According a recent blog post by the National Consumer Law Center (NCLC), Parent PLUS loans can be very dangerous loan products, at least compared to other kinds of federal student loans. This is true for several reasons:

1. the interest rates on Parent PLUS loans are higher than other federal student loans;

2. PLUS loans have "origination" fees of 4.2%, just for taking out the loan, compared to NO FEE for other federal loans;

3. There are no borrowing limits other than the total cost of attendance, so a parent or parents taking out a PLUS loan or series of loans can get into serious trouble, and borrow more than they can afford to repay;

4. Parent PLUS loan borrowers are not eligible for Income-Based Repayment (IBR) options, which can make it much more difficult to avoid going into default and the consequences of default;

5. If you consolidate a PLUS loan with other federal loans, it "taints" the entire batch, so that you can no longer use IBR for any of the loans;

6. Just like other student loans, PLUS loans are very difficult to discharge in bankruptcy;

7. If you default on a PLUS loan, you face the full weight of government collection powers, including wage garnishment, Social Security offsets and tax refund offsets. Also, there is no "statute of limitations" or time limit for the collection of federal student loans.

So if you want to help your child get through college, think twice before taking out Parent PLUS loans. If you later find that you cannot pay them, you may find yourself paying them back out of your Social Security benefits, or with funds that you need yourself, for your own needs.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization