd a letter that showed the balances - but it did not have a starting pymt date or an exact amount as I recall.
Well, glad I looked. I do have a letter from February on one of the PP loans showing a pymt of $295 starting 1/2017. So - I would imagine they both start 1/2017 with similar amounts. I wish this info was on the servicing website. It should be the first thing you see when you log in.
PP loans give a sizable kick back back to the colleges so colleges love this loan as it is another form of very easy revenue.
In case anyone is interested, I did finally receive a letter that my PP loans start with first pymt due 1/3/17. $24,000 loan has a $295 pymt and the loan that is closer to $23,000 has a $275 pymt. Sharing this because even with my banking background, the reality of loan pymts always seemed very vague and far off in the distance.
Between the PP loans and each sonâs Federal student loan (which I am paying) I have almost $1000/month in student loan pymts. I will tell you very honestly that if I could go back in time 10 years or so, I would give the topic of how much to spend on college and how to pay for it far more thought. Thatâs $1000/month that should be going towards retirement savings.
Too late for me to change any of this now, just something to consider for those with kids in hs.
@rockvillemom Has this loan been âfully disbursedâ for both semesters? I thought payments didnât start until 60 days after the loan was fully disbursed for both semesters.