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According to recent research conducted by Sallie Mae and Ipsos, 6 out of 10 parents are currently saving for their children’s college education. But this isn’t always enough, and many parents end up taking out a parent PLUS student loan in order to pay for their child’s education. While this is generous and sometimes necessary, it raises the question: Who is responsible for that parent PLUS loan? In other words, who pays the parent PLUS loan back?
The answer is, usually the parents who took the loan out. And very often, they are left making those loan payments long after their student graduates, sometimes still owing money well into their retirement years.
But it’s not always the parent who pays back the parent PLUS loan — the student can pitch in with repayment, or even refinance the loans into their own name. Really, the question of who should make the payments depends on the circumstances of each case.
The truth is that sometimes, children don’t know until much later that their parents took out loans to finance their education. At the same time, parents might not realize the burden the loans will put on them until many years have passed.
Who pays back the parent PLUS loan?
Legally, of course, the parent who took out the loan in their name is responsible for parent PLUS loan repayment. After all, it was they who decided to take out the loan specifically for their child, and it was they who agreed to repay it.
However, this is probably only a good idea if the child is willing to take on the debt and can comfortably make student loan payments on time every month.
Should you take over repaying your parent’s PLUS loan?
So what if you don’t or can’t refinance your parent’s loans into your name? Should you just offer to pay them to help pay back the parent PLUS loan?
Here, too, the answer depends on the situation. For example, sending in payments for your parent’s loan makes sense if …
- you have a good relationship with your parents.
- you have a solid, high-paying job.
- you can afford the payments.
Unless there’s a difficult relationship between the parent and child, most students are happy to take over, or at least help with the payments. Certainly, no one wants to burden their parents financially during their retirement years.
And if you can’t afford the whole payment, you could still schedule some level of automatic monthly contribution from your checking account to go toward the parent PLUS loan or other debt taken on by your parents.
That said, I do have a sweet neighbor who is a retired teacher and mother, and she 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 that parent PLUS loan regularly and 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 instance, they can refinance that debt into a private loan, possibly extending the term in order to make the monthly payments smaller, or even getting a lower interest rate if they qualify.
Your parents can also see if they are eligible for the income-driven 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 is responsible for the parent PLUS loans — or rather, who should be responsible for them. This can burden your parents and possibly even delay their retirement.
The best thing to do is talk to your parents and try to find a way where you can work together to tackle the debt, whether you both pitch in or whether you take over the loan completely.
Sage Evans contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.47% APR (with Auto Pay) to 7.59% APR (with Auto Pay). Variable rate loan rates range from 2.27% APR (with Auto Pay) to 6.89% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of August 15, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/15/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.37% effective July 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.27% – 6.89%1||Undergrad & Graduate|
|2.27% – 7.55%2||Undergrad & Graduate|
|2.43% – 6.65%3||Undergrad & Graduate|
|2.24% – 6.67%4||Undergrad & Graduate|
|2.37% – 7.95%5||Undergrad & Graduate|
|2.46% – 9.24%6||Undergrad & Graduate|