Parent Plus Loans for a student in the USA?
July 17, 2015 11:35 AM   Subscribe

So our son was surprised at registration time with notice that he needs 12K for school this year. The ever so helpful financial aid office recommends we take a ParentPlus loan to pay for the cost. Anyone ever done this, is it a decent loan for parents to take on? We've literally just learned bout this hours ago after thinking we were all set for his bachelors.

Further details: Technically, he's my stepson and both his mother and stepfather are 100% disabled. Does that factor at all into student aid for this loan. Not sure what to do with all this overwhelmingly information. Sanity check, please!
posted by sock, the puppet to Education (10 answers total) 1 user marked this as a favorite
 
Information regarding the Parent Plus loan can be found on the government website:here.

The interest rates are currently at 6.84%, so they're not low - please take the time to consider how this would impact your long term finances and also take the time to look at other options for loans that may be cheaper (home equity line, for example).
posted by Karaage at 11:43 AM on July 17, 2015


Has he filled out a FAFSA? That will be required for a PLUS loan, but it sounds very likely that he would qualify for a Direct Subsidized Loan (also applied for through FAFSA), which have lower interest rates and do not accrue interest or require payments while he is in school, as the PLUS would. It'll also tell him if he qualifies for Pell Grants, though IME he is not likely to receive grants that will cover 12K of tuition.
posted by kagredon at 11:44 AM on July 17, 2015 [1 favorite]


My daughter called me at the beginning of her 4th year of college (2 years ago) & said "Dad, there's one more type of loan I need you to get declined for so that I can apply for some extra financial aid." So, I applied for a $23,000.00 Parent Plus loan, 100% sure I'd be declined. Bankruptcy 6 years ago, no loans or credit since -- nada.

I was shocked when they accepted my application, but we went with it. It was an amazingly painless process, though a little weird. -- they distribute the money directly to the school at the beginning of each semester for the entire year, then the school reimbursed us, & I had to put 1/2 a year's money into savings and hang on to it, each time. They have a relatively easy-to-navigate website, & it really hasn't given me much difficulty.

Also, be warned that since you're a parent & not the student, there's no grace period. The first payment is due the same month they graduate, so if your kid is planning on finding a job to pay the loan with, you'd better be prepared to make the first few payments for them.

No idea about the 2nd half of your question.
posted by Devils Rancher at 11:46 AM on July 17, 2015 [1 favorite]


Yeah, also what kagredon said -- do all that other stuff first, and use the Parent Plus loan as a last resort to fill whatever gap there is between all the other subsidized loans/grants, the cash you have & the actual cost.
posted by Devils Rancher at 11:51 AM on July 17, 2015


Parent Plus loans do not fall under the Income Based Repayment program, which means that my payments for them are significantly higher than those on any of my other student loans and are a real financial hardship, even though they are really small loans compared to the others.
posted by velebita at 12:04 PM on July 17, 2015 [3 favorites]


Best answer: My experience is almost identical to Devil's Rancher's. My daughter entered school, and didn't want me to be burdened with the loan*, but I was required to apply for the PLUS loan and be declined so she could get the direct loan. Recent divorce and sucky credit ensured that I was declined. For the first two years. Then... I was approved for the last two. I'm not an expert on other alternatives, but it was (relatively) painless. But, like anything involving a bureaucracy, be prepared for some hiccups. I remember at least one occurrence of the funds not showing up and she had to go through a series of aggravating appointments and phone calls to straighten it out. And the monthly payment amount never seems to be the same, or what the original agreement stated.

(*True to her word, my wonderful daughter took over the payments as soon as she was gainfully employed, although the loan is still technically in my name.)
posted by The Deej at 12:05 PM on July 17, 2015 [4 favorites]


Best answer: (*True to her word, my wonderful daughter took over the payments as soon as she was gainfully employed, although the loan is still technically in my name.)

Same here, the upside of which is that it redounded to my credit report, and my score has gone up significantly in the last year.
posted by Devils Rancher at 12:23 PM on July 17, 2015 [2 favorites]


Best answer: As another data point, my dad's credit wasn't great but was able to take out loans when my student loans weren't enough. I have now taken over payments for him. Call the financial aid office and also see what lenders they normally use and see if get more info from them. Also, they tend to be flexible and if for some reason there's a period where you can't pay them you can work with them or go on "forbearance."

On Preview: I'm the wonderful daughter of The Deej (so yeah, he's not lying.)
posted by Crystalinne at 12:26 PM on July 17, 2015 [13 favorites]


I need more background on how this was such a "Surprise" to him, because my knee jerk reaction is that he is not responsible enough for you to take on a 12k(!!!!) debt he didn't know about until the very last minute??? Maybe he needs to defer starting until next term?

Signed, a kid who had a very poor parent and knew every penny of my tuition bill, loan details, etc. as an 18 year old.
posted by nakedmolerats at 6:18 PM on July 17, 2015 [1 favorite]


(I really didn't mean for that to sound blamey, I would just say more that bailing out a 12k "mistake" is a big deal and if it's true that he could or should have seen this earlier, it may not be the best life lesson that mom&dad will just take care of it - there should be some serious framing of 'what went wrong here...')
posted by nakedmolerats at 7:48 PM on July 17, 2015 [1 favorite]


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