The End of Parent Plus Loans?

Parent Plus Loans have often been seen as a way for parents to help their children attend and afford college. These loans are not based on debt-to-income ratio, and, as such, a number of parents quality for these high-interest loans. While this type of loan has been in circulation for a number of years, there’s a new debate brewing.

That debate is centered on the idea that these loans do not offer a return on investment (ROI) for parents, and might (potentially) drive the cost of college tuition up. With more parents defaulting on Plus loans and tuition rates steadily increasing, whether or not these loans are ‘fair’ remains unseen. 

The Obama Administration Adjustment

In 2010, the Obama Administration ended the Federal Family Education Program (FFELP) and changed the credit criteria for Plus loans - prior to these changes, parents did not have to have exceptional credit in order to obtain a Plus loan. Under the Obama changes, Plus loans come with the same credit criteria as private loans.

The reason for this was two-fold.

  1. Parents that did not have good credit were approved for Plus loans in the past. This often meant that those same parents wound up in default when loan payments were due - simply because the loans were granted with high interest to people that could not feasibly pay them back.
  2. The other reason is that the more people that obtained Plus loans, the more colleges could charge (Ask yourself: Why would tuition prices fall if everyone can get a loan?).

For all intents and purposes, these loans were classified as predatory. Once the Obama administration changed the rules for Plus loans, tuition enrollment dropped by the thousands. 400,000 loan applications were denied. Some colleges dropped tuition prices. Parents that could not afford to send their kids to school were no longer caught in a detrimental loan agreement.

Discontinuing Plus Loans

While the White House might move to end Plus loans completely, colleges and universities will likely fight back. Simply, these higher learning institutions do not want to lose out on students or rising tuition fees. At the very least, now, the US government might move to educate parents further on these loans in an effort to stop defaults.


What to Do If You are in Default

First, note that you are not alone. Many parents that agreed to Plus loan deals are in default. Strapped with hundreds per month in payments, these loans are not easy to pay back. If you have wound up in default, you should also know that there is help. Please contact the Dellutri Law Group today for more information and for a free consultation.