Government Extends College PLUS Loans To Parents With Low Credit Scores
Many parents who do not have the financial resources to pay for their childrens' college tuition out-of-pocket turn to parent PLUS loans to finance their education. These government loans have become more popular since the recession, but many college administrators are concerned that the loans are being extended to parents who cannot afford to pay them back.
"They are giving loans to people who have no business getting federally funded loans," Texas Christian University loan programs assistant director Melet Leafgreen told U.S. News and World Report.
This includes parents who are disabled and unable to work full-time and those who have subprime credit scores, the news publication adds.
Similar to federal student loans, parent PLUS loans may not be discharged during bankruptcy, forcing parents to pay the remainder of their balance. Additionally, PLUS loans tend to carry a higher interest rate than Stafford loans - a fixed 8.3 percent rate verses 6.9 percent.
Parents and students alike are advised by financial professionals to explore all financial aid options before turning to loans, such as grants, scholarships and work-study programs. Many students also work part-time during their college years to pay for their room and board and chip away at debt.
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