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Should We Feel Obligated to Pay on the Parent Plus Loans?

By on March 21, 2018

Question:

Dear Steve,

My fiancé went to a private university at the advice of her parents. Entering her senior year, her parents informed her that they did not pay for her tuition out of pocket but that they instead took out a ~$200,000 Parent Plus loan to pay for the school.

This loan is in parents’ name. They also told her that they could only pay for half the loan and are asking her to pay the other half.

We would understand helping out here if my fiancé was informed of this prior to going to college however her parents selected the school for her, mentioned nothing about money before college, then surprised her this with this during her senior year.

Obviously, at that point, there was little anyone could do about the situation. Also, her parents make quite a lot of money while my fiancé makes significantly less. We feel that they’re viewing this as merely an inconvenience but it was all caused due to poor planning.

However, we don’t want to ruin the relationship with them. We can’t make afford to make the financial commitment they’re asking. We still have other financial goals such as my fiancé’s graduate school, saving for retirement, saving for a house, having children and saving for their education so we don’t end up in this situation again.

Should we feel obligated to contribute half of the Parent Plus loan?

George

Answer:

Dear George,

That’s quite a question.

From a detached point of view, the facts are one of the parents actually applied for the loans. And that is a key point here. The student loans are the responsibility of the signing parent and there is no contractual responsibility by the student to the government to repay any of these loans.

As the Parent Plus Master Promissory Note that the parent signed states, “I promise to pay to ED all loan amounts disbursed under the terms of this MPN, plus interest and other charges and fees that may become due as provided in this MPN.” That “I” is the parent, not the student.

READ  Should I Take a 401(k) Loan to Payoff My Parent PLUS Student Loans?

A Parent Plus Loan can’t be assigned to someone else, like the student. It is not the student’s loan.

All of that being said the next issue is what the understanding was between your fiancé and the parents when the loans were taken out. If they never mentioned the repayment plan then it would be unfair to allow expenses to be incurred without reservation and demand half the payment from the student.

Ultimately none of these facts matter because it all comes down to the relationship between your fiancé and the parents. As you mentioned you don’t want to ruin the relationship with them.

So the most logical course of action would be for everyone to sit down together and have a conversation about current financial concerns and raise the issue of saving for retirement and planning for the future. Either you will all come to a mutually agreeable arrangement or you won’t. And if you don’t then you will have to weigh the cost to the relationship versus the cost to your financial future.

Bottom line, while there may not be a legal or contractual obligation for your fiancé to repay a penny of these loans there is a family expectation she should contribute. That might not be fair but it is a current reality and any adjustment to that will need to be negotiated and agreed to by all concerned.

Post a comment and let me know what you decide to do.

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About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

2 Comments

  1. PJ

    March 31, 2018 at 11:18 am

    First, their daughter was told during her senior year. So she was not clueless about the loan they took out on her behalf. Second, no one made this girl go to a private college even if the parents insisted. She could have at any point stop attending the college as an adult she had that choice. Therefore, don’t make it appear this grown woman was forced against her will to attend a private dude. Third, the parents are closer to retirement than both of you and may need their daughter to assist with the debt to plan for their retirement or to address health issues. You future husband sound like a selfish, self absorbed prick pitting the daughter against her parents. Her future with you isn’t yet set in stone (not yet married) and this between her and her folks.
    This self entitlement mentality by demonstrated by this fiancé and this generation where you take from parents with no intention of giving back is sickening. Remember you reap what you sow. Karma is a bitch.

    Honor thy mother and thy father. You will need their help again many times in the future especially when the babies comes or you lose your job and can’t pay your bills. Hard times comes to every one. How you handle this situation will determine your future relationship with those parents.

  2. George

    March 21, 2018 at 10:52 am

    Asked question about repaying Parent Plus Loans.

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