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Episode 04 That Putrifying Pestilence Known as the Parent PLUS Loan

Episode o4 That Putrifying Pestilence Known as The Parent PLUS Loan

Minute 1:  It all begins with the FAFSA.  You will be expected to take out a Parent PLUS loan even if you get a zero EFC letter.

Minute 2:30 A Parent PLUS Loan is a loan to your student that you are obligated to repay. If you don’t, your income tax refund can be garnished and your Social Security can be seized.

Minute 4-7: If you need a Parent PLUS Loan, you likely can’t afford to repay a Parent PLUS loan. Parent PLUS Loans are expensive. They are not like direct subsidized loans, where the interest is covered by the American taxpayer during the time they are in college. The Parent PLUS Loan is much more expensive. It has a 4.25% origination fee. Interest for 2018 is set at 7%.

Minute 6:20:  Average student takes 6 years to graduate; therefore, if your student takes the average amount of time to graduate and you take out $5000 per year, you will owe $30,000 at the end of their six years in college.

Minute 7:00: The student may be given a check for excess loan proceeds. If the student doesn’t need the money for tuition that semester, they may blow the money on a beach vacation or shopping and you won’t even know!

Minute 8: Loan payments are due immediately, not upon graduation. If you can’t start making payments immediately, you can’t afford this loan. It’s true you can get a deferment on payments (not interest), but if the loan is not paid on time, your wages can be garnished, your income tax refund can be seized, and all except $750 of your Social Security can be seized. 

Minute 10:30-13:30:  What is the interest on $30,000? Roughly $12,000 plus $1,300 of origination fees. That is a monthly payment of $358.00. You need to ask yourself if you can start paying this money back today. If the answer is no, then the answer is clear, you cannot afford these loans. When you see the loan amount you are expected to take out in your student’s freshman year, you need to multiply that amount by six. The average number of years a student now takes to graduate.

Bonus Content:

Unsure of how to calculate how much your loan will cost you. Check out the calculators at Student Loan Hero. Email us with questions if you are unsure as to which calculator to use to figure out your loan cost.

Still don’t believe you have educational options? Check out our forthcoming book, Shun Student Loans and Derek Magill’s new book Create Your Career.

 

 

About the author, Rose McConnell

Rose McConnell is an attorney practicing in Atlanta, Georgia. She is the author of Shun Student Loans; Get the Education You Need for the Fabulous Life You Want. Her concern over rising debt levels grew out of observing the devastating impact of excessive debt during the 2008 financial crisis. Many of her clients lost their homes, had their retirement savings decimated, and have never financially recovered. She podcasts to warn families of the dangers of student loans and to offer information to debtors struggling with repaying education loans.

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