Question: Is there a way to consolidate Parent PLUS loans with my regular student loans? Parent PLUS loans not only have higher interest than my own loans, but they don’t currently count in finding an income-based repayment plan because they’re in my mom’s name, even though that’s me who paid them. Combining them would put me at over $80,000 in student loan debt and income-contingent repayment would actually help me then.
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Responnse: The short answer is no: Parent Plus loans cannot be directly consolidated with a student’s federal student loans. This means that you can only claim income-based reimbursement (IBR) on the amount of your own loans.
Some private lenders may allow you to take over a Parent PLUS loan by refinancing, but private lenders generally do not offer income-contingent repayment, and you would lose other government loan benefits – such as current interest-free payment break on federal loans and eligibility for federal programs that involve loan forgiveness.
That said, Cecilia Clark, student loan expert at NerdWallet, suggests that after the payment pause ends (payments on federal student loans are now suspended until May 1, 2022), refinancing through a private lender may be worth considering if you have a stable income. and can benefit from a lower interest rate and a lower payment. However, carefully consider the rates and terms you offer on a refi: “The interest rate you may be approved for may be the same or significantly higher than the rate you are currently paying on Parent PLUS loans. This will depend on the current interest rate environment and your personal financial profile, including your credit history and income,” says Akeiva M. Ellis, Certified Financial Planner.
If the terms you’re offered on the refi aren’t great, you might want to consider asking your mom to co-sign the loan, adds Andrew Pentis, certified student loan counselor and education finance expert at Student. Loan Hero. But do your homework whatever you decide: “Refinancing isn’t for everyone, and it would irreversibly strip the federal loan of its exclusive government protections,” he adds.
If refinancing isn’t right for you, consider replacing the parental loan with an income-contingent repayment (ICR) plan that could cap monthly contributions at a percentage of your discretionary income, says Pentis. ICR is the only income-based repayment plan available to Parent PLUS borrowers, and the program caps payments at 20% of your Discretionary Income or your fixed monthly payment amount over a 12-year loan term if that is. this is lower. With this plan, forgiveness is granted after 25 years of payments and your mother would have to swap the PLUS loan for a direct consolidation loan to become eligible for ICR. The loan would still be in your mother’s name, but at least the monthly payment would most likely be lower.