November 24, 2009

Parent Plus Loan Tax Exemption

Posted in Parent PLUS Loans, Private Loans tagged , at 2:23 PM by dbonvie

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

Posted in Misc at 9:41 AM by Joe From Boston

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.


November 23, 2009

Substitues for a Parents Signature

Posted in Parent PLUS Loans tagged , at 10:50 AM by dbonvie

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:

  • the parents are not currently in the United States andcannot be contacted by normal means,
  • the current address of the parents is not known, or
  • 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.

November 18, 2009

Parent Plus Loan Credit Requirements

Posted in Parent PLUS Loans tagged , at 12:38 PM by dbonvie

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.

November 16, 2009

Can A Stepparent Take Out A Parent Plus Loan?

Posted in Parent PLUS Loans tagged , at 9:50 AM by dbonvie

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)
  • 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.
  • 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.
  • 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.

November 12, 2009

Parent Plus Loan Forgiveness Conditions

Posted in Parent PLUS Loans tagged at 4:41 PM by dbonvie

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?

Posted in Consolidation, Parent PLUS Loans tagged , at 10:46 AM by dbonvie

Yes, you may consolidate a Parent Plus Loan, but there a few things you should know.

  1. 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.
  2. If you have your own federal loans you are allowed to consolidate your Plus loan with them.
  3. 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%.

November 6, 2009

Parent Plus Loan Holders Get The Repayment Shaft

Posted in Parent PLUS Loans tagged at 11:29 AM by dbonvie

Friday Rant (Opinion Piece)

When it comes to repaying loans for higher education it is often the student we think of first, and with good reason, but what about those parents who have over extended themselves for their children? Some of them are in debt way over their head. What can they do to help their cause? If you are thinking about an Income-Based repayment plan, think again. You are not eligible.

Students who hold a Stafford, Grad Plus, or a consolidated bundle of both are eligible to enroll in an IBR plan if they demonstrate financial need, according to a federal formula that essentially limits monthly payment to no more than 15% of discretionary income. Borrowers can also report a $0 income if they are unemployed as well. $0 payments are allowed under the IBR plan which is fantastic. So what about the parents?

Are some parents not unemployed? Why are they not eligible for the same assistance? It sounds like a double standard to me. These parents who work hard their whole life and have hit hard times because of the economy are told, sorry, deal with it? That’s not right.

Still, a parent can utilize the 36 months worth of deferment time they are extended, but that just delays the inevitable and capitalized interest will continue to roll. It’s like trying to plug a hole in the Titanic with some taffy.

Don’t get me wrong, I love students and want them to have every advantage when it comes to paying off high school loans, but let’s not forget about Mom and Dad who have given us so much.

November 4, 2009

Is Getting a Parent Plus Loan a Plus?

Posted in Parent PLUS Loans tagged , , , at 11:49 AM by dbonvie

Parent Plus loans serve as an excellent loan option for parents today looking to aid their student with the cost of higher education. That said, Parent Plus loans are not the only option that parents have. Here are the most common three options that parents consider when helping out their student(s) with school.

1. Parent Plus loan: A federally back loan with an 8.5% fixed interest rate for the life of the loan. This loan is fully deferrable while the student is in school but will remain in the parents name until the loan is paid in full.


2. Private student loan: This is a loan type that parents will co-sign for their son or daughter. The primary responsibility for repayment falls on the student, though the co-signers credit can still be damaged if payments are not made. This loan type is fully deferred while the student is in school. The interest rates are variable and are dependent on the index the lender is using and the credit of the applicant. In some instances after a designated amount of on time payments from the student (36-48 months) is reached the parent can be removed from the loan application with a written request.


3. Home equity lines: With rates at 20-year lows many parents have elected to take out a home equity loan. For some this is the lowest interest rate of the three with the opportunity to fix this rate. There is no deferment time and the loan repayment would begin within 30-60 days. This loan would be the parents responsibility to repay as the student would not be attached to the application.