<p>With the U.S. government taking control of PLUS loans away from private lenders, approval requirements seem less stringent. But not all parents actually want PLUS approval. Some hope to be turned down so that their child will then be eligible for extra Student Stafford loans with lower interest rates and more flexible repayment terms.</p>
<p>Is the government setting up families for financial doom by handing out PLUS funds too readily?</p>
<p>We always counsel our students who hope their parents will be turned down for a PLUS that the parents do NOT have to take the loan if they are approved … but the student will not receive the additional unsub. Very often the parents are quite surprised that they were approved, and they opt to cancel the PLUS.</p>
<p>*The Department of Education says it is simply awarding PLUS loans according to the rules set by Congress: Federal law “provides no authority for the Department to deny an applicant a PLUS loan based on their perceived ability to repay the loan,” a department spokesman explained via E-mail. Instead, parents can borrow as long as they don’t have what the law calls “adverse credit.” That low standard only cuts off parents with serious credit problems such as a bankruptcy, lien or foreclosure in the last five years, or a bill currently more than 90 days overdue. *</p>
<p>WOW!!!<br>
Don’t ask me when those loans got into default. However, I know I will be forced to pay for it.</p>
<p>Those of us who are responsible will be paying not only for our own kids’ educations, but also for the educations of the children of many other people. It gives a whole new meaning to “it takes a village,” doesn’t it?</p>
<p>Honestly, I think that it would probably be better to get rid of PLUS loans entirely and just stick with the Staffords. If it’s really necessary, the limits can be increased or something like that.</p>
<p>There are many parents who borrow PLUS loans responsibly. I live in an area with extremely depressed housing values, so they are a good alternative for parents who can’t tap into home equity. They really do have their place.</p>
<p>It’s the large PLUS loans borrowed by low-EFC parents that worry me. How the heck are these families going to repay these loans? It seems wrong to me.</p>
<p>I am not against PLUS loans, I am against preying on people who cannot afford it by saddling them with loans they cannot repay. Education is like buying house, it can be an emotional decision. When housing prices were at the peak, the talk was about how buying a house was the right thing to do for the family, irrespective of the long term consequences. It appealed to the gut.</p>
<p>Similarly, education for yourself or your children often is a very emotional decision. Let us say your child gets into a good college. Most parents will not easily be able to say “No, we cannot afford it”. However the truth may be is that they cannot afford it. PLUS loans offer them a way out, though it may not be the best decision, especially if loans are available to nearly all.</p>
<p>The other victims of PLUS loans are adults who are working in dead end jobs and are trying to improve their skills for themselves and their families, especially single mothers. For profit institutions use pressure tactics to make these people enroll, load them up with loans they cannot repay and provide them substandard education. They again appeal to their emotions, suggest that they are not good parents if they are not willing to get an education in … and improve their career. A lot of them finance their education with PLUS loans. If someone looked at these loan applications and asked hard questions, then many of these loans would never have been given. At the end tax payers loose, students and their parents loose, the educational institutions win.</p>
<p>There has to be some basis to lend money either on ability to repay based on current assets or future income. That is called prudent lending. Otherwise do not call it a loan, call it a grant, a write off, boondoggle or what ever.</p>
<p>But not all parents actually want PLUS approval. Some hope to be turned down so that their child will then be eligible for extra Student Stafford loans with lower interest rates and more flexible repayment terms.</p>
<p>that’s not really the government’s problem (nor was it the problem of private lenders). The idea of giving more in Stafford loan monies to students if parents are ineligible was supposed to help poor students and students whose parents may have squandered their own money and trahsed their credit pay for school. The Stafford limits are limits for a reason.</p>
<p>I think responsibility in this case is shared. Yes, giving away loans too easily is what got our country into the financial crisis we’re now in. But at the same time, the fault partially lies with the families who don’t calculate the cost of the money they borrow and see if they can actually afford to take on that loan.</p>
<p>Education shouldn’t be an entirely emotional decision, and honestly, I think it’s only an emotional decision for upper-middle-class families who have lots of options. The majority of middle-class and lower-income students go to public universities close to home and it’s not such an emotional decision for them. Just because it’s not easy to say “No, we can’t afford that college” doesn’t put the fault on the PLUS loan system or make this “preying” on middle-class families who want to bite off more than they can chew. Parents need to assume their responsibilities and be realistic with their children BEFORE they apply to school. I didn’t even apply to my “dream” school (Columbia) because I knew that even with them meeting 100% of my family’s “need”, I wouldn’t be able to afford it. This was before no-loan policies.</p>
<p>I don’t agree with the loosening of the PLUS loan requirements; I think they should be based on creditworthiness. Because like someone already says, what ends up happening is that responsible borrowers and taxpayers end up paying for the loans (and thus the educations) that the more irresponsible borrowers default on.</p>
<p>The majority of middle-class and lower-income students go to public universities close to home and it’s not such an emotional decision for them.</p>
<hr>
<p>The truth is that middle-class and lower-income students VERY often go to public universities close to home … where they live on campus, thus doubling their costs. I know far too many parents who borrow ridiculous sums of money to send their kids away to State U (and in my state, even the “lesser” schools are $16k-17k/year with room & board thrown in). Because so few people have saved, they end up borrowing to pay what isn’t covered in grants/scholarships. </p>
<p>A couple years ago, a guidance counselor at our local high school asked me what she should do because at that point she had about $17,000 in PLUS loans for her son’s first two years in college. She still had 2 more years for him, then her daughter would be starting. I discussed the need to have her son live in less expensive quarters during school (something that could be done in his school’s area), and I told her that she really needed to seriously consider having her daughter start at a community college or attend one of the 2 state U’s within driving distance so she could live at home. The mom couldn’t disappoint her kids, so she has just continued to rack up more & more debt. She is a single mother, and all I can say is that I hope her kids are willing to help her in her old age … because she will still be paying off those loans in retirement.</p>
<p>Parents need to help their kids choose schools that they can afford without so much debt (and they should consider saving or scaling back their lifestyles while the kids are in school, but that is another topic).</p>
<p>I was one of the few (only?) poster on cc that tried to point this out when most everyone else here was singing praises of the Obama Administration for nationalizing the educ loan business.</p>