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Parent Plus Loans

JenaS62JenaS62 320 replies40 threadsRegistered User Member
I need some clarification on something. For a parent plus loan, it says that you can borrow up to the cost of attendance minus any financial aid received by the student. Next year I will have three kids in college at the same time and although they will have to take some federal student loans, I'd like to keep it to a minimum and take on most of the burden myself. Does a student have to take the full amount of federal student loans ($5500 for freshman) before I can take a parent plus loan?
edited January 2012
15 replies
Post edited by JenaS62 on
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Replies to: Parent Plus Loans

  • mom2collegekidsmom2collegekids 84100 replies1025 threadsForum Champion Financial Aid, Forum Champion Alabama Forum Champion
    Does a student have to take the full amount of federal student loans ($5500 for freshman) before I can take a parent plus loan?


    No.

    But, you might want them to take the full student loans anyway (even if YOU will be the one to pay them back). Parent Plus loans are at a higher rate, so it may be cheaper for you to pay back THEIR student loans.
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  • JenaS62JenaS62 320 replies40 threadsRegistered User Member
    ah ha! Thanks for that.
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  • bchan1bchan1 786 replies7 threadsRegistered User Member
    You also need to be careful about the total amount you plan to borrow. You need to qualify for Plus loans; if you qualify in year 1 & 2 it doesn't necessarily mean that you will qualify later if your debt to income/assets ratio isn't healthy. Keep in mind the goal is for your kids to graduate from college, not merely attend until the money runs out.
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  • guitars101guitars101 2122 replies135 threadsRegistered User Senior Member
    I was under the impression that wth the Parent plus loan as long as you didn't have adverse credit that you would qualify. I didn't think they took debt to income ratio into factor. Please clarify anyone who has experience and knows about this type of loan

    thanks
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  • JenaS62JenaS62 320 replies40 threadsRegistered User Member
    "Keep in mind the goal is for your kids to graduate from college, not merely attend until the money runs out. "


    What does that even mean? Of course the goal is for my kids to graduate. What money are you talking about running out?
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  • WayOutWestMomWayOutWestMom 10215 replies204 threadsRegistered User Senior Member
    Talking about being unable to qualify for Parent Plus loans after one or more years since each loan you take out will decrease your credit worthiness by increasing your debt-to-income ratio.

    While Parent Plus loans can be more lenient on qualification than say a private lender, you can get denied for having poor credit. Even if you qualified in previous years.
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  • kela10kela10 166 replies6 threadsRegistered User Junior Member
    I don't think the exact Parent Plus loan qualifications are published anywhere but there have been posters who state they have been denied due to debt to income ratios & posters who report qualifing the first year and then not being able to qualify again.
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  • guitars101guitars101 2122 replies135 threadsRegistered User Senior Member
    I read on several websites that you will get denied only if you have adverse credit. the reason others don't qualify the following years is because they became delinquent and didnt qualify that way. I also read that debt to income ratio is not taken into account for this loan.

    does anyone know for sure??
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  • JenaS62JenaS62 320 replies40 threadsRegistered User Member
    Well I went out on the web to find the answer and in several different places I found that debt to income ratios and FICO scores are not taken into consideration for a parent plus loan - only negative credit history.

    PLUS LOANS for Parents with BAD CREDIT?

    "Q: Can my parent get a Parent PLUS Loan even with bad credit?

    A: Yes, it is possible. But it depends how you define bad credit.

    Eligibility for Parent PLUS loans is not based on household income and your parents do not need to demonstrate financial need in order to qualify, so parents at all income levels can apply.

    Parents will need to pass a simple credit check as part of the Parent PLUS Loan application process.

    But this is not an in-depth credit review like they would receive if they were applying for a home mortgage or even cosigning for a private student loan.

    Keep In Mind: The Parent PLUS Loan credit check DOES NOT consider the FICO score or the debt-to-income ratio of the parent applicant.

    The Parent PLUS Loan credit check ONLY looks for negative credit history such as loan defaults, loan write-offs, or bankruptcy.

    As long as your parents do not have any of these negative credit events on their credit report, they will probably qualify for the Parent PLUS Loan."
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  • guitars101guitars101 2122 replies135 threadsRegistered User Senior Member
    Jens, thanks so much for looking into this. appreciated :)
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  • KimXClarkKimXClark 18 replies7 threadsRegistered User New Member
    Here is the official explanation of the grounds for rejection of a PLUS loan application from the Department of Education:

    "A parent with an adverse credit history is prohibited from obtaining a
    PLUS Loan. A lender must obtain a credit report on each applicant
    for a loan from at least one national credit bureau. Unless the lender
    determines that extenuating circumstances exist, the lender must
    consider the applicant to have an adverse credit history if

    - he or she is 90 days or more delinquent on the any debt; or

    - during the 5 years preceding the date of the credit report, he or she
    has been determined to be in default on a debt, his or her debts
    have been discharged in bankruptcy, or he or she has been the
    subject of foreclosure, repossession, tax lien, wage garnishment, or
    write-off of an SFA debt."

    It has nothing to do with debt to income ratios.
    Kim Clark
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  • KimXClarkKimXClark 18 replies7 threadsRegistered User New Member
    In fact, some people feel that the government's standards for approving PLUS loans are dangerously lax: Government OKs College Loans to Struggling Parents - US News and World Report
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  • kelsmomkelsmom 15586 replies99 threadsRegistered User Senior Member
    Add me to the list of those who feel the standards for approving PLUS loans are dangerously lax. I cringed each time I saw a 0 EFC family approved for ridiculous PLUS loan amounts ... and they will be able to repay that money HOW?! They don't HAVE extra money. I know that the reasoning is to help families pay for college for their kids. I get that. I believe in personal responsibility ... anyone familiar with my posts knows that ... but allowing folks to borrow what they simply are not going to be able to afford is wrong. I know it gets into the whole issue of providing access to college for all, but somewhere, somehow, we have to draw the line. Approving debt based on credit ... when clearly the family has no extra money for repayment ... just seems very wrong to me.
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  • jnm123jnm123 735 replies8 threadsRegistered User Member
    Kelsmom, I agree. While we do use Parent PLUS loans to finance our daughters' education, we are fully aware of accruing interest at 7.9% and want to get them paid off before the compounding kills us. Although the President said something or other in the State of the Union address about lessening the rate, is it possible that the rate factors in all those 0 EFC folks that will eventually default on their loans?
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  • kelsmomkelsmom 15586 replies99 threadsRegistered User Senior Member
    The rate is set by Congress, and I don't know how they determine it. It hasn't risen in recent years, so I doubt the rate has anything to do with whether or not parents will pay the money back. It's guaranteed by the government, so it's just us taxpayers left holding the bag if loans don't get repaid.

    I have nothing against PLUS loans, of course ... I just don't like parents getting approved when they realistically cannot make the payments. It reminds me of the push by the government to get lenders to approve people for mortgages they couldn't afford. And we know how that turned out ...
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