We all want to do what is best for our children, but going deep into debt so they can go to their dream school may not be the best choice. Some parents are being forced to file for bankruptcy after taking out Parent PLUS loans on behalf of their children. This is bad in and of itself, but it is made worse by the fact that PLUS loans, like other student loans, are difficult to discharge through bankruptcy.
What Are Parent PLUS Loans?
The amount of debt a student is able to take on in order to get a college education is limited. Policymakers don’t want young adults to bite off more than they can chew, so they cap the amount they can borrow. For many students, the amount they are able to borrow is less than they need to go to their dream school. Enter the Parent PLUS loan.
Parent PLUS loans are capped at a much higher amount. Borrowers can take out the total cost of attendance, minus any other aid provided.
These loans are underwritten by the federal government, so many people assume they are a good idea. While they may work well for families, they are very risky for others. The interest rates are relatively high, the income-driven repayment plans are expensive, and if you default, the government can confiscate your tax refunds and garnish your wages and Social Security.
PLUS Loans Grow In Popularity
Despite the risk of taking out a Parent PLUS loan, a growing number of parents are doing so in order to ensure their kids get the education they want.
“At the end of last year, there were 3.6 million loan recipients with nearly $101 billion in Parent PLUS loans — an increase of about 40% from $72.2 billion (adjusted for inflation) at the end of 2014.”
Data from the Federal Reserve reveals that people over the age of 50 are taking out students at one of the fastest-growing rates. Since most college students are younger than that, this indicates that these loans are probably Parent PLUS loans.
Difficult To Discharge
When a family is hit with the first statement, or heaven-forbid, faces some sort of life-altering challenge that makes it difficult to make payments, reality sets in. Parent PLUS loans are not a lifeline, they are an anchor. They will drag your family down when you are struggling to keep your head above water.
PLUS loans, like other student loans, are not always dischargeable through bankruptcy. A filer must prove repaying the loans would be an undue hardship. This is a difficult burden to meet, but the difficulty of meeting it should not prevent you from seeking relief and consulting with one of the experienced bankruptcy attorneys at Hanson & Payne.
A Milwaukee Area Bankruptcy Attorney You Can Trust
If you are struggling to keep up with payments on your Parent PLUS loans, or other student loans, Hanson & Payne is here for you. Our Milwaukee attorneys have handled many bankruptcy cases where student loans played a role. Please contact us today to schedule a free consultation.