Welcome to College Confidential!

The leading college-bound community on the web

Sign Up For Free

Join for FREE, and start talking with other members, weighing in on community discussions, and more.

Also, by registering and logging in you'll see fewer ads and pesky welcome messages (like this one!)

As a CC member, you can:

  • Reply to threads, and start your own.
  • Post reviews of your campus visits.
  • Find hundreds of pages of informative articles.
  • Search from over 3 million scholarships.

Read this before you take out a Parent PLUS loan

189101113

Replies to: Read this before you take out a Parent PLUS loan

  • HappyFace2018HappyFace2018 Registered User Posts: 699 Member
    edited June 2016
    @rockvillemom Very well said.
  • guyfromfloridaguyfromflorida Registered User Posts: 18 New Member
    edited June 2016
    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.
  • guyfromfloridaguyfromflorida Registered User Posts: 18 New Member
    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 Student's Estate, assuming there is one. But, beware this: "However, there is one important thing to note about Parent PLUS loans. If the loan was discharged due to the student’s 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." At any rate, I am not "railing" 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.
  • HappyFace2018HappyFace2018 Registered User Posts: 699 Member
    @guyfromflorida

    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.

    https://www.irs.gov/uac/about-publication-4681
  • LBad96LBad96 Registered User Posts: 3,196 Senior Member
    We were just denied the Parent PLUS loan for the second straight year...honestly feeling very relieved about it.
  • HappyFace2018HappyFace2018 Registered User Posts: 699 Member
    edited July 2016
    @LBad96 How will you cover the COA without the loan?
  • LBad96LBad96 Registered User Posts: 3,196 Senior Member
    @HappyFace2018 we found a way last year, we'll find a way again.
  • HappyFace2018HappyFace2018 Registered User Posts: 699 Member
  • class0f2017class0f2017 Registered User Posts: 923 Member
    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.
  • HappyFace2018HappyFace2018 Registered User Posts: 699 Member
    @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 student’s biological or adoptive mother or father. Both parents may get a PLUS loan as long as the total aid package does not exceed the student’s 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.";
  • rockvillemomrockvillemom Registered User Posts: 6,566 Senior Member
    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.

    Don't 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, here's a clue.
  • raulhumber2raulhumber2 Registered User Posts: 141 Junior Member
    @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.
  • rockvillemomrockvillemom Registered User Posts: 6,566 Senior Member
    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.
Sign In or Register to comment.