Student Loans: Should I borrow the money? What is a Parent Plus Loan?

As I approach my 19th year in the practice of law, I often ponder the risks of assuming large student loans. I took the risk, and I successfully repaid my student debt. Others have not been so lucky.

I signed my first student loan promissory note on September 6, 1985. I finished undergraduate studies with a loan debt of $11,000. My total borrowings topped out at just short of $60,000.00 in 1993 following law school. It was a surreal number to me. I found it depressing. If I recall correctly, the payments were over $750 monthly, and started in January,1994. I struggled at first as my first job as a lawyer did not pay very much. I bumped along, scraping, scrimping, and saving (and keeping my old car running) for just about two years, until 1995 when I was able to “consolidate” to a payment of some $450 monthly plus an “unconsolidatable” loan that I paid $60 monthly on the side of for a total of about $510 monthly. This was a princely sum for a 27-year-old with an old, dying car and no outside family help.

Essentially, I paid my last student loan payment in July 2010. Some sixteen and one-half years later.

I have always been a bit entrepreneurial, In 1996, I was able to start my own law practice. From its inception, it has always done pretty well. Others have not been so lucky. Many of my friends have struggled with student loan payments.

How would my road be different today if I was a graduating high school student?

I don’t know if I would have even gotten so far today as tuition is higher and some of the student loans I was able to take out are not as available. Many of the loans offered today are Parent Plus loans, in which the student loan lenders try to get the parents of a student to sign up for the student loan. I don’t know if my parents would have been so willing to sign student loan notes for me in the amount required to get through four years of private undergraduate education. Also, with tuition hikes, the $10,000 I borrowed to get through my undergraduate program may be equivalent to borrowing $30,000 today. Would my parents (both hardworking people with high-school educations ) have been willing to sign up for $30,000 (in today’s dollars) of parent-obligated “plus loans”?

I likely would have had to attend a less expensive school under today’s situation, other than the Whitworth College (a private Presbyterian affiliated college in Spokane, WA) that I attended. I greatly benefited from my time at Whitworth. I believe that my educational experience at some other school would not have had the same qualities that Whitworth provided me. I can safely say that under today’s situation, my trajectory would have be different now than the one I was able to take.

If you are a parent, and your child is extremely motivated and a high achiever, I would probably step up and sign up for an appropriate amount of Parent Plus student loans as a last resort. However, if your child is a bit unsure of his/her direction, I suggest that you avoid the Parent Plus loan option. In the case where your child is less focused or not a high achiever, you are better off taking out a home equity loan (if you have any home equity) to pay for their education rather than taking out Parent Plus loans. The reason I recommend this approach is because even if you end up in financial trouble, the home equity line of credit can potentially be discharged through bankruptcy should you lose your home, whereas the Parent Plus loan is less dischargeable in bankruptcy.

If you are a child and are considering asking your parents to sign up for a Parent Plus loan for your benefit, all I can say is that you better be “on target” with your education. If you’re reading this blog, there’s a very good chance that you are aiming pretty well.

Seriously, for a young person to make good on their promise to their parents in return for their financial support through a Parent Plus loan, you need to get in, get great grades, graduate, and get to work. Do not screw your parents financially by changing your major five times, and by partying while you bring home a string of C’s, D’s and the occasional F. You need to decide on your major (or at least your department) before you show up for the first day of college as a freshman, and you need to stick with it even if you decide you might “want to go in a different direction”. You do not have the right to ask your parents to obligate themselves unless you are giving 110%. If you are not achieving top honors (baring some sort of learning disability) while asking your parents to sign up for Parent Plus loans, you are insulting your parents. Parent Plus loans did not exist when I was in college, but during my first couple of years at school, my parents did pay for some of the tuition. My way of honoring their commitment was to graduate summa cum laude which means “highest honors”. I was 5th in GPA in my college graduating class and finished with a 3.91 Grade Point Average. I received one “B” grade in my freshman year and two in my senior year. Every other grade was an “A”.

For what it is worth, that is my story. If you are a parent and your child does not have a commensurate level of committment to educational and study dedication, then you have the right to say “no” to a Parent Plus loan when asked by your child.

If you are a child and you do not intend to excel and be at the top of your class and department, you have no right to ask your parents to so obligate themselves to a Parent Plus loan, unless of course your parents are so wealthy that the Plus Loan is of no financial consequence to their long-term economic position.

Thank about it. Student loans are only for people ready to give a 110% effort towards being a student. There is a reason they are called student loans, and not called “play time, find myself loans.” Student loans are serious. If you take one out, you need to be serious about your career based on the education that you are buying with your student loan.

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