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Parent Plus Loan Problem

MadicanMadican No faceRegistered User regular
Here's the summary. In 2012 my dad cosigned with me on student loans in order to attend university. One of these was a Parent Plus loan for the maximum eligible of $17,000. We both thought that I would be the one making payments on these loans two years down the line when I had the degree and a stable job. I got the degree and the job and begin payments next month, so that's all good. The problem is the Parent Plus loan. The bill showed up yesterday, but not at my apartment, it went straight to my dad who had cosigned the loan with me. I contacted Fedloan about this, to get the loan placed under my name where it would be part of my current Income-Based Repayment plan, which is part of my Public Service Loan Forgiveness program, but they told me in no uncertain terms that the parent is on the hook for the Parent Plus loan and there is nothing I, the student who received the money, can do about it. If we had known they would be the ones expected to pay, and that I wouldn't be able to take on the loan myself, it would never have been signed. But we didn't, and we did, so here we are two years later and ready for this to get real ugly.

My parents cannot take the hit on their finances this loan would cause. I can, because of my IBR plan which brings my total loans (according to Fedloan's site) to $10 a month payments for ten years before complete forgiveness. I need a way to take that Parent Plus loan and put it under my name and my plans so I can be the one making payments on it as it should have been from the start. Failing that, I need a way to soften the blow as much as possible. Right now they're looking at consolidating the loan and proceeding from there. Any advice or suggestions?

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Posts

  • bowenbowen How you doin'? Registered User regular
    Parental Plus loans are entirely the responsibility of the parents.

    There's no way to absorb them yourself. Consolidate would only really be an option if it brings the monthly payment down.

    They either need to make the payments or default, there's really not a way around this. PLUS loans fall under the shit umbrella that applies to all student loans, and cannot be discharged in bankruptcy unless your parents can prove hardship.

    Can you afford to pay the monthly installment on the PLUS loan yourself? It may be the best way. They can probably add you as a payer for the loan, and you just set up the installment plan. I know you mentioned IBR, but that doesn't apply to PLUS because it was factored off your parent's income and assets when originally disbursed.

    Ladies.
  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    you have to obtain a line of credit (private or otherwise) in your name and then use the credit to pay off the loan in full

    that transfers the debt to you

    the only way you can possibly avoid a triple digit monthly payment is if you got the refi to occur through some sort of student loan refinancier, and that managed to qualify for IBR.

    sounds like a major longshot to me

    bowen
  • bowenbowen How you doin'? Registered User regular
    Check this out. Looks like it might apply to students who enter public work like you are and want some sort of IBR on it.

    http://www.fastweb.com/financial-aid/articles/can-parent-plus-loans-get-income-based-repayment-and-loan-forgiveness

    Ladies.
  • MadicanMadican No face Registered User regular
    bowen wrote: »
    Parental Plus loans are entirely the responsibility of the parents.

    There's no way to absorb them yourself. Consolidate would only really be an option if it brings the monthly payment down.

    They either need to make the payments or default, there's really not a way around this. PLUS loans fall under the shit umbrella that applies to all student loans, and cannot be discharged in bankruptcy unless your parents can prove hardship.

    Can you afford to pay the monthly installment on the PLUS loan yourself? It may be the best way. They can probably add you as a payer for the loan, and you just set up the installment plan. I know you mentioned IBR, but that doesn't apply to PLUS because it was factored off your parent's income and assets when originally disbursed.

    If I could take on the monthly payments I'd do it in a heartbeat. But I cannot. I can pay my bills and have shelter, but everything after that is mercilessly budgeted for and even an extra $200 would be outright impossible to handle. The only reason I don't worry constantly is because the IBR puts my payment low enough and that my job is with the state, meaning it's not likely I'll lose it any time soon.
    Jasconius wrote: »
    you have to obtain a line of credit (private or otherwise) in your name and then use the credit to pay off the loan in full

    that transfers the debt to you

    the only way you can possibly avoid a triple digit monthly payment is if you got the refi to occur through some sort of student loan refinancier, and that managed to qualify for IBR.

    sounds like a major longshot to me

    A triple digit payment would break me. Not even a matter of scrimping and scrounging, it is outright impossible under my current income. Especially since the interest rate would be sky-high considering I haven't had much opportunity to build credit yet. Without that IBR I'm dead in the water.
    bowen wrote: »
    Check this out. Looks like it might apply to students who enter public work like you are and want some sort of IBR on it.

    http://www.fastweb.com/financial-aid/articles/can-parent-plus-loans-get-income-based-repayment-and-loan-forgiveness

    Yeah, I'm currently on the PSLF program myself and I know my dad is eligible too since he also works for state. Only problem with that is he'd need to keep working for ten years to get the forgiveness after consolidating it to put under an IBR like me.

    At this point, my parents think my best option would be to better my position; let them consolidate and begin IBR payments as I begin studying for and taking certifications and promotional exams in earnest, with the end goal of repaying them as I become able. I could, in a very short amount of time, learn enough to take cert exams and become eligible for a position in IT for state that would double or triple what I make right now as a secretary. From that position, all else being equal, I would be able to actually help in a meaningful way. That's their opinion on the matter. There is no problem with this path except it requires I let them shoulder what should be my burden, which is extremely hard for me to let anyone do.

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  • ShogunShogun Hair long; money long; me and broke wizards we don't get along Registered User regular
    edited June 2015
    No, a Direct PLUS Loan made to a parent cannot be transferred to the child. You, the parent, are responsible for repaying the loan.
    A PLUS loan made to the parent of a dependent student cannot be transferred to the student through consolidation. Therefore, a student who is applying for loan consolidation cannot include the PLUS loan the parent took out for the dependent student’s education.

    these are responses to common questions from studentaid.ed.gov

    edit: your dad needs to call the loan servicer immediately and find out what his options are

    Shogun on
    bowen
  • bowenbowen How you doin'? Registered User regular
    This is going to sound extremely cold and callous, and I'm sorry, but:

    Your parents financial problems aren't your worry.

    It may feel like it is, but don't let that be your burden.

    Your parents/father need to get in touch with whomever the loan is through immediately.

    Ladies.
  • MadicanMadican No face Registered User regular
    bowen wrote: »
    This is going to sound extremely cold and callous, and I'm sorry, but:

    Your parents financial problems aren't your worry.

    It may feel like it is, but don't let that be your burden.

    Your parents/father need to get in touch with whomever the loan is through immediately.

    They're my problem when this occurred as a result of them wanting to let me attend university and I had the full understanding I would be the one paying off the loans. I made a commitment and I will see it through.

    Anyway, I've spoken with them further and we've agreed they will take on the monthly payments until I gain an IT position, at which point I will have six months to get my ducks in a row before assuming the payments. From there I will be in a position to wipe out the loan quickly.

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  • bowenbowen How you doin'? Registered User regular
    That's a good thing then.

    I take the approach that you're their child and that is their responsibilities as a parent. I've seen a lot of situations go down where parents will treat kids like garbage because "I had to pay for food" and other shitty stuff like that, so I tend to be a bit more blase in these situations. I know more than a dozen people that fit into this category and I'm glad your parents treat you better, just don't let it cloud your judgement that you owe them. That's why I come off a bit more crass than I mean to about this, so I apologize.

    Do what you want, but more importantly, do what you can do to help.

    Keep looking around to see if you can get them assistance, I'm sure there's something out there. It does look like consolidation might help them get a repayment that's more favorable (and income based?), but they should get all their ducks in a row!

    Also, good luck, I hope it works out for you!

    Ladies.
  • Fuzzy Cumulonimbus CloudFuzzy Cumulonimbus Cloud Ethlete Please Eat Doritos™, Like And SubscribeRegistered User regular
    Also it really was your parents' responsibility to understand the terms and conditions of a Parent Plus loan. They were the financial adults at the time of the loan and you most likely were 18 and not super knowledgeable about finances in general.




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  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    edited June 2015
    a word of advice

    a loan like this, if left unpaid, will capitalize very quickly. it's not a rare story for students who have parent plus loans where their parents flat out didn't pay them, let all the interest accrue, and now owe 1.5x or 2x as much as they originally got a loan for

    if your parents elect to not pay or underpay, and then demand you pay some months/years later, then that is potentially costing you thousands of dollars

    i have given my own friends the same basic advice as the previous post... at the end of the day it's your parents responsibility when they sign the paper. You have a moral obligation to take any success you find in life and repay them by paying the loan, since they stuck their neck out to get you educated. But that's not a license for them to dick you over either if you can't pay it off when you need to.

    at minimum, work with them to at least make sure the interest is paid at all times. the bank will almost certainly agree to let you do that as long as you need to, because for them its just free money

    Jasconius on
  • JohnnyCacheJohnnyCache Starting Defense Registered User regular
    Madican wrote: »
    bowen wrote: »
    This is going to sound extremely cold and callous, and I'm sorry, but:

    Your parents financial problems aren't your worry.

    It may feel like it is, but don't let that be your burden.

    Your parents/father need to get in touch with whomever the loan is through immediately.

    They're my problem when this occurred as a result of them wanting to let me attend university and I had the full understanding I would be the one paying off the loans. I made a commitment and I will see it through.

    Anyway, I've spoken with them further and we've agreed they will take on the monthly payments until I gain an IT position, at which point I will have six months to get my ducks in a row before assuming the payments. From there I will be in a position to wipe out the loan quickly.

    no idea what you are doing now, or how busy you are, or what you are like generally, but if you can handle it a little side work in the meantime - driving for uber/lyft/etc, tending some bar, delivering for grubhub, something, could make you 200 a month, probably in one day a week. While it's not for everyone, I worked security for a concert company for a while and picked up 75-100 a night 2-4 nights a month for a while when in a similar situation with some medical debt, and got to see/hear a lot of free live music (which is a rarity on a budget)

    Shogun
  • Inquisitor77Inquisitor77 2 x Penny Arcade Fight Club Champion A fixed point in space and timeRegistered User regular
    Your parents should have known that this part of the loan was going to be billed to them directly. That's really the long and short of it. Even if you had agreed to pay off the loan in their name, it should have been clearly budgeted so that they knew that you/they would need this money at this point in time.

    If they have emergency money sitting in a bank account, now is exactly the time to use that money. Otherwise, they'll have to do some math to figure out whether it's worth dipping into something like a retirement account or getting another loan at a lower rate to pay it off, whether they'd prefer to just take the credit hit instead, etc.

    I'd strongly recommend that they contact their loan servicer to figure out if they can renegotiate or mitigate the payments in some way. Here's a good place to start: https://studentaid.ed.gov/sa/types/loans/plus

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  • Void SlayerVoid Slayer Very Suspicious Registered User regular
    Would it be possible for you to pay a portion of the payments at this time while they pay the rest and transition over to you paying it later?

    Also there might be tax liability on them if you pay off their loan? IDK.

    Good lord, do not let them not pay though, who knows what crazy penalties might be added on in addition to the interest. When there are non-discharged loans in particular you need to know exactly what might be added to it and why.

    He's a shy overambitious dog-catcher on the wrong side of the law. She's an orphaned psychic mercenary with the power to bend men's minds. They fight crime!
    bowen
  • bowenbowen How you doin'? Registered User regular
    Would it be possible for you to pay a portion of the payments at this time while they pay the rest and transition over to you paying it later?

    Also there might be tax liability on them if you pay off their loan? IDK.

    Good lord, do not let them not pay though, who knows what crazy penalties might be added on in addition to the interest. When there are non-discharged loans in particular you need to know exactly what might be added to it and why.

    20k loan will turn into a ~35k loan after 5-10 years.

    Don't ignore shit.

    That's a $200 a month difference on a 10 year repayment plan.

    Ladies.
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