Hey everybody, Matt Carpenter, College Aid Pro and College Aid Professionals. When it comes to families that need to borrow money for college, and there’s millions of them, there is no black and white answers, no right or wrong way to do this. For all the families that we work with, we give many, many different recommendations, because, what is the best recommendation for one family is not necessarily the best recommendation for the next.
Parent PLUS loans
The PLUS loan is a federal government program for parents that need to borrow money for their sons or daughters going off to college, or for graduate level schools, the students themselves borrow the PLUS loan. This is a pretty popular program that gets mixed reviews. But there are some cases where we can take advantage of this program and it can be a great thing, for some families. We refer to it as a PLUS loan cheat code.
Parent PLUS Loan Cheat Code
The Parent PLUS loan for a parent or parents, whether it’s a single family or two family household that might have a very low income. The PLUS loan, now this can be where the problem lies, but for some families it’s beneficial. There are no income requirements and there’s no max to the amount that parents can borrow. Even if one parent has very low or no income, they will qualify for a PLUS loan. When the loan goes into repayment, it goes into repayment six months after the student has graduated from college. Parents can set up a repayment plan that is based on the income they take home. That means the minimum monthly payments could be as low as zero dollars. Then, the PLUS loan is forgiven after 25 years. You could be in a situation if one parent has okay credit and no income they can borrow all of college under the PLUS loan and will have no repayment until it’s due which would be 20 to 30 years after graduation. Once they are eligible for forgiveness, they’ll get hit with a big tax amount, called a tax bomb. Why? Because the forgiven amount of that loan becomes taxable income. For the year that the loan is forgiven it could be problematic. However, even in this scenario, it’s usually still a win for families that fall into this scenario.
Is there a permanent solution or a right solution for every family borrowing? No, but if a family falls into this category, we would at least consider taking a look at the PLUS Loan cheat code.