Questions about Student Loan Eligibility

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By Mark Kantrowitz

June 16, 2020

During our webinar about Student Loans 101 (Borrowing), participants asked dozens of questions. Here are the answers to questions on borrowing student loans and student loan eligibility:

Can a parent take out federal loans for his own education? If yes, will that help the current financial aid package of our son?

Parents can borrow student loans for their own college education, the same as any other college student.

When a parent borrows student loans, it does not affect their child’s eligibility for federal student loans.

When a parent is enrolled in college, it does not affect the student’s Free Application for Federal Student Aid (FAFSA). The number in college is based on the number of children in college and does not include the parents. This can lead to the student and parent having different expected family contributions (EFC) on their FAFSAs, since the number in college will be greater on the parent’s FAFSA than on the child’s FAFSA. 

However, a parent can ask their child’s college for a professional judgment review of their child’s FAFSA because of the parent’s enrollment in college. The college will want to see proof that the parent is genuinely enrolled in college, such as a copy of a paid bursar’s bill.

If the college financial aid administrator decides to make an adjustment, they might increase the number in college or they might subtract the parent’s actual college costs from income. This will usually lead to an increase in the child’s financial aid eligibility. 

For federal student loans, do they ask for parent’s savings account information and the student’s savings account? What about income?

Students who want to receive federal student loans, including a Parent PLUS loan, must file the Free Application for Federal Student Aid (FAFSA). 

The FAFSA asks for information concerning the income and assets of the student and the income and assets of a dependent student’s parents. This information is used to calculate the expected family contribution (EFC), which is used to calculate financial need, which is used to determine eligibility for subsidized federal student loans.

Eligibility for unsubsidized federal student loans and Parent PLUS loans does not depend on financial need, but a FAFSA is still required. They do not reduce your loan eligibility if you have a lot of assets. The goal of requiring the FAFSA is to ensure that the student receives all of the grants and student employment to which they are entitled before they borrow. The requirement to file a FAFSA cannot be waived even if the student does not want other types of financial aid. 

Can a student have two co-signers for a private student loan?

Generally, yes, but it depends on the specific lender. This most often occurs when a student is denied a private student loan, despite applying with a cosigner, because the cosigner’s credit scores are not good enough. The lender may allow the student to add another cosigner with a better credit history to try to qualify for the loan.

Can a student borrow for a second Bachelor’s degree program?

A student who is seeking a second Bachelor’s degree can continue borrowing Federal Direct Stafford loans, but only up to the annual and aggregate limits. Parents can borrow Federal Direct Parent PLUS loans to help a child pay for a second Bachelor’s degree, but only up to the annual limits.

Federal Work-Study (FWS) may be available for a second Bachelor’s degree. However, many colleges prioritize Federal Work-Study funding for students who are seeking a first Bachelor’s degree. 

Certain types of financial aid, such as the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG) and the TEACH Grant are available only for a first Bachelor’s degree. 

Students who are double-majoring and who will be receiving two Bachelor’s degrees should time their courses so that they take the last classes for both degrees in the same term. Otherwise, they may lose eligibility for some forms of financial aid during their last term if they finished the requirements for one of the degrees in an earlier academic term.

For some students, it may be better to pursue a graduate degree, such as a Master’s degree, than a second Bachelor’s degree. Graduate degrees get new loan limits. 

Didn’t the government change the rules on using home equity loans to pay for college?

Home equity loans may still be used to pay for college, but the interest is no longer deductible. The Tax Cuts and Jobs Act of 2017 changed the rules concerning the deduction for interest paid on new home equity loans, home equity lines of credit (HELOC) and mortgages. From 2018 through 2025, inclusive, interest may be deducted only on loans used to purchase, build or renovate a home. 

I am divorced and the non-custodial parent. Can I borrow a Parent PLUS loan for my daughter?

When a dependent student’s parents are divorced or separated, both parents can borrow Federal Direct Parent PLUS loans, but the combined loan amounts cannot exceed the college’s cost of attendance minus other aid received.

Are international students eligible for federal student loans?

International students and undocumented students are not eligible for federal student loans. They may be eligible for a private student loan. Some lenders of private student loans require a creditworthy U.S. citizen or permanent resident to cosign the loans.

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