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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

  • HappyFace2018HappyFace2018 Registered User Posts: 751 Member
    @WISdad23 I could not agree with you more! I love your "stupid tax" comment. Taking out a PPL is not a crazy thing to do if it is part of a thought out process. Those who don't think through the process deserve the consequences. Faulting the lender/government is ridiculous. I know families who have taken $50,000 a year and are gradually paying $600, $1,200, $1,800 and $2,400 a month as their child moves through the college experience. Is that crazy? If the parent can't afford it YES! But they knew damn well that would be the case before they took the loans...so why blame the lender/government. :-?
  • playacarplayacar Registered User Posts: 37 Junior Member
    It sounds like everybody involved in the loan transaction, the student, the obligors and anyone not obligated on paper but whose income will likely need to be used to repay the loan should take out a life insurance policy or increase their current policies to cover the full amount of the loan, included anticipated interest accruals. For PLUS loans, if death of the student or guarantor triggers full forgiveness of the loan, then insurance wouldnt be needed for any of these covered parties. All parties likely need to be covered for other types of loans.
    We know of a family whose son tragically passed away while attending medical school. His parents had largely financed his education through home refinancings, with the idea that their high earning future son would help with the future repayment. Now they are faced with the double heartbreak of the loss of their son and possibly, the loss of their home. Horrible situation.
    Term life insurance is usually not super expensive, so hopefully most people who are taking out loans can also purchase a term life policy to protect themselves. In a perfect world, everyone would also obtain disability insurance, as well.
  • 1966Parent1966Parent Registered User Posts: 90 Junior Member
    If you have outstanding credit - a private student loan may be more affordable than a PLUS loan. If you are going to borrow to pay for school consider buying cheap term life insurance on your child so that you can repay the debt in the horrible circumstance that something happens to your child.
  • HappyFace2018HappyFace2018 Registered User Posts: 751 Member
    @1966Parent The concern with taking a private loan is it must be paid if the parent or the student dies. Not so with a PLUS loan.
  • ARTCCARTCC Registered User Posts: 53 Junior Member
    If you have good credit, even with the additional cost of sufficient life insurance to cover the amount of the loan for the untimely passing of the student or cosigner, a private loan could be substantially cheaper--often no origination fees and lower interest rates than a PLUS loan. Many working adults already have life insurance and the monthly cost of a good term life insurance policy for most college students should be affordable.
  • PheebersPheebers Registered User Posts: 510 Member
    @1966Parent and @ARTCC are there actually private loans with lower rates? I've seen low rates advertised, but I don't know anyone who's actually gotten them. My husband and I have tippy-top credit and considered a private loan for cash flow management for one of my daughters... Discover advertised rates starting below 4%. We cosigned for my daughter (who has good-ish credit, nothing negative, but a relatively short history) on the application, expecting a decent rate. They came back to us with about 10%, IIRC. We couldn't get an answer about why -- they acknowledged that we had great credit scores, were low risk, had the ability to pay it back, etc, etc. We've never had a problem refinancing our house, getting good car loans, etc. More than one rep I spoke with at Discover said that was a pretty common rate, and that they didn't know any circumstances with people getting the much lower rates. REALLY?

    Obviously we didn't take the loan. But I worry about people who don't realize they're getting a different rate than they applied for, or who don't realize what a difference it makes, or who think they don't have a choice.
  • golfdude71golfdude71 Registered User Posts: 42 Junior Member
    Hello,

    If PP loans do not require income qualification but only good credit, is there a FICO score threshold above which these loans are granted ?

    I am a USA citizen with reasonably good credit score but since I have been living outside the USA for the past few years, I can start again building my credit history if required, since my kids still has couple of more years before he goes to college.

    Thanks.
  • twoinanddonetwoinanddone Registered User Posts: 12,194 Senior Member
    There really aren't qualifiers, just disqualifiers. A parent plus loan should be approved for an applicant who hasn't declared bankruptcy in the prior 5 years, is not more than 90 days delinquent on any 'major' debts (which they define as over a certain $ amount, like $3000, so they are looking for default on a mortgage payment), and hasn't defaulted on other government debts, like the parents own student loans, a military loan, FHA mortgage, etc.

    For private student loans to parents, better rates may be available to applicants with higher credit scores, but that's really up to the bank.
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