There is no escaping a Direct PLUS Loan, so not making payments and letting a PLUS loan go into default is a huge mistake. Even declaring bankruptcy will not dismiss the debt. Until the debt has been repaid, the government can garnish your wages, or withhold money from your Social Security benefits and tax refunds. What’s more, there are no time limits for when the government can collect the debt. So before you even consider defaulting, contact your loan servicer for advice, or seek out an attorney who specializes in student loan debt.
What’s more, unlike Sallie Mae loans, you won’t be able to have a PLUS loan balance forgiven if your child is later faced with total permanent disability (TPD).
What to Do Before You Take a PLUS Loan
Many times, a school will present the student’s financial aid package with a Direct PLUS Loan added in. The school might say that it wants to make families aware of all of their available funding options, but including the Direct PLUS Loan in the package can make the true cost of college confusing. When considering the costs of college, ask for a financial aid package breakdown without the PLUS loan.
Instead of a Direct PLUS Loan, you might have your child opt for a private student loan for any leftover costs that grants, work-study, federal student loans, scholarships, and other aid do not cover. If you want to help your child financially, you can make payments on the private loan while they are still in school. This allows you to subsidize your child’s college costs but doesn’t hold you solely accountable for the debt.
You may be able to refinance your PLUS loan to lower your interest rate or spread payments over a longer period.
What to Do if You Have a PLUS Loan
If you took out a Direct PLUS Loan for your child’s education and are struggling to pay it back, consolidation (as described above) might be an option. Continue reading “Danger 4: They’re Impossible to Get Out of, Even in Bankruptcy”