Consolidating parent plus loans to student
This can lead to parents borrowing much more than their child needs for college.
Since the borrower’s debt-to-income ratio is not considered, it is very possible to secure a loan that you cannot afford.
In fact, even if you are not struggling to pay back your loan, it is a good idea to research PLUS refinancing to secure a lower interest rate and monthly payment.
Borrowers can even extend the loan-repayment length up to 25 years, which will also reduce the monthly payment amount, which can help you stay afloat financially when you are on limited income.
Pay as much as you can towards the loan while you can still make money, even if it means you have to tighten up your budget.
Do not borrow against your retirement fund or cash out your retirement fund early to cover the loan costs.
However, parent borrowers can contact the loan servicer to request a deferment while the child is still enrolled half-time and for six months after your child ceases to be enrolled.
There are several plans and programs available to help students who cannot afford their loans.
If you want to help your child financially, you can make payments on the loan while he or she is still in school.
A federal student loan granted to a student is also eligible for loan forgiveness programs, forbearance, and in special circumstances, loan cancelation, whereas Direct PLUS loans given to parents are not eligible for all of these assistance programs.
When you apply for a Direct PLUS loan for your child, your credit report is looked at, but your income and debt-to-income ratio is not considered.
The lender does not factor in whether parent borrowers will be able to pay the monthly loan payment on top of a mortgage and other debt.
This is why it is very important for borrowers to do their own homework and to know what they can afford before they sign up for one of these loans. Furthermore, defaulting on your loan will put you at risk for government collection consequences, including wage garnishment, Social Security offsets and tax refund offsets.However, parent PLUS loans are not eligible for most of these plans.