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Read this before you take out a Parent PLUS loan

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

  • KMichKMich Registered User Posts: 57 Junior Member
    This is so timely for us. My D has gotten into a couple of privates and they have offered her good scholarship money but our out of pocket is about $10-15 K per year than the state schools (who also gave her scholarships). She really wants to go somewhere that is smaller and the privates allow that, but we are questioning the cost. I knew I didn't want to do PLUS loans and most of the privates didn't even put that on their Financial Aid awards, and most have told us they don't view them as aid. This just confirms it.
  • calmomcalmom Registered User Posts: 18,307 Senior Member
    The PLUS loans are not "aid" - they are a financing option. (Just like the mortgage on your home is not "aid" -- it is an obligation, but for most of us the only way that home ownership is possible).

    You are eligible for the PLUS loan whether or not it is listed on the financial aid award package. But it is only one borrowing option -- I think it is a better option than a private unsecured loan, but under some circumstances a family that chooses to borrow may do better with a HELOC instead. There may be other sources of borrowing that may make more sense financially as well -- for example, one could borrow against accumulated cash value in a life insurance policy.
  • Fishnlines29Fishnlines29 Registered User Posts: 1,518 Senior Member
    Has anyone tried the Sallie Mae student loans that came out last year?
  • cloudysmomcloudysmom Registered User Posts: 605 Member
    Following for Sallie Mae
  • twoinanddonetwoinanddone Registered User Posts: 11,776 Senior Member
    The Sallie Mae loan is just a private loan option. If you think the rates and terms are better than BofA or Discover, or Plus, then go for it.

    I've heard some parents getting really good terms from their credit unions or bank, local (or state) loan options, but usually the total amount borrowed is under $10k (for all years). The benefit of Plus loans is that, currently, the amount borrowed is not limited except by COA. Martin O'Malley, the former governor of Maryland, thought borrowing $350k in Plus loans was a good idea. Mike Pence, current VP of the US, has Plus loans.

    You have to decide what is good for your income level, your future earnings, your age.
  • calmomcalmom Registered User Posts: 18,307 Senior Member
    The other benefit of a PLUS loan (vs. any other private loan) is that there are a few protections built in against adverse events, like loan forgiveness or remission under some specific circumstances (such as death of the student). Not a reason in and of itself to choose Plus over an alternative -- but something to factor in.

    I took Plus loans, very carefully structuring them to keep payment levels affordable, and paid them all off within 2 or 3 years of my younger child's graduation. I knew that when my kid graduated I would have more discretionary income and would be able to accelerate payments -- and as I paid the loans off early, I did not pay all that much interest over the life of the loan.
  • ahill70ahill70 Registered User Posts: 46 Junior Member
    Following. I have been advised against Parent PLUS loans and if we choose private student loans, cosigned by us, that we should also get a life insurance policy on our son, as morbid as that sounds. I am so confused. But this thread is very helpful.
  • exlibris97exlibris97 Registered User Posts: 654 Member
    @ahill70 I'd be wary of private loans. They offer few of the protections and options of government ones. As for the 'morbid" poster above, that's a reality and is one reason government loans are preferable. Check the death/disability/consolidation/refinancing options. Private loans are not comparable in these terms.
  • MassDaD68MassDaD68 Registered User Posts: 1,219 Senior Member
    These loans are generally not a good idea.

    The sad reality is that college has gotten so expensive for the middle class that families have few options. Not every child thrives at a large state flagship. Some do better in a smaller environment like those provided by private colleges.

    Sadly, many need to access this credit in order to make college possible.
  • ahill70ahill70 Registered User Posts: 46 Junior Member
    It really is sad. Limited options and the prices are astounding if you don't manage to get merit $$.
  • Old_parentOld_parent Registered User Posts: 87 Junior Member
    @ahill70 Even with merit money the costs are staggering. 70k total per year minus 25k merit money (the average my d has been offered) leaves 45k per year. From a financial perspective I'd be insane to pay the difference between private and public colleges, or incur debt when the outcomes are similar. The difference would pay for a PHD.
  • TampaGirl21TampaGirl21 Registered User Posts: 3 New Member
    I'm 17, going into a pre law program and I had to take out subsidized and unsubstidized loans adding up to $5,500 and a Parent plus loan for $23,000 and this is just for my first year of undergrad school since I'm going private .. which means I'll probably have 7 more years of this and I'm currently in freak out mode about my future because I'll be paying up to $1,000 a month for 20+ years after college and everybody keeps telling me "not to stress it" or "it's along ways away just forget about it for now" but it's terrifying because if I can't get a job in my field I have no back up plan, I think this was more of a vent for me but does anybody else worry about all of this?
  • austinmshauriaustinmshauri Registered User Posts: 5,136 Senior Member
    edited April 2
    @tampagirl21, Start a thread in the financial aid forum to ask if ~$30k/year debt for undergrad is worth it. You'll get lots of guidance.
  • twoinanddonetwoinanddone Registered User Posts: 11,776 Senior Member
    The Parent Plus loan is not in your name, it is in your parent's name. You will not be able to combine their loans with yours, and if they are taking ~$23k per year, or about $100k over 4 years, that payment will be a lot more than $1000/mo and your $5500/6500/7500/7500 (total about $30k) payment will be about $400/mo.

    You need to reconsider this plan.
  • annamomannamom Registered User Posts: 640 Member
    edited April 3
    what is the pros and cons of a HELOC vs a PP loan? just started to think about this....
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