My Parents Defaulted on My PLUS Loan And Now My Credit Has Been Damaged. – Melissa

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March 2, 2010

Melissa wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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“Dear Steve,
My parents defaulted on a PLUS loan now my credit has been severely damaged.
My parents took out a PLUS loan for my college tuition. It is now defaulted. I can’t figure out why my credit is now severely damaged when the loan is not in my name or social security number. I am having a hard time just paying back my loans, now theirs as well. Is it legal for my credit to be ruined if the loan wasn’t taken out in my name? Also, if I start a payment plan will my credit still be damaged, or how long will it take to recover? Help!
Melissa”

Steve’s Answer:

Dear Melissa,

Hum, odd. Generally PLUS student loans are taken out by either the graduate student or the dependent parent on behalf of the student. Most often we think about PLUS loans as being parent only.

If the loan was solely a parents PLUS loan then I can’t find anything that would make you responsible for that debt.

What I’m afraid has happened here is that your parents served as an endorser or cosigner for your PLUS loan and when they stopped making payments on your behalf, the loan became your responsibility. This could happen if you were a graduate and using a graduate PLUS loan for more advanced studies.

I wonder if the original application was in your name and your parents agreed to pay for it. It’s worth checking on that with the student loan servicing company and try to get some clarity on the specifics of the original loan.

Get some more information and give me an update so I can do some more digging for you.

Big hug.

@GetOutOfDebtGuy