12.03.09
Can I Cancel My Parent Plus Loan?
YES. You can cancel a PLUS loan the same way a borrower would cancel a Perkins or a Stafford loan. In fact, even after the funds have been disbursed to the school you can still cancel your loan. You would just contact a financial aid officer at the school and let them know that they can send the funds directly back to the lender, provided your request is received within the designated add/drop period. Keep in mind, however, that in some instances you can not get back the origination and default fee of 4% back.
Does A Parent Plus Loan Have Fees?
YES. Parent Plus loans do have fees.
The standard fees attached to a federal Parent Plus loan include a 3% origination and a 1% default fee. That 4% can be quite significant too if you are taking out a great deal of money for your student. It’s also important to note that those fees are taken right off the top as well. So if you need $10,000 you should apply for $10,400. That way $10,000 will make it’s way over to the school.
You may also find that some lenders are willing to waive the default fee. If this is the case jump on that deal. A 3% fee is obviously better than a 4% one.
11.24.09
Parent Plus Loan Tax Exemption
Did you know that any federal loan, including Parent Plus loans which are used to pay for postsecondary education costs, are eligible for tax exemptions? Qualified borrowers are allowed to deduct the loan interest. The maximum education loan interest deduction is $2,500.
There are conditions like income limits that apply to the education loan interest deduction. Consult your tax advisor for more details to see if you qualify.
Signing off
Well, after 4.5 years I’m leaving the Student Loan Network to pursue other career opportunities. Dave and Kristin and possibly a few others will continue to post and provide you with the best info possible on how to survive the student loan process.
I wish all of you the best of luck in your endeavors. It’s been a pleasure gathering and presenting information to you for the last 4 years.
Monique
11.23.09
Substitues for a Parents Signature
Although parent information must be provided for a dependent student when completing the FAFSA, a high school counselor or a college aid administrator may sign the application in place of a parent if:
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the parents are not currently in the United States andcannot be contacted by normal means,
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the current address of the parents is not known, or
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the parents have been determined physically or mentally incapable of providing a signature
The signer must provide his or her title in parentheses next to their signature and briefly state the reason (only one is needed) why they are signing for the parents. The signer assures a minimum level of credibility in the data submitted, however, they do not assume any responsibility or liability in this process.
11.18.09
Parent Plus Loan Credit Requirements
When a lender determines a borrowers eligibility for the Parent Plus loan they must examine their credit history, but what is considered adverse credit history you ask? What are some of the markers they look for when rendering a yay or nay decision? Let’s delve into what adverse credit history actually is.
Adverse Credit History
Adverse credit history is defined as an applicant being 90 days or more delinquent on a debt or having been subject in the last five years to a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of an FSA debt. The absence of any credit history is not considered adverse credit. FFEL lenders may establish more restrictive credit standards for determining adverse credit.
When determining whether a borrower is ineligible for a Plus loan based on an adverse credit history, the lender, or the Department of Direct Loans, must obtain a credit report on the borrower from at least one national credit bureau. To provide a more accurate determination of adverse credit, the report must be obtained within a time frame “reasonably” related to the loan period.
11.16.09
Can A Stepparent Take Out A Parent Plus Loan?
Yes, a stepparent can take out a Parent Plus loan for an undergraduate student. Stepparents are eligible as long as their information was included on the Free Application for Federal Student Aid (FAFSA).
For FAFSA purposes a parent is considered one of the following:
- A step-parent (after marriage)
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If parents are divorced or separated, the parent is considered to be the one which the student lived with more in the past 12 months.
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If the student did not live with either parent in a divorced/separated situation, the parent is the one who contributed more financial assistance in the past 12 months.
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If the student did not receive appreciably more support from one parent or another, the parent is the one who claims the student as a dependent on the IRStax return.
Note: A foster parent, legal guardian, grandparent or other relative is not treated as a parent for purposes of filing a FAFSA unless that person has legally adopted the applicant. An adoptive parent is treated in the same manner as a biological parent on the FAFSA.
11.12.09
Parent Plus Loan Forgiveness Conditions
If you have taken out a PLUS Loan to help pay for your child’s education, all or part of it may be cancelled (forgiven) for several reasons. You may qualify for total or partial loan forgiveness if:
- The school closed within 90 days of your child’s enrollment and they were unable to finish their program of study.
- The school did not properly qualify your child’s status before they began studies.
- You did not receive a refund that was due to you.
- Your signature was forged.
- The school did not properly evaluate your child’s ability to benefit from the coursework before beginning studies.
- You become totally and permanently disabled.
- If you or the dependent for whom the loan was borrowed, dies
- Your loan is discharged due to bankruptcy. (Typically, student loans cannot be discharged in a bankruptcy.) Consult your legal counsel regarding your particular situation.
Can I Consolidate My Parent Plus Loan?
Yes, you may consolidate a Parent Plus Loan, but there a few things you should know.
- The parent who took out the Plus loan owns the Plus loan for the life of the loan. What I mean by that is you can not have your student, who the loan was taken out for, roll your Plus loan in with their federal Stafford or Perkins loans. The loan is in your name and tied to your social security number.
- If you have your own federal loans you are allowed to consolidate your Plus loan with them.
- Your fixed consolidated interest rate will depend on the loans you are rolling into your federal consolidation. A weighted average will be taken based on the interest rates attached to said loans.
So what are the Parent Plus loan interest rates that exist today? They vary widely, which is why your friend could have a really low fixed rate while you are stuck in the eight percent rate. Again, your consolidated rate is a reflection of the interest rates attached to your current loans. It is not strictly a market gage, as is the case with a home refinance.
Parent Plus Loan Rates
- Any FFEL Parent Plus loan taken out after 7/1/06 holds an 8.5% fixed rate, however, if you consolidate that loan there is an immediate interest rate deduction of .25% as the consolidation rate is capped at 8.25%.
- Within the Direct Loan program Plus loan are fixed at 7.9% for those disbursed after 7/1/06.
- For all other Parent Plus loans that have not been previously consolidated and which were disbursed prior to 7/1/06 the interest rate is at a historically low level, 3.28%. The previous low was during the 2004-05 academic year when Plus loans were are 4.17%.
