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Read this before you take out a Parent PLUS loan


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

  • ptcptc Registered User Posts: 66 Junior Member
    My son attended Berklee this year, which is number 2 on the list of places with high rates of parents with PLUS loans. We did not have to take out a PLUS loan this year. But my son also is not goign back to Berklee either, and the cost of the college is the primary reason. He loves being in Boston and he has made some connections that may be useful for him down the road. But he was disappointed with the level of committment that he saw in many of the students in his classes, which dragged down the value of the classes, in his view. Plus, between Hurrican Sandy, the winter blizzard, and the marathon bombings, Berklee was closed to classes for two weeks this school year, which makes the cost of the schooling even higher.
  • cloudyweathercloudyweather Registered User Posts: 10 New Member
    I thought Harvard was supposed to truly try and meet need.

    They do, but some parents mismanage money / don't want to pay for their children's education. I know some ethnic Indian parents in USA who make their children take out loans (some even as high as $150,000+) for undergraduate studies. I feel sorry for these children.
  • jnm123jnm123 Registered User Posts: 743 Member
    That is not correct. Students can only take out Stafford loans totalling maybe $26-27,000 for 4 years total. It's the parents that would take out the rest in PLUS loans to make up the difference, providing they meet the minimum criteria to be able to obtain these loans.
  • ldavisldavis Registered User Posts: 672 Member
    Their minimum criteria must be pretty low... I think a family w/ $50k in income
    can pretty much borrow whatever amount they want. That's the trap.
    Reminds me of the Mortgage Brokers in the early 2000's.... no documentation...
    no problem!! We all know how that turned out.

    That is a very scary article but an impt. warning! Thanks for sharing.
  • ldavisldavis Registered User Posts: 672 Member
    FAQ Parent PLUS loans... interest accrues from Day 1, etc.

    Parent Plus Loans: Frequently Asked Questions - US News and World Report
  • colorado_momcolorado_mom Registered User Posts: 8,872 Senior Member
    Parent loans are scary, especially with the the high and compounding interest. I can understand using them for small tide-overs, but not huge borrowing. If a family has not had enough funds to save significantly for college, I'm not sure how they will be able to pay back the loans.
  • abudhabi-mamaabudhabi-mama Registered User Posts: 176 Junior Member
  • charlieschmcharlieschm Registered User Posts: 4,282 Senior Member
    Grad and professional students can take out unsubsidized Staffords at 6.8% with 1% fees. After that, they need to take out federal grad school PLUS loans with a higher interest rate and 4% up front fees. Those grad plus are taken out by the student, not the parent.
  • momof3greatgirlsmomof3greatgirls Registered User Posts: 817 Member
    Once again we will be holding the bag. Many of these borrowers don't have any assets to sell to pay off these loans. What do they care if the interest racks up on a 100k loan.

    Maybe I am wrong but I think many on CC are not going into debt to finance college as much as other parents. I think many come here to get the scoop on making college more affordable. Sure there are ones that want the best college for their kid no matter how much it costs, but many more want it to be affordable or the best buy they can get.

    We personally told our snowflake that we could afford instate colleges.
    20K a year was our budget and guess what she stayed within her/our budget. But we have large chunk of equity in our home, and no car notes or any other loans except a home loan. We are paying for college with savings. The money is all saved already and dd has two more years til graduation. Now the problem for us is to get more than double the amount we had to pay for our oldest ready for the twins. Ask me again in eight years.
  • 1966Parent1966Parent Registered User Posts: 107 Junior Member
    This is one of the most helpful articles I have read on CC. Thank you for sharing this - I see the dangers and problems of PLUS loans that are packaged by parents, but what are the issues to consider when taking a private loan from Discover, Sallie Mae or Wells Fargo. I looked at a credit union as well, but it is issued by Sallie Mae - so I think it is the same loan.
  • RunsWScissorsRunsWScissors Registered User Posts: 456 Member
    Just out of curiosity, we applied for a private parent loan, tempted by the low variable rates. The rate they can back with wasn't ridiculously high, but nowhere near low enough to even be tempting. For reference, the corresponding fixed rate they offered was higher than a direct parent loan. We have very little equity in our house, but otherwise our credit is very very good.
  • hookedhooked Registered User Posts: 7 New Member
    JannatC, how is that site helping you when it does not seem to be operational yet?
  • CathyMcClareyCathyMcClarey Registered User Posts: 23 New Member
    I've heard several horror stories about parents being stuck with repaying private student loans, even if their child had died (which apparently is one of the few ways the feds will cut parents some slack on repaying Parent PLUS loans). With 2 children in college this coming fall, we knew we couldn't afford major Parent PLUS loans for both of them (what we already have for the older child is bad enough). So we made extensive use of Net Price Calculators when considering colleges for our D to apply to last fall, and the private college our D will be attending this fall (both an academic & financial "safety school" for her) will have a net cost of attendance no more than 1/3 that of the public university her brother attends (even though the sticker price of his school is approx. 35%-40% less). Picking a college with both a relatively low sticker price & great non-loan financial aid is certainly an easy way to help minimize the amount of Parent PLUS loans which will be needed!
  • Merrymaid4Merrymaid4 Registered User Posts: 45 Junior Member
    We're presently weighing out the option of a Sallie Mae, a Parent Plus or just bite the bullet and pay cash for our son's third year. After reading copious amounts of bad experiences with the loans and the ever growing interest each day, were leaning towards cash while hinting to our son, "if this ceramic engineer career really pans out for you, you could always send us on a cruise.....(;"

    We're pretty sure senior year will be a loan time for him but last year and all doesn't seem like such a burden.....

    And then mom and pops can concentrate on living it up again!
  • HImomHImom Registered User Posts: 34,022 Senior Member
    One thing that many of these families don't appear to be giving enough weight to in these though economic times is what happens when the parent is unable to continue working due to disability, downsizing or other factors. Many of these students will be unable to assume those payments, as many do not appear to have significant (or often any) wages to contribute, even if they minimize expenses by living at home.

    I do worry about the many aging parents and young people who have crushing debt. It is certainly a recipe for a tough future.
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