In a new twist on the student loan crisis, this year has seen a growing number of students paying on their parent’s loans. The problem started with the Parent PLUS loan system, a system that is notorious for granting parents large amounts with few strings attached.
To take out a PLUS loan, the government does not consider the parent’s income, ability to pay, or other debts. In fact, the only consideration for a PLUS loan is a credit check. Provided that the applicant does not have any adverse history, meaning that the parent is not more than 90 days late in paying any current obligation or have a bankruptcy or foreclosure in the past five years, the parent is approved. As a result, parents sometimes take out large amounts of PLUS loans that they are never able to repay.
Unlike student loans that are currently capped at $31,000 in subsided and unsubsidized aid for each year of attendance, a parent PLUS loan can be used to finance the entire cost of attendance, minus any other financial aid. Further, the total amount allowed is not capped, meaning that if a parent has five children, she can borrow the full cost of attendance for each of the them. It is not difficult to see how quickly parents can become overextended in the PLUS loan system.
As important, the PLUS loans feature higher interest rates than other student loans, and like other student loans, the PLUS loans are not dischargeable in bankruptcy. As a result, many recent grads who can barely pay their own loans are also making payments on their parents PLUS loans.
If you have PLUS loans and cannot make payments, their may be some relief. Increasingly, private lenders have offered refinancing to PLUS loan debtors. Refinancing can lower payments and interest rates, but waives the some of the special protections that come with federal student loans. Before you do, schedule an appointment with to discuss the other debt relief options you might have.
If you are in over your head in student loan or other debt, let us help you explore all of your options. We are bankruptcy lawyers who know how to give you a fresh financial start. Contact our New Jersey law firm by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at