Government OKs College Loans to Struggling Parents

I have myself and spouse who are both on total disability. We have two sons in college. One is in is first year of law school, who took out loans, but not enough to cover all of his expenses. My other son is in a community college, 500 miles from home, who take out sttarford loans on his on credit. Although we have poor credit, we have never foreclosed on a property, and our bankruptcy was back in 2001. Can you please give me more information or options that we can apply for more funds for our sons. Thank you.

janice Corey of FL 8:39PM September 12, 2012

This article on demonstrates how in the dark so many people are about this problem, including the people quoted in the article. Students are coming out of school with anywhere from $25,000 to $250,000 in Stafford and Parent PLUS loans. Default rates are understated because you can defer payment while in school - graduate, undergraduate or even part-time. Meanwhile interest continues to accrue. The availability of funds just gives the colleges and universities even more room to raise costs. In the meantime about half of those graduating with bachelor's degrees in things like psychology, social work, political science and fashion merchandizing are unemployed or under-employed. At least with mortgages, you had a house you could foreclose on. What are they going to do, take away your diploma? In the meantime, a lot of people are going to be delaying family formation (getting married, having children) and buying houses and durables while they struggle with the burden. The public doesn't realize it yet, but this is another bubble waiting to pop and the tax payer, as always is going to pay the piper (unless we all do as the Fed inflates its way out of our debt).

Chicken Little of IL 6:32PM April 26, 2012

What is as equally worrisome is that PLUS loans are not part of the Cohort Default Rate calculation. This means the problem will lie hidden until it grows so large that it will have to be addressed. However, for those destitute individuals that are approved and have no visible means of support at least they will be eligible to take advantage of the new Income Based Repayment program. As always it will be the middle class that takes it in the shorts trying to find a way to finance their child’s education.

eddiemeboy of NY 10:01AM October 15, 2010

Using the rule of thumb that total education debt should not exceed income, which is the equivalent of the 14.5% debt-service-to-income ratio, I estimate that 10.6% of parents are borrowing excessively from the Direct Loan Parent PLUS loan program, based on 2007-08 data. If one uses an 8% debt-service-to-income ratio as the threshold, then 15.2% are borrowing excessively. If one uses a 20% debt-service-to-discretionary income threshold, then 14.9% are borrowing excessively.

Nothing prevents the student from helping his or her parents on the PLUS loan payments.

Incidentally, everything in Don of FL's comment is factually inaccurate. Neither FFELP nor Direct Loans are collected by the IRS (though in both cases the government could offset federal income tax refunds on defaulted loans), the statute of limitations was repealed for both types of loans many years ago, neither type of loan has ever been dischargeable in bankruptcy since passage of the US Bankruptcy Code in the early 1970s, and wage garnishment has been a feature of both programs for decades.

Mark Kantrowitz of PA 9:06PM September 27, 2010