Student loans vs Parent PLUS: Which is better for FAFSA aid impact?
I'm trying to figure out the smartest loan strategy for my daughter's college. We've gotten her FAFSA back and the SAI score means we're looking at about $14,000 we need to cover beyond grants and scholarships. We're debating between: 1. Taking loans in her name (federal direct loans) with me as cosigner and I'd help with payments 2. Me taking out Parent PLUS loans directly I'm worried about how each might affect future financial aid. Will having loans in her name impact her SAI for sophomore year? Or is Parent PLUS better because it stays off her credit? What's been your experience with either approach? We're trying to minimize long-term debt while maximizing aid eligibility for next year.
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Tyrone Johnson
Parent PLUS is better bc the student isn't stuck with the debt! My kid graduated 3 yrs ago and I'm still paying but at least she's not starting life with all that debt
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Gabrielle Dubois
•Thanks for responding. So you went with Parent PLUS? Did that affect your child's financial aid package in their later years?
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Ingrid Larsson
There's actually a lot to consider here beyond just whose name is on the loan. First, Direct Subsidized and Unsubsidized loans in the student's name don't require a cosigner - these are federal loans. Private student loans would require a cosigner with good credit. Considerations for federal student loans (in student's name): - Lower interest rates than Parent PLUS loans - Interest subsidies available on some loans while in school - Lower loan origination fees - Access to income-driven repayment plans after graduation - Loan forgiveness options Parent PLUS considerations: - Higher interest rates (currently about 1.5% higher than Direct loans) - Higher origination fees - Fewer repayment options - Legally your responsibility, not your daughter's Regarding future financial aid: Outstanding loan balances don't affect the SAI calculation on FAFSA. The standard financial aid advice is to maximize federal Direct Loans in the student's name first before turning to Parent PLUS loans.
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Carlos Mendoza
•wait so ur saying that my daughters loans from freshman year wont hurt her for sophomore fafsa?? i thought all debt counted against you for aid eligibility
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Zainab Mahmoud
Been thru this 3 times with my kids and ALL STUDENT DEBT IS EVIL!!! The system is designed to trap these kids before they even start their careers. My oldest is STILL paying after 10 yrs and can't buy a house because of it. My advice? If you can afford the Parent PLUS then do it, at least YOU have established credit and income. These kids have no idea what they're signing up for!!!
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Ava Williams
•totally agree!! my parents took out plus loans for me & it was the best decision. they had the income & i was able to start my career without that burden
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Raj Gupta
Important point nobody's mentioned: Federal Direct Loans have ANNUAL LIMITS for dependent students! - 1st year: $5,500 max ($3,500 can be subsidized) - 2nd year: $6,500 max ($4,500 can be subsidized) - 3rd year+: $7,500 max ($5,500 can be subsidized) So if you need $14,000, your daughter can only get $5,500 in her name through federal loans this year anyway. You'd need Parent PLUS or private loans for the remaining $8,500. Also, with Parent PLUS loans, you have to pass a basic credit check. They mainly just check for adverse credit history, not income-to-debt ratios like private loans.
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Gabrielle Dubois
•This is incredibly helpful - I had no idea about the annual limits! So even if we wanted to put all the loans in my daughter's name, we couldn't do it through federal loans. This definitely changes our planning. Is there any advantage to maxing out her federal direct loans before moving to Parent PLUS for the remainder?
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Lena Müller
If you're looking at this purely from a financial aid perspective for future years, neither federal student loans nor Parent PLUS loans affect future FAFSA calculations. The FAFSA doesn't consider current student loan debt when calculating the Student Aid Index (SAI). However, there are other important differences: 1. Interest rates: Direct Subsidized/Unsubsidized loans currently have lower rates than PLUS loans 2. Subsidized loans don't accrue interest while in school (huge benefit) 3. Loan fees: Direct loans have lower origination fees (about 1% vs 4% for PLUS) 4. Repayment flexibility: Student loans offer more income-driven options after graduation My recommendation: Have your daughter take the maximum federal Direct Loans she's eligible for (especially subsidized if available), then fill the remaining gap with Parent PLUS. This gives you the best of both worlds.
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Gabrielle Dubois
•Thank you for breaking this down! It seems like a hybrid approach makes the most sense - max out her federal direct loans for the better terms, then use Parent PLUS for the remainder. I appreciate you confirming that neither will impact future aid eligibility.
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Carlos Mendoza
we tried calling the financial aid office to ask this EXACT question and were on hold for like 2 hrs before getting disconnected!! so frustrating when u need answers before the deadline!
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Raj Gupta
•I had the same problem trying to reach FAFSA last month! After getting disconnected twice, I used a service called Claimyr and got through to a FSA agent in about 20 minutes. They hold your place in line and call you when an agent is available. Saved me hours of frustration. Their website is claimyr.com and they have a demo video showing how it works: https://youtu.be/TbC8dZQWYNQ The agent I spoke with confirmed what others here are saying - federal student loans don't impact future aid eligibility, and there are annual limits on how much a dependent student can borrow.
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Ava Williams
my roomate's family did both - she has some loans & her parents have some plus loans. They said it was the best compromise so everyone shares some responsibility but nobody gets totally crushed by debt lol
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Ingrid Larsson
•This is actually the approach many financial aid advisors recommend - splitting the responsibility can be a good middle ground. It gives students some ownership in their education while preventing them from being overwhelmed by debt.
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Tyrone Johnson
One thing noone menitoned is that Parent PLUS loans can sometimes be transfered to the student after graduation using refinancing companies. Thats what we plan to do with our son when he gets his first job, but for now we're protecting his credit while hes in school
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Zainab Mahmoud
•BE CAREFUL WITH THIS PLAN!!! Once you refinance a federal loan into a private loan, you lose ALL federal protections - no income-based repayment, no forgiveness options, no hardship deferments. Private loans are MUCH less flexible if your kid hits hard times!
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Lena Müller
After reading your situation again, I'd recommend this specific strategy: 1. Have your daughter take the max federal Direct Subsidized loans first (~$3,500) 2. Then federal Direct Unsubsidized loans (~$2,000) 3. Then you take Parent PLUS for the remaining ~$8,500 This maximizes the loans with the best terms while splitting responsibility. The subsidized loans are particularly valuable since no interest accrues while she's in school. And remember, you can always help her pay her loans after graduation even if they're in her name - but having some loans in her name helps build her credit history.
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Gabrielle Dubois
•This is the exact breakdown I needed! I think we'll follow this approach - max out the subsidized, then unsubsidized up to her limit, then Parent PLUS for the rest. I appreciate everyone's insights!
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