Beware of Parent Plus Loans

cptofthehouse
Wed, 17 Oct 2012 16:48:44 +0000

A major beef I do have about PLUS is the way a lot of colleges package them. They are often presented as financial aid. That is misleading. I have seen award letters where it looks like the college met full need for a family by tucking the PLUS in there. It is particularly distressing because there is no guarantee and considerable doubt that a parent can qualify for PLUS and since the recommended time to apply for it is a certain period before the semester (in fact you can’t apply right away, I believe), I have seen parents who are counting on it get declined after their kid has long made the school choice and other options are gone. Not nice at all.

There is also a point when a program is clearly a problem if more families are getting into trouble from it than getting advantages. If the default rate is high, and the program is costing more than expected to run, then something should be done. As stated earlier, I, personally don’t know where we are with this particular program. The program came to be due to tremendous failures and costs in getting students who took out more loans than they could handle for college, in their own names. By involving the parents, part of the rationale is that parents are more responsible, experienced and settled adults regarding finances. At age 18, to expect a new adult to make this kind of decision for large debt for college, resulted in a lot of defaults and painful chasing down of those who did not pay back their loans. That was my generation of students. I still remember a number of my classmates who “defaulted” on their student loans, and the government trying to chase them down and collect for decades thereafter. They may still be trying to collect, for all I know. That is why federal loans ae limited for students.

But though we can say all that we want how responsible people should be, they often want. When too many people default or get into trouble with something, whether it is their own fault or not, it can affect others uninvolved adversely. That is why intervention is often advocated for home foreclosures. Though the folks defaulting on the mortgage are fully to blame for taking on what they could not handle, when too many in a nieghborhood do that, it can sink a community. When the pain of meeting ones’ obligations become far more painful than walkng away, it’s pretty clear what the majority reaction will be.

So the Parent loans may not be something out there for long. They are there right now, however, and something to consider.