Parent Plus Loan Tips

Money Kuel Category Expert: Joy Alford-Brand

If you are a parent of a young adult, there’s a chance you have student loan debt.

“What you may not know is the largest growing demographic of student loan debt borrowers is actually parents of college students.”

It shouldn’t be any surprise to anyone that student loan debt is becoming a massive issue. This is especially true since it has now eclipsed credit card debt as the highest amount of unsecured debt in the nation. What you may not know is the largest growing demographic of student loan debt borrowers is actually parents of college students.

Things You Should Know!

If you are (or are about to be), a Parent Plus borrower, there are a couple of things you should know about your loans.

1. You have to qualify for Parent Plus loans (meaning you have to have decent credit to apply).
2.  There is no statutory cap on the amount of loans you can take out. (Beware!)
3. They come due 60 days after they are fully disbursed. However, they can be put in deferment or forbearance while your student is in school.
4. They will still accrue interest when they are in deferment or forbearance, though.
5. You don’t get a grace period on your loans after your child leaves school like they do.
6. They only qualify for one income-driven repayment plan and that is the Income Contingent Repayment plan.
7. If your payments are in default, the government can offset your tax refund to pay your federal student loans.
8. If your payments are in default at the time you are ready to begin getting your Social Security payments, the government can garnish your SS payments to pay your federal student loans. They can’t take your full payment, though.
9. If your student should die, their federal loans will be forgiven and your Parent Plus loans on behalf of that student will, too.
10. Student loans are generally (with some exceptions), not dischargeable in bankruptcy.

I’m sorry for the wholly depressing nature of this list. However, it’s better to hear the bad news and adjust for it as soon as you can. Knowledge is power and savings!

“As an attorney who specializes in bankruptcy and debt management, I would absolutely not take out loans, or co-sign loans, for anyone but you and your spouse.” 

Should I Take Out Parent Plus Loans For My Student?

As if the preceding list was not enough of a bummer, now we get to the million-dollar question that most people ask me about paying for their kids’ college. Should they take out Parent Plus loans to cover their students’ college expense shortfall? Well, my friends, that is a very difficult question to answer. So, here is my typical response.

As an attorney who specializes in bankruptcy and debt management, I would absolutely not take out loans, or co-sign loans, for anyone but you and your spouse. We don’t know how our children will act out in the wild so, you could potentially take out tens of thousands of dollars in student loans and watch Junior get three and a half years into their degree and then drop out to go save the whales in the Arctic Circle or lead drum circles out in the bush somewhere. That is not good.

Know Before You OWE!

Having said that, I fully realize that parents will do what they have to do to make sure their kids get a leg up in the world. That includes helping them in any possible way to get a college degree. The last thing I would ever do is judge someone for doing what they feel is necessary to help their kids. If you feel like you need to take out Parent Plus loans to help your child get their degree, I support you without question. Please just make sure you know what you are doing before you sign on the dotted line. Know before you OWE!

Finally, don’t forget that the temporary Coronavirus forbearance on federal student loan debt ends on 9/31/21. That date is just around the corner. If you are having issues with your student loans, don’t wait until the last minute to figure out a strategy to deal with them, including continuing to make payments during the forbearance. Get on top of them now. You’ll be glad you did!

About the Author:

Joy Alford-Brand is an author, public speaker and attorney.  She graduated with Bachelor’s Degree in History from Wright State University in Dayton, Ohio in 1994 and she received her Juris Doctor from Ohio State University College of Law in 1998. Her main area of practice is Bankruptcy. She is admitted in North Carolina where she lives and works. Joy founded newcashview.com in 2015 as a platform through which she could help others work toward financial freedom and peace of mind!  For more information, check out newcashview.com.