Parent PLUS vs. Unsub Stafford

bradlam · ‎08-20-2013

So we need another $5500 for my son's schooling this year. The financial aid office has looked over my credit report & said that there is a $175 medical collection on there from 2 years ago that counts as "adverse credit", and a Parent PLUS loan will be denied. My son can then get $4000 in an unsusidized loan. If I pay the medical collection though, I will most likely be approved for the $5000 PLUS loan. So my question is, do I want to pay that? I'm a little leery of the PLUS loan, and we can pay the additional $1500 if he got the $4000 unsub loan ($750 per semester). Has anyone ever secretly hoped that they would maybe get denied for the PLUS loan? Which loan would you want to aim for?

cookiemonster · ‎08-20-2013

Yes, as a matter a fact the financial aid counselor told me to apply knowing that I would be denied in order to receive the unsubsidized loan that would be in my son's name and not mine. I prefer that all loans be on him. good luck!

InvincibleSummer3 · ‎08-20-2013

I agree with the previous poster. There's nothing wrong with not wanting to cosign on a loan. If you feel leery for any reason, I would encourage you to listen to that little voice. There are many stories of folks who cosigned and regretted it later.

There's a reason they tell parents that in the event of an air emergency they should put on their own oxygen mask before helping the kids. Take care of you first, and you'll be in a much better position to help him should that become necessary.

dta · ‎08-20-2013

@InvincibleSummer3 wrote:
I agree with the previous poster. There's nothing wrong with not wanting to cosign on a loan. If you feel leery for any reason, I would encourage you to listen to that little voice. There are many stories of folks who cosigned and regretted it later.
There's a reason they tell parents that in the event of an air emergency they should put on their own oxygen mask before helping the kids. Take care of you first, and you'll be in a much better position to help him should that become necessary.

Parent PLUS loans are not generally made with a cosigner. If they are, it is a denied parent seeking a cosigner (called an endorser, who is never the student), not the student with the parent as a cosigner. A PLUS loan without an endorser is always the parent's and will never be the responsibility of the student nor affect the student's credit.

To the original question, apply for the loan and hope to be denied. Do not appeal unless additional loans are needed beyond what he can borrow in an increased unsub loan (resulting from the denial). On top of higher interest rates, the loan fee on PLUS loans is now over 4% (compared to just over 1% on Stafford unsub loans).

I work in an FA office and it's a little funny how many parents and students cheer when I come back with a denial.