Recently, I was asked to contribute to U.S. News & Report’s article on Parent PLUS Loans titled, “4 Strategies for Repaying Federal Parent PLUS Loans.”
The rules and regulations governing these loans are particularly complex, so I was glad to shed some much-needed light on them (in plain English).
Since the article was published, I’ve had many people email me, asking me more questions about their Parent PLUS Loans.
So here’s a Q & A format of some of the most popular Q’s that parents of borrowers have asked me about their Parent PLUS Loans. Hopefully, this blog will help give you a clearer picture of what these loans (and their repayment) are all about.
Q: Can I transfer my Parent PLUS loans to my children, post-graduation?
No, Parent PLUS loans cannot be transferred from the parent to the child, nor can they be combined with the student’s federal loans through consolidation.
This is due to the firmly established student loan regulations contained within the Higher Education Act.
In all cases, federal student loans must remain in the original borrower’s name for the life of the loan. This same name rule also holds true for federal student loan consolidation.
The parent cannot consolidate her/his Parent PLUS loan with their child’s loans, for the simple reason that they are not under the same name. Parent Plus loans are taken out in the name of the parent, only, and the child’s student loans are under the child’s name, only.
Q: Can I, as a parent, cosign on my child’s federal loans?
No. Federal loans are never cosigned by the parent and the student/child, as they often are with private loans.
Even in the rare circumstance where the student’s credit is good enough to qualify him/her for a private student loan consolidation or refinance – where federal loans can be combined – the private student loan lender will still require all loans included to be under same name.*
(*Certain private student loan lenders, such as SOFI Student Loans, will consolidate federal and private student loans together, if the borrower is creditworthy. However, private loans cannot be included in a federal student loan consolidation.)
Please note, if the parent borrower also has Stafford, Grad Plus or a consolidated loan of their own, they may combine all of these qualifying federal student loans with the Parent Plus Loan, since the loans would be under the same name.
Q: What repayment assistance options do I have for my Parent PLUS Loans?
Parent Plus loans do not qualify for any of the new income driven plans, such as IBR, Pay As You Earn and ICR.
However, they may qualify for the Income Sensitive Repayment (ISR) plan if the loans are not Federal Direct Loans.* Please note, this option is temporary, and offers no forgiveness options.
*Parent borrowers should ask their federal student loan servicer/lender if their Parent Plus loans qualify for the ISR program.
Here’s where it gets tricky(er). Although Parent Plus loans do not qualify for IBR, PAYE and ICR, a consolidated loan that includes a Parent Plus loan will qualify for the ICR program (but not IBR or PAYE), provided they meet the income requirements.
And, contrary to intuitive thinking, you can consolidate one loan in the federal student loan system.
So, if you have just one Parent Plus Loan, and no other loans in your name, you can still consolidate this loan so that it is no longer a Parent Plus Loan, but a consolidated loan. Once the consolidation is completed, then, you can qualify for the ICR program.
If you’re thoroughly confused by this, you’re not the first (or the last). Make sure you schedule a free consultation with me by clicking here. Together, we’ll go over your Parent Plus loans (and perhaps your other loans) and get clear on what your next best steps are, given your present budget and upcoming life plans.
A Word about Forgiveness Eligibility + Deferments
If you have qualifying employment, such as with a non-profit or government agency, you can now take advantage of the Public Student Loan Forgiveness program (PSLF), if you meet all the requirements. If you do, you can have your loan forgiven, tax-free, after 10 years of qualifying payments, under the ICR program.
Parent Plus borrowers should also be aware that they do qualify for Unemployment, In-school and Military Deferments, if the qualifying circumstances apply to the parent borrower, specifically.
Additionally, most servicers/lenders also allow a few years of forbearance to Parent Plus borrowers.
Q: What should I do if I (a parent) need help with my payments?
If you are a Parent Plus borrower who needs help with your payments:
1. When possible, work in tandem with your child to come up with the best repayment plan of attack together. Since each loan type provides an array of different options, the most sound repayment strategy usually comes when all of the student loan debt, both your’s and your child’s, are considered as parts of the same student loan portfolio.
2. If you only have one Parent Plus loan and no others in your name, then consolidate that loan. You can do so for free, yourself, anytime, at studentloans.gov. As an added bonus, consolidating (in some circumstances) will refresh your forbearance eligibility.
3. Apply for the Income Contingent Repayment program.
4. If you don’t qualiify for ICR, ask about deferments, ISR or forbearance.
5. If you need help with the process, call Direct Loans at (800) 433 – 3243. They will help you as much as you need, for free.
If You Are Still Confused
Set up a free consultation with me by clicking here.
After working in the student loan industry, and the financial services industry, I’ve amalgamated an unusually well-rounded insider knowledge of all student loans, both private and federal… and yes, even these remarkably enigmatic Parent PLUS Loans.
I’d be happy to go over your repayment options, in plain English, and help you understand which repayment options are best for you and your child.
Looking forward to being of help —