Approved for a Parent Plus Loan

[CAB]

I was just approved for a parent plus loan for my daughter. But I have some questions. First, it is agree dthat our daughter will ultimately be paying back these loans. So with this said, here is my question.

 

Should of I done the undergraduate loan and just co-signed for her, or is it possible that some point this loans can be consolidated and transferred to her name? I'm figuring in 4yrs I'm looking at 80,000 in debt for her, and then another child heading off. I'm worried that it will definately hurt us when looking to refi or anything that takes a look at your income-to-debt ratio.

 

Also, if I should really do the co-sign loan, and if we defer it for 60mos, it that 24mos worth of payments have to be made for it to be in her name soley? Thats what I think I'm gathering from the info I've read.

 

Advice from someone would be great - I'm excited that we can finance her education, but I want to do this right so that we're not going to have regrets down the road.

 

Thanks so much for your insight.

[LynnInMN]

I was just approved for a parent plus loan for my daughter. But I have some questions. First, it is agree dthat our daughter will ultimately be paying back these loans. So with this said, here is my question.

 

Should of I done the undergraduate loan and just co-signed for her, or is it possible that some point this loans can be consolidated and transferred to her name?

If you are being offered PLUS loans I would have to assume to has been packaged for all her federal staffords. That would leave PLUS loans and private loans as the remaining options. If you borrow a PLUS loan, it will always remain in your name.

 

I'm figuring in 4yrs I'm looking at 80,000 in debt for her, and then another child heading off. I'm worried that it will definately hurt us when looking to refi or anything that takes a look at your income-to-debt ratio.

 

Also, if I should really do the co-sign loan, and if we defer it for 60mos, it that 24mos worth of payments have to be made for it to be in her name soley? Thats what I think I'm gathering from the info I've read.

Keep in mind that interest accrues from the date of dispursment on both PLUS aned private loans. If you defer a PLUS loan the interest will be capitalized, creating a larger balance.

Same goes for a private loan, except the private loan will be at a higher interest rate. Payment terms on private loans are not that flexible either.

Advice from someone would be great - I'm excited that we can finance her education, but I want to do this right so that we're not going to have regrets down the road.

 

Thanks so much for your insight.

[CAB]

We've been receiving her FA packages from schools, she qualifies for the Stafford loan, an example

 

Tuition 35,300/yr.

 

Award Program:

UNE Nursing Scholarship 3,000

WCC Endowed Scholarship 1,000

UNE Access Grant 1,500

Federal Work Study 1,500

Federal Perkins Loan 1,000

Nursing Student Loan 1,500

Subsidized Stafford Loan 1,750

 

Thats only 10,750. Obviously leaving a pretty good gap. So yes, I started with seeing if I would get approved for the parent plus loan. My big question is - should I go a different way. Should I just co-sign for her. I don't really want these loans on my credit for the next million years.

 

What is the best route for funding these additional loans - with as little as possible impact on my credit.

 

Its not that I don't want to help my daughter, and of course I will help pay these loans, the problem is we're sitting on a interest only mortgage that will have to be refinanced in 5yrs - I don't want to prevent that from happening.

 

If I was approved for the Parent Plus, can I change it to a Ungraduate loan and just co-sign for her?

[LynnInMN]

The only alternative would be a private loan and being a cosigner is going to make just as much impact on your credit as a plus loan, but at a higher interest rate. Private loan payments can be high...on $80k your daughter would be looking at monthly loan payments probably around $800-1000 per month over and above her stafford payments. PLUS loan payments would be just as high.....however PLUS loans can be consolidated and the repayment terms extended.

 

Are you making the right (affordable) choice for her education with that high a tuition?? Is she aware of what her debt load is going to be like and what the payment is going to be when she graduates?? From just what you are writing, her student loan payments are going to be well in excess of $1000 per month.

[Cynic]

Private loans are outside my area of expertise, but I can tell you the following about PLUS loans:

 

1) You, the parent, are the borrower, forever. Regardless of any agreement you have with your daughter, you will be ultimately be legally responsible for repayment of the loan. Deferments will be granted or not granted based on your financial situation, not your daughter's, and you will be the one who must request them, now and 10 years down the road until the loan is paid in full. Payment, and nonpayment, will be reported to credit agencies in your name.

 

2) They go into repayment 30 days after they are fully disbursed. They start accruing interest when they are disbursed. You are not entitled to a deferment because your son/daughter is in school. The lender can give a forbearance if they choose to, but they are not required to.

 

3) Your daughter's federal student loans and your federal PLUS loans cannot be combined in a Federal Consolidation Loan at a later time- the loans one person is responsible for cannot be consolidated with those of another person in the federal system.

 

4) PLUS loans are regulated and insured by the federal government. They generally have more favorable terms then private loans, but do not sign for them if you do not fully understand the terms, and do not intend to repay them if your daughter can't or won't.

[Cynic]

Tuition 35,300/yr.

 

Award Program:

UNE Nursing Scholarship 3,000

WCC Endowed Scholarship 1,000

UNE Access Grant 1,500

Federal Work Study 1,500

Federal Perkins Loan 1,000

Nursing Student Loan 1,500

Subsidized Stafford Loan 1,750

 

Thats only 10,750. Obviously leaving a pretty good gap.

 

The 1st thing I would recommend toward filling some of that gap is Unsubsidized Stafford loans. They are at 6.8%, will be in the student's name, and require no cosigner. After that PLUS loans (if you, the parent understand and agree to what you're getting into taking that kind of loan) and then private loans.