Question: My son will be entering his sophomore year at a 4 year private university. For his freshman year, I took out a Parent Plus Loan. However, as a single parent, there is no way I can do this every year. Therefore, my son is applying for a student loan through the university’s recommended lender, in the amount of $8,000. It appears, from the application, that I must be a cosigner on the loan application since he has no credit history. No problem there. However, when I called to inquire about something, I was told that unlike the Parent Plus Loan, which is approved based simply on credit worthiness (of which mine is excellent), the student loans go by credit worthiness AND debt vs. income. As a single parent, my income hovers in the $30,000. range, but along with this I also have a mortgage, car payment, and approx. $5,000.00 in credit cards. I am concerned that because of a low income, my son will not be approved for this loan. I am beginning to panic because school is only 4 weeks away, and I don’t know what I’ll do if he isn’t approved for a student loan. Can you calm my fears?

Answer: If you want to take the “student loan” instead of the PLUS as a way for you to have less responsibility for the loan, be aware that when you co-sign the “student loan” you become just as legally responsible for it as a PLUS loan. You are essentially saying that if your son doesn’t pay it, you will.

The difference is that they now have two people that are taking individual responsibility, and if one doesn’t pay they can go after the other person. So you personally don’t have any less responsibility with the “student loan” vs. the PLUS.

As to whether you’ll qualify for the “student loan”, only the lender can tell you. They are going to compare your total debt of all kinds against your income to determine if you can reasonably be expected to meet all those payments. If they think that you can’t, then no loan. And remember that the new debt will be considered as part of your debt next year if you apply again.

Depending upon how much you really must borrow, there is one aspect of the PLUS to consider: if you should be turned down for a PLUS loan, your son can then borrow up to another $4,000 ($5,000 for juniors and seniors) in the form of an UNSUBSIDIZED interest-bearing Stafford loan. Like the regular Stafford it will be in his name alone (a TRUE student loan).

For unsubsidized Stafford’s he’ll have the option of paying the interest each month, or deferring it (with compounding) until after he’s out of school. In other words, that $4,000 loan can become maybe $5,000 by the time he graduates – so consider checking off Item 12 on the promissory note that reads “I want to pay unsubsidized interest while I am in school.” At current rates, it’ll be about $27 per month once both semesters have been disbursed to the college.

A side issue: based on a $30,000 total income I suspect that you received a Pell Grant, which means that your EFC was under $3,100. That means that the college did not choose to fill your son’s full need since you still have to borrow another $8,000. Some schools just don’t have a lot of money to give, but if your son’s grades have been less than stellar it could be why you were shorted. If true, make him aware that if he brings his grades up there’s a chance that the college could give him more money next year – it’s always the best money to the best students…if it’s available at all.

And have you spoken to the financial aid office about your dilemma? If you ask, they may be able to offer some additional aid help – or not.

Your situation may help remind others just entering the college cycle that they have to consider how they’ll manage to pay for four years of college, not just the first year, once they know how much aid a college is offering to the potential freshman. If the EFC stays around the same or less each year, one can usually expect to get about the same amount of aid each year (but not necessarily any more).

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