03.19.08 | Parent PLUS Loans and Parent Loan Consolidation
Parent PLUS loans are Federal based loans taken out by a Parent on behalf of a child. Here are some quick facts about the loan before I touch on the consolidation of these loans:
1. These loans are taken out by the parents in their names, and can NEVER be transferred to the students name when they graduate
2. The student has no obligation to repay this loan
3. The payments on these loans start right away… they are not deferred because the child is in school (this is not the case with Stafford loans).
4. A parent plus loan is not a joint loan between 2 parents… even if the parents are married, only one parent applies for the loan and the loan will be under that parent’s name and associated Social Security number.
A typical college student is in school for four years. Let’s assume a parent will be borrowing 4 plus loans in total; one for each school year. The loan is typically applied for in the summer time… and half of it is disbursed for Fall semester, and the 2nd half will be disbursed at the start of spring semester. The loan payments will not begin until the loan is fully disbursed, so spring semester is when the parent will receive their first bill.
The following year, the parent repeats this process, and spring of their child’s Sophomore year they want to consolidate the 2 loans together. I say spring because you cannot consolidate a loan that is not fully disbursed. So to apply for a loan consolidation for your 2 loans..you simply fill out a Consolidation Promissory note with the company of your choice. Your loan payments will then be paid back to the company you chose, instead of your initial lenders for the loans.
Let’s add another child to the mix… many times parents have multiple children in college at the same time. Let’s say Dad and Mom have two children, Ben and Molly. Ben is a freshman at College X and Molly is a Junior at college Z. Dad has borrowed a plus loan for Molly for each year she has been in school. He wants to do the same for Ben. Dad CAN consolidate his PLUS loans together even though they are for 2 different children. However, if mom applied one year, with her Social Security Number, her PLUS loans cannot be combined with Dad’s PLUS loans. So keep that in mind when borrowing – it should be the same parent every year, unless you have no plans to consolidate.
One last fact about the PLUS loan is that its forgiven if: the parent that borrowed it becomes deceased OR the child that it was taken out for becomes deceased. Post any questions you may have about this loan.
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What if a student was given information (by a working member in the financial aid office) that wasn’t updated and it effected the payment for their loan? For example: The student was told that the Parent Plus Loan could in fact be transfered to the student’s name once the loan is distributed to them and that it would be forgiven after the student starts working for a title 1 school in Kentucky. Now, the student has learned that the loan would not be transferred to the student and it’s not forgiven. So, what is one to do?
March 20th, 2008 | #
If you have written documentation of this, you can petition the FSA Ombudsman for assistance – http://www.ombudsman.ed.gov – as PLUS loans cannot and have never been transferable to the student.
March 20th, 2008 | #
I have a question about the federal Plus loan? If is only allowed for the parents to take out this loan, then it means the parent must have good credict? Can my parents borrow the total cost of 4yr degree program? Or only borrow pre year? What is the interest rate after the 6 months of graduation, when my parent borrows up 160,000 for my for years? Is there a way my parent can have a payment plan or is this not possible? My mother is a single parent rasing three girls and has bad credit. I’m the second child strating my freshman year in 06/16/08 in the Culinary Institute of America. Per semester the total cost is 30,000 and I also do not have any credit. I need some guidance, HELP?
April 2nd, 2008 | #
Culinary Institute of America is a ripoff – if you don’t have the money to go to school, don’t borrow it. The kind of job you are going to start with will only pay you around 30K a year – you will never pay off your loans. So if you want to go, pay as you go.
May 25th, 2008 | #
Let me just say to any potential student or borrower: NEVER NEVER NEVER take out a PLUS loan as a parent for your child and as a student, NEVER NEVER NEVER take out a PLUS loan from a parent. The loan can NEVER be transferred to the student and if the student graduates, 9 times out of 10, they have the hardest time making that payment. And if they don’t the parent is responsible – even if this loan ends up being 30 years old. I know – my parents took out these loans for me and my brother when we were young and didn’t have a clue about what the loan meant. And sure we both had every intention of paying this loan back. But I had no idea life would get in the way and now the loan has gotten so high over the years because of their outrageous interest rates and at this rate, it’s like making a payment toward a house. And it breaks my heart to think about how my parents worry about this loan being on their credit. And yes it’s in good standing and paid on time but it’s still there against their FICO score. So think long and hard before you do this – this is my biggest regret about my college years and if I could go back, I would have never took the loan out and worked my butt off at McDonald’s to pay my own way.
October 30th, 2008 | #
My children assured me they would pay the loans when they graduated. They now refuse to do so and I cannot afford to pay. Needless to say we no longer talk.
November 13th, 2008 | #
Plus loans are a convenient way to help finance a college education. One benefit is that a portion of the interest is tax deductible. My kids also pormised they would pay me back for the Plus loans I took out for them. It would be nice, but I am next expecting anything soon. I’m 55 but the Dept. of Ed has allowed me to consolidate my middle son’s Plus loan with a 30 year repayment plan. If I make to 85, I’ll be happy, but if I don’t the debt willbe discharged. Is it any wonder our government is going broke?
January 22nd, 2009 | #
My mother took out Parent plus loans for my 4 year degree, I never knew that she expected me to start paying them once I graduated, but thats what she told me right after graduation, I wish she would have brought this up before I started, I have my own Student loans (which I am perfectly ok with paying), but there is no way that I can afford to pay the Plus Loans, I don’t know how to tell her no though, so students, be REALLY careful in deciding how to pay.
February 18th, 2009 | #
Steve write the following: “It would be nice, but I am next expecting anything soon. I’m 55 but the Dept. of Ed has allowed me to consolidate my middle son’s Plus loan with a 30 year repayment plan. If I make to 85, I’ll be happy, but if I don’t the debt willbe discharged. Is it any wonder our government is going broke?” My question is what steps did you do to get it consolidated with a 30 year repayment plan. I am 54 and I need to ge this done. I
April 26th, 2009 | #
To consolidate your federal loans the Department of Education is your best resource. They may be reached at 800-557-7392. Generally speaking to get a 30-year term is dependent on the amount that you owe.
April 27th, 2009 | #
in reply to Ronnie: I’m in the same boat! I was on my way to teach english abroad after graduation until my father said to me that I can’t because I need to get a high-paying job to pay his parent plus loan along with my loan ($1000 a month). Why did he wait to tell me that?!?! If i knew that then I probably would of majored in a subject that’s known to pay new graduates A LOT rather than “following my dreams”…not to meantion that this recession is so bad (been job-hunting for a year)! He also wants me to go to a “cheap” graduate school in order to get a high-paying job but if I do that then i definitely won’t be able to pay him back because I will be too busy paying for graduate school! This is INSANE!!!! I don’t know what to do!
May 29th, 2009 | #
Re: Ronnie and Kenia
I am in the exact same position. I graduated a little over a year ago. I am a teacher and just got married and am trying to buy a house. My mom found out how much we make (not taking into account that we are about to have to start making payments on a HOUSE)and is insisting I start paying her loans. As a teacher, I really do not make that much money; my husband makes even less. We already shell out hundreds a month for our student loans. I understand where she is coming from (my 2 brothers are at an expensive school with no scholarships) and I know she will need help in a few years to pay. I just don’t know if I will be able to afford it; right now it’s a house payment, but in a few years it will be my own kids! If I had known this, I would have made college less expensive from the beginning.
July 29th, 2009 | #