Author Topic: What are parent Plus loans and why are they better than other choices?  (Read 3403 times)

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6686
  • Location: BC
I have kids entering high school and have started to learn about funding options in earnest, not just the savings portions.

As a Canadian, I am confused what options Americans have for loans.
1. Savings of various types
2.Bursaries and scholarships
3. Federal loans in the student's name up to limits, based on need. Stanford and ??  The May have low interest, deferred repayment, and can not be struck in personal bankruptcy
4. Student cc and personal loans

Parents can take :
5. Personal loan, cc or HELOC; refi mortgage etc
6 401k loan. (Any advantages?)
7. School private loan with deferment
8. Parent plus loan (is this same as no. 7?)

What else have I missed?  What are advantages of each?

And my big question.. Why do students seem to think that numbers 7 and 8 are their responsibility to repay?  Why are they thought of differently than savings from parents or personal loans so often?




caliq

  • Pencil Stache
  • ****
  • Posts: 675
Re: What are parent Plus loans and why are they better than other choices?
« Reply #1 on: February 11, 2015, 04:51:47 PM »
Federal student loans are called Stafford Loans; they can be either subsidized (no interest while in school, lower interest rates -- means tested eligibility) or unsubsidized (interest accrues while in school, higher interest rates -- I think available for all?). 

Parent PLUS loans are federal loans to parents, they're not private.  Unlike federal student loans, your credit score is checked. 

Students can take private loans with or without their parents.  Normally, they're taken out in the student's name with the parents as cosigner (because the student doesn't have a good enough credit score).  Which is why students feel obligated to repay them.

My parents haven't taken any PLUS or private loans, but I would want to pay them back if they had, because I would feel a moral obligation to them. 

FiguringItOut

  • Pencil Stache
  • ****
  • Posts: 763
  • Location: NYC
Re: What are parent Plus loans and why are they better than other choices?
« Reply #2 on: February 11, 2015, 09:21:20 PM »
When I was in college many moons ago, my 3rd and 4th year, my parents had to take Plus loan to cover the gap in my tuition.  Before they took these loans, I said I would pay them back.  My parents didn't have savings to cover this gap, and I felt bad for my folks having to take the loan out. 

I ended up paying these Plus loans back fairly quickly by setting up a recurring payment from my bank account that was about twice the minimal monthly payment.  I didn't even know that the loan was done and over with, until my mom called and said they got a check in the mail for overpayment. 

teen persuasion

  • Handlebar Stache
  • *****
  • Posts: 1087
Re: What are parent Plus loans and why are they better than other choices?
« Reply #3 on: February 11, 2015, 09:23:11 PM »
My kids' funding options for college (not just loans) have been: merit scholarships, need scholarships, private scholarships, federal aid (PELL), state aid (TAP), school grants, sub and unsub loans, work study, summer earnings, work off campus, savings, small amounts from us.  There have also been some fed grants that have disappeared (SMART grant, I think), and DD3 just signed for a TEACH grant which will require her to teach in underprivileged areas for a number of years, or it converts to loans she has to repay.  They have also received refundable tuition tax credits at the Fed and state levels.

caliq

  • Pencil Stache
  • ****
  • Posts: 675
Re: What are parent Plus loans and why are they better than other choices?
« Reply #4 on: February 12, 2015, 05:28:23 AM »
My kids' funding options for college (not just loans) have been: merit scholarships, need scholarships, private scholarships, federal aid (PELL), state aid (TAP), school grants, sub and unsub loans, work study, summer earnings, work off campus, savings, small amounts from us.  There have also been some fed grants that have disappeared (SMART grant, I think), and DD3 just signed for a TEACH grant which will require her to teach in underprivileged areas for a number of years, or it converts to loans she has to repay.  They have also received refundable tuition tax credits at the Fed and state levels.

+1

Sorry, my initial response kind of missed the forest for the trees.  There's lots of options besides loans but I'm also not sure how being Canadian will impact that.  For example a lot of my grants and scholarships are because I'm at an in state school and got certain grades/test scores in high school in this state.  But there are definitely university specific options and scholarships that you apply to individually (ie. Not included in your schools institutional aid application). This sounds counterintuitive but a private college might have more unrestricted aid available for a foreign student.  Don't make the mistake of only considering state universities because the initial price tag looks cheaper.  Often private institutions have a much larger pot of money to give away.  It's worth applying to a broad range (obviously within the realm of what your kid is interested in) and seeing what you get.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6686
  • Location: BC
Re: What are parent Plus loans and why are they better than other choices?
« Reply #5 on: February 12, 2015, 06:24:12 PM »
My kids' funding options for college (not just loans) have been: merit scholarships, need scholarships, private scholarships, federal aid (PELL), state aid (TAP), school grants, sub and unsub loans, work study, summer earnings, work off campus, savings, small amounts from us.  There have also been some fed grants that have disappeared (SMART grant, I think), and DD3 just signed for a TEACH grant which will require her to teach in underprivileged areas for a number of years, or it converts to loans she has to repay.  They have also received refundable tuition tax credits at the Fed and state levels.

Thanks! What is a need scholarship, is this different from a bursary?

I forgot the school internships...  Here kids with bursaries can apply for paid part time work on campus, at much better than minimum wage, and hours suitable to accommodate studies...

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6686
  • Location: BC
Re: What are parent Plus loans and why are they better than other choices?
« Reply #6 on: February 12, 2015, 06:28:21 PM »
Thanks to everyone! My question arose because initial research is loaded with a lot of USA specific advice, and I found some terms confusing.

As a parent, it seems a bit weird to give a loan to my kids for their tuition and then expect it to be repaid, but I guess why not?  Parents do this all the time for car loans and such...

teen persuasion

  • Handlebar Stache
  • *****
  • Posts: 1087
Re: What are parent Plus loans and why are they better than other choices?
« Reply #7 on: February 12, 2015, 07:53:47 PM »
My kids' funding options for college (not just loans) have been: merit scholarships, need scholarships, private scholarships, federal aid (PELL), state aid (TAP), school grants, sub and unsub loans, work study, summer earnings, work off campus, savings, small amounts from us.  There have also been some fed grants that have disappeared (SMART grant, I think), and DD3 just signed for a TEACH grant which will require her to teach in underprivileged areas for a number of years, or it converts to loans she has to repay.  They have also received refundable tuition tax credits at the Fed and state levels.

Thanks! What is a need scholarship, is this different from a bursary?

I forgot the school internships...  Here kids with bursaries can apply for paid part time work on campus, at much better than minimum wage, and hours suitable to accommodate studies...

I'm not familiar with the term bursaries.  Need scholarships are given on the basis of family need (cost of attendance vs. Expected family contribution).  Some schools only award scholarships based on need, while some will grant scholarships based on merit (high grades, SAT scores, etc).  My kids have gotten some of each: merit to entice them to accept, and need scholarships to make up the gap between the cost of attendance and our low EFC due to family size relative to income.

Applying to multiple schools also allowed DS2 to petition his first choice school to increase their aid package to match a rival school's FA package.  The school asked to see the rival's offer, and then beat it!