Parents of dependent undergraduates may use a Direct PLUS loan, commonly known as Parent PLUS loan, to borrow each year up to the student’s tuition fees without limiting the amount borrowed. While a loan without a limit may sound appealing, parents can take on serious debt.
According to a July 2021 survey conducted by The Harris Poll on behalf of NerdWallet, 1 in 3 parents with a federal PLUS parent loan say they would not have taken the loan if they could have started all over.
Parent PLUS loans are much easier to acquire, with no income requirement and no relaxed credit standards; However, they are more expensive than other federal student loans because they have higher interest rates and higher origination fees, NerdWallet explains.
According to federal data from 2021 College Scorecard, the median PLUS parent loan debt is $ 29,945, NerdWallet added, and a third of parents are not ready for the restart of the loans, which have been on hold since the start of the pandemic.
New repayment information released by the government just this year shows just how big a deal Parent Plus loans have become. While the majority of parents have been able to make payments, 10% of loan takers can only afford the interest payments, leaving them with bloated debt.
Collectively, parents owe $ 103.6 billion in PLUS parent loans, the Wall Street Journal reports. Many parents are unable to retire because of the loans they often expected their children to pay back.
In addition, loan repayment problems are a double problem. Failure to repay loans not only harms the borrower’s credit, but if they default, the debt falls on taxpayers, according to the Wall Street Journal.
The NerdWallet survey also found that 28% of Parent PLUS borrowers rely on blanket debt forgiveness, but there is no guarantee among the experts.
The WSJ added that these loans are not eligible for federal student plans that write off debt after 20 to 25 years. One way around this would be to ask the government to consolidate old loans into new ones to create a loan that can be paid back based on income. Parent PLUS loans can also be canceled in the event of the death or permanent disability of the borrower.
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This article originally appeared on GOBankingRates.com: Parent Plus Loans: How Much Debt Do Parents Have and Can They Be Forgiven?