It has become common practice for parents to take out loans to finance the college costs of their children. A Brookings Institution report stated that over 3 million people owe almost $90 billion in parent PLUS loans. It has been noted that some parents even go as far as taking out these loans for their multiple children thereby increasing their debt. Nowadays, the eligibility for these loans has expanded so even parents who have poor credit scores can get approved.
A lot of experts believe Parent PLUS loans are a trap for the innocent as it takes a very long time for these parents to repay these loans. Parent PLUS Loans do not qualify for any type of income-based repayment plan and student loan forgiveness program. There are a lot of restrictions with these loans and in this article, we will discuss Parent PLUS Loan, refinancing, payment options, and application for deferment & cancellation.
Introduction to Parent PLUS Loans
In the 1980’s, the loan program was introduced so parents from middle and upper-income households could afford to pay for their children’s college while keeping their assets liquid. Lower-income parents can also apply for these loans as the Parent PLUS Loan program only considers the credit history of the borrower, not the ability to repay.
These debts weigh down families for generations particularly low-income families. Research shows that over 30% of Parent PLUS borrowers are from low-income families. Although these loans have existed for a long time, a major con is an overlapping debt that has long-lasting effects. When parents apply for Parent PLUS Loans, they do not qualify for income-based and pay-as-you-earn repayments. So, what options do you have to reduce the Parent PLUS Loan payments?
How to Reduce Parent PLUS Loan Payments
Despite the restrictions on these Parent PLUS Loans, there are some options accessible to lower the loan payments such as:
Repayment Plan Change
You can change the repayment plan to either Graduated or Extended. With Graduated repayments, you can make monthly payments which increase every two years. Extended repayments, on the other hand, extend your repayment terms to up to 30 years depending on how much you owe. Unlike the graduated plan were payments increase over time, the extended plan payments remain the same.
Loan Refinancing
Most private loans offer low payments and interest rates so you can refinance your parent PLUS Loans into a private loan. This is one of the best options for borrowers who have good credit and there are different lenders available that offer this option. There is also the option of refinancing your Parent PLUS Loan out of your parent’s name and into your name. However, the parents have to cosign this release after several payments that have been paid on-time.
If you feel stuck in the grips of a Parent PLUS Loan, you need help. Elias Dsouza of Dsouza Legal Group has the experience you need to navigate this complex topic. Contact Elias today for a free consultation.