According to recent research conducted by Sallie Mae, only 48% of parents are currently saving for their children’s college education. Whether through poor planning, rising college expenses, job loss, or other extenuating circumstances, many parents take out student loans on their child’s behalf in order to pay for their education.
While this is generous and sometimes necessary, this also places a burden on many parents. They are often left making Parent PLUS loan payments long after their child graduates, sometimes into their retirement years.
So, should children repay their parents and help with Parent PLUS Loan repayment if their parents took out a loan on their behalf? Should they refinance the loans into their name? Or, should they let their parents pay for the loans since they are the ones who took them out?
There is no easy answer to these questions; the truth is, it really depends on the circumstances of each case.
Sometimes children do not know until much later that this is how their parents financed their education. At the same time, parents might not realize the burden the loans will put on them until many years have passed.
Who is Legally Responsible for Parent PLUS Loans?
Legally, the parent who took out the loan in their name is responsible for Parent PLUS loan repayment. That’s because the parent decided to take out the loan specifically for their child while agreeing to repay it.
However, the child should only do this if they want to and can comfortably make student loan payments on time every month.
Should You Take On Repayment of the Loans?
So what if you don’t or can’t refinance your parent’s PLUS loans into your name? Should you just offer to pay them?
This is a tricky question and it definitely depends on the situation. But in some cases, taking on repayment of these loans might be the right thing to do. This might be the case if
- you have a good relationship with your parents,
- you have a solid, high paying job,
- you can afford the payments, and
- you do not want to burden your parents in their retirement years.
I personally would not want to burden my parents with student loan payments. If they had taken out a loan on my behalf I would likely take over the loan or at least schedule automatic payments for them from my checking account until the loan was paid off. I do not like feeling that anyone is stuck with debt or putting off retirement because of me.
That said, I do have a sweet neighbor who is a retired teacher and mother who makes student loan payments on a Parent PLUS loan every single month. She lives in an expensive part of the country near her family, but because she is frugal and does odd jobs on the side she is also able to pay her Parent PLUS loan regularly and still remain retired.
Making Parent PLUS Loan Repayment Easier
If you cannot afford to take over payments for your parents but still want to help, you can recommend ways your parents can make the Parent PLUS loans more manageable.
For one, they can consolidate and refinance PLUS Loans into a private loan with a lower interest rate to help save money over time. This would also lessen the number of loans they have to keep track of, making payments easier to organize.
Your parents can also see if they are eligible for the Income-Contingent Repayment plan, which would require they pay no more than 20% of their discretionary income on student loan payments each month. After 25 years of payments, the loans are forgiven.
Ultimately, leaving your parents saddled with student loan debt for your education is not an ideal situation. It can cause family disagreements over who should be responsible for student loan repayments and can burden your parents and possibly even delay their retirement.
The best thing to do is talk to your parents, have an open dialogue, and try to find a way where you can work together to tackle the debt, whether you both contribute to payments or whether you take over the loan completely.
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