College loan question

[Pembo]

Opinions, thoughts, etc on Parent Plus loan vs private loan in student name with parent as cosigner.

Not sure which way to go.

 

[FINFAN]

Opinions, thoughts, etc on Parent Plus loan vs private loan in student name with parent as cosigner.

Not sure which way to go.

There is one difference (as sad as this may be) but if the parent named on the PP loan dies, the loan is forgiven. Unlike Student loans, even if the student passes away the loan must still be paid. Nice, right? Student loans can be adjusted based on income, return to school, whereas the PP can not. If you want to consolidate or refi loans, look up what the current criteria is, I know it has adjusted in the past few years. The rate on the PP is usually a smidge lower. They all stink~with rates as low as they are the is absolutely NO REASON student loans are as high as they are, interest wise.

 

[JanaDee]

There is one difference (as sad as this may be) but if the parent named on the PP loan dies, the loan is forgiven. Unlike Student loans, even if the student passes away the loan must still be paid. Nice, right? Student loans can be adjusted based on income, return to school, whereas the PP can not. If you want to consolidate or refi loans, look up what the current criteria is, I know it has adjusted in the past few years. The rate on the PP is usually a smidge lower. They all stink~with rates as low as they are the is absolutely NO REASON student loans are as high as they are, interest wise.

Not quite true. If a student dies with student loan debt and there is no co-signer on the loan, the loan is forgiven. If there is a co-signer, then the cosigner is responsible for paying off the rest of the loan.

 

[Hisgirl]

With the PP loan you lose access to several repayment options such as IBR and ICR unless you consolidate then it may be eligible for ICR. Also, there is no disability discharge. The parent would still be responsible.

Is there a reason you are only looking at these two choices? Normally, private loans are seen as a big no-no because of the limitations and inability to access the same options direct loans offer. Clark Howard just posted an excellent guide to school loans.
http://www.clarkhoward.com/student-loan-guide

 

[mousehockey37]

OP. check you PM.

 

[Pembo]

Hisgirl - thanks for the link. It helps explain a bit more.
mousehockey - thanks for your pm. It really helped.

Question - on the PP loan - the parent is responsible for paying or the student? or both? Will ds be able to consolidate the pp with his other federal loans?

 

[trip]

The Parent's Plus loan is in the parent name and not the student so the parent is liable for the loan. Now if the student wants to pay..........

 

[sksjasams]

The Parent's Plus loan is in the parent name and not the student so the parent is liable for the loan. Now if the student wants to pay..........

Now if the student wants to pay....they can, but they are under no obligation. The PLUS loans cannot be consolidated in with the student's loans bacause they are not the student's loans. The parent is the borrower.

 

[trip]

Now if the student wants to pay....they can, but they are under no obligation. The PLUS loans cannot be consolidated in with the student's loans bacause they are not the student's loans. The parent is the borrower.

That's right. Plus loans are in parent's name and even if the student says they will pay they are not legally bound. Also, if a parent co- signs a student loan the parent would be responsible to pay if the student doesn't. The government can even take part of a social security check for payment. Never co-sign any type of loan unless you are willing and can afford to pay it off.

 

[Pea-n-Me]

Someone posted this on one of these threads once - sorry, I can't remember who - but it helps put it into perspective, so I'll pass it along.

http://www.huffingtonpost.com/jenna-levine/jenna-levine-26-graduate-_b_823081.html

 

[teller80]

I'm sorry, but the story on Jenna Levine just makes my eyes roll. She had an Associates degree and couldn't figure out the math to get her Bachelors? American University told her it would be $19,000 per semester just for tuition. Of course she'd have at least $100,000 in loans at the end of two years. And what about her parents? There's no way I'd saddle my child with that kind of debt, I'd just say no. Yet she doesn't seem to take any responsibility - she calls Sallie Mae a "seductress" and a "loan shark". She claims "they forgot to mention what would happen to my proverbial legs if I didn't pay up", yet "My parents warned me about the interest rate and the risk I was taking, and I promptly ignored their concerns"; and as for the loan, she "continued to skip the fine print". No sympathy from me.

 

[Pea-n-Me]

I think it happens a lot. Kids don't realize the implications, and sometimes neither do parents.

Anyway, it's just food for thought.

 

[teller80]

Pea-n-Me -I think it's a great PSA. I've got one who graduated college and one there now, and I tell everyone I know to be careful with having your child graduate with a mountain of debt. But I can see it going in one ear and out the other in both parents and student ("But they NEED the college experience").

 

[leebee]

Hmmm... interesting story from Jenna Levine. I question the numbers, though. You have to be very, very in need to qualify for federal work study money. When DD21 was in college, she didn't qualify, although she DID qualify for Perkins and Stafford loans, both subsidized (also an unsub loan, but she didn't sign for that as she didn't want to be paying interest while in school or else having it build up and become part of the principle). When we talked to the financial aid office, they were very clear that federal financial aid normally goes to only the neediest of students- in fact, the aid officer said that usually only students who qualified for Pell and Supplementary grant money would qualify for work study. Knowing this, it seems odd that Jenna Levine was needy enough to qualify for work study but NOT for federally-subsidized loans.

No sympathy. She acknowledges that she didn't read the fine print, didn't listen to her parents warnings, didn't even look at her loan papers after she signed them. She admits to borrowing additional money to attend additional semesters because her community college credits didn't all transfer. I am sorry she's struggling, and I think the situation with the cost of education, loans, etc. is an abomination, but she's the one who signed the papers without bothering to read them. How is this anyone's responsibility other than her own??

 

[teller80]

Leebee - My kid was opposite. She qualified for work study but not for subsidized loans.

 

[FINFAN]

Not quite true. If a student dies with student loan debt and there is no co-signer on the loan, the loan is forgiven. If there is a co-signer, then the cosigner is responsible for paying off the rest of the loan.

OP stated "with parent as co-signer", thus my reply.
Also, a PP loan will be on a credit report so if a refi, auto purchase, anything along those lines is borderline, the pp loan may affect approval, based on amount ,of course.

 

[GrnMtnMan]

absolutely NO REASON student loans are as high as they are, interest wise.

Student loan rates are higher because there are lots more defaults/losses on student loans than mortgages. At the height of the housing bust, mortgage defaults briefly touched a 'normal' level for student loans. Usually, student loans default 6 to 10 times more frequently than a mortgage.

 

[FINFAN]

Student loan rates are higher because there are lots more defaults/losses on student loans than mortgages. At the height of the housing bust, mortgage defaults briefly touched a 'normal' level for student loans. Usually, student loans default 6 to 10 times more frequently than a mortgage.

well maybe if they gave them a fair interest rate they would be defaulted on less frequently

 

[teller80]

I didn't think you could default on a student loan. Or am I confusing that with not being able to bankrupt them.

 

[teller80]

well maybe if they gave them a fair interest rate they would be defaulted on less frequently

What do you think is a fair rate?