Read this before you take out a Parent PLUS loan

@gobith what are your son’s other college options? You are playing financial Russian Roulette.

Somehow you must be convinced that this school will provide your son with an education that is worth all the additional costs - however you do not have the cash in hand.

Hope you rethink and do something more financially responsible.

@gobith – I have to add - “. While there are no guarantees in business, I have more than 90% confidence in this outcome” – is troubling. The problem is that it’s a 10% risk of disaster. (And your confidence may be overly optimistic – google the phrase “optimism bias” to see what I mean – it’s not personal to your situation – rather, it is human nature to overestimate chances of success).

If you had an existing asset – such as my example of a rental house that you own – then you would have something secure to fall back on. I did take PLUS loans for my kids - though my upper limit for both kids together was $40K – but I made sure to look at my assets (home owned, money in retirement fund) as well as my current budget to keep the loan down to an amount that I knew I could manage. I actually paid off the loans entirely within 3 years of my younger child’s graduation-- I had been paying as much as I could muster of current costs out of pocket, so one I no longer had that expense, it was easy to pay off the balance.

I know that it is hard to disappoint your kid. But the financial aid your son has been offered is negligible – and it doesn’t sound like you are in a position to fund it. What are your son’s other current options?

Calmom and SOSConcern,
I really thank you for your candid and helpful input. I have a lot of thinking to do. My wife and are still very strongly inclined to move forward with the loan options offered to us by AU. I will start to examine other sources besides PLUS. I will also talk to the AU Financial counselor. We have put our kids through private school from Kindergarten. It has served them well and made us strong believers in the private school system.

@Gobith, I would also encourage you to seriously consider your son’s other options. Is there something specific to American that no other school can offer your son, that makes that expensive price tag worth the risk and sacrifice?

We, too, put our older son through private schools from K through high school, but we paid as we went solely out of our income until high school, when we he received very generous financial aid. It was still a big bill, but the discipline of having paid it gave us a pretty good idea of what we could do when he got to college. In the end, he took the generous merit money offered through an out-of-state public university, so we’re actually paying a little less now than we were his senior year of high school even with living and travel expenses. Once you factor those in, the total cost can get out of hand. In our son’s case, he wanted to study engineering or math, so he had a lot of options. Regardless, you have to ask yourself honestly how much of a premium are you willing to pay to help your son get an undergraduate degree?

Think about your future retirement and the needs of the rest of your family members, especially if something unexpected (an unanticipated illness, etc.) were to occur.

LuciTheLakie,
Thank you for your input. Yes, my family and I have a lot to think about. My son’s interest is in the School of International Studies at AU. He is a very good STEM student. But, is also strong in literature. Our research is showing that DC is the place to be for his chosen career path: Government and/or Foreign Service.

Best Regards,

I thought that might be the case, @Gobith. There was a lengthy thread about a year ago that may be of interest to you started by a parent with a child interested in a career in foreign service:

http://talk.collegeconfidential.com/college-search-selection/1641350-high-efc-suck-up-and-pay-or-take-merit-money-p1.html

It might even be worth starting your own thread and getting some additional feedback. There are a lot of smart and experienced parents on here. Best of luck to you!

LucieTheLake, Thank you! There is some gold in that link…

Not much pay or opportunity in those fields without a master’s degree. Typical path will be an internship or low paying entry level position after undergrad, then to grad school for a master’s. The master’s programs tend not to offer much in the way of financial aid.

Foreign service has its own path & requirements. If there is a strong desire for foreign service, then I think the best thing a student could do would be to attend a school with a very strong language program in a strategic language. Some of the strongest programs happen to be at public universities.

But bottom line: your kid is going to need money for grad school with his career goals.

My son attended a west coast regional public university. He also spent a semester in D.C. as a congressional intern his senior year. His school paid the costs for that semester, including travel & housing, tuition, and a generous monthly stipend. I don’t think he would have been offered a similar opportunity at a private college.

There are opportunities to be found at many colleges. There is also a huge opportunity cost when you saddle yourself with debt. In your line of work you should be acutely aware of that.

I hope you also accept and realize that the PLUS loan is your debt – not your son’s. Sometimes on CC we read about parents who borrow huge amounts of money to finance their kid’s undergrad years, with the expectation that the kid will take over and pay back the loan after he graduates.

My daughter majored in political science & international relations, and financed her own summer internship with a UN agency abroad. After graduation she got a wonderful job working with an agency tied to the UN – really cool job, she had a UN badge and got to work with diplomatic staff, even travel abroad to organize a conference. Starting pay was about $35K. She left after 2 years because there was no where to grow with the job; by the time she hired her replacement the agency had changed its policies and were only considering candidates with master’s degrees. They had plenty to choose from. Pay was the same.

Your son’s career goals are wonderful: but he is going to want a master’s or other advanced degree-- and he definitely won’t be in position to help you if you run into difficulties down the line with the loans.

Don’t let the college’s marketing hype get in the way of your common sense.

Calmom, Thank you for your input. Yes, I know that PLUS is my loan, not the kids. There is a lot of wisdom and experience behind your post. We have some tough choices to make over the next few months.

It seems that less of us get aid and more of us are expected to take on loans. It really stinks when you have to tell your child that it may be near impossible to attend a school she was accepted to because of money. But, it is probably a wiser choice to attend a school we can afford rather than go into debt.

“t really stinks when you have to tell your child that it may be near impossible to attend a school she was accepted to because of money.” - True. I hope you find a way to sort through things and find a reasonable solution.

If you have friends with younger kids, tell them about the college NPC (Net Price Calculators). It’s better to know the scoop ahead of applications.

Thank you! Can you talk to my H, please!

This is an excellent thread! If parents are depending on PLUS loans for all four years, then they need to realize that by the end of 4 years, on a loan of about $25K, they will be paying a combined loan payment of close to $1000! Scary, isn’t it?

I regret taking out our parent plus loans. We used it for 4 years of room and board at my daugter’s state school (Connecticut so @‌ 20k a year )
After deferment we now pay $550 a month for the next 25 years.
Very depressing…

Nice to get some reality checks. It is definitely disappointing to tell ur child to pick the most affordable school especially when she has the grades and did everything right in school. Colleges are getting less generous with the bright middle class kids in favor of athletes that bring in revenue or kids who are disadvantaged economically. I’m not saying that these kids shouldn’t get the money, I’m glad for them. Unfortunely, a middle class kid whose family has income from a hard working parent/parents gets to take on loans instead of getting “free aid”. It just another reality check

My position remains that if you are going to borrow for college, and that’s a big if that needs to be a careful decision, this is probably the way to go. I prefer Parent Plus to private loans and to a home equity loan. I like how easy the application process was and the ability to defer pymts until after graduation - although you can and should make voluntary pymts. I like that it is a fixed rate loan with various repayment options. I am paying interest now and hope to increase my voluntary pymts next year so as to reduce the required pymts that will begin in 2 years. We were pretty much out of money/options, so I am glad this is available.

Rockvillemom,
Thank you for your comment. I agree with your assessment. It is great that we have such options available. Otherwise, it would be impossible for us to send the kids to a decent college. I was flip flopping between a sallie-Mae and the PLUS loans. But, I am also leaning towards a PLUS loan. Thank you for the details on the payment options. It gives us more choices.

My son has been accepted at a prestigious school, but they want his Dad and I to take $100k in direct parent plus loans. 

My husband is a 100% disabled veteran, and I recently had to leave my job when his illness escalated.

This is an incredibly unfair situation for my son who will probably need to give up his dream school because we’re not quite poor enough and not rich enough to do this.
If schools would at least offer in state tuition for families like ours, but instead there all like
“We have lots of customers—we don’t need you” attitude.

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I really believe that MIDDLE SCHOOLS should have a mandatory requirement whereby parents must attend sessions detailing the costs and financing of higher education. I come across many parents who don’t understand that and EFC of -0- doesn’t mean that they won’t be expected to help pay for their student’s education. They fully expect that the
“zero” in that combination guarantees a free ride for their kid and no one and nothing has told them anything to the contrary until it’s too late…

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We’re expected to take out Parent Plus Loans of 80k for my son to go to a state school, forget about prestigious. Our EFC is basically everything that wasn’t covered by his in-state scholarship. We live paycheck to paycheck like everyone else…but in an expensive area. I was going to stop working next year to take care of our youngest who has learning disabilities & really needs my time…however I am now going to continue working to literally just pay for school & my son will STILL need loans. sigh