Lately, I’ve had an increasing amount of student loan consultations with Parent PLUS loan borrowers. More parents are looking toward retirement with a significant amount of debt from financing their children’s educations. This dynamic can be stressful for parents hoping for a peaceful retirement after many decades of hard work. Parent PLUS loans can throw off even the best-laid plans for retirement.

Parent PLUS loans aren’t entirely bad. On one hand, they give parents the ability to pay for their children’s education when they haven’t fully planned for the cost. The Parent PLUS loan can be a solid option depending on the parent’s financial goals. Increasingly, saving for the full cost of collegiate attendance is out of reach of lower and middle-class families.

On the other hand, the Parent PLUS loan has significant drawbacks. First, it commands higher interest than the loans given to students through the FAFSA and requires a credit check. It also comes with fewer perks (as I will cover below) and can be borrowed in greater sums. This is why it’s so easy to over-borrow at the cost of future financial freedom.

One of the major drawbacks of Parent PLUS loans is limited repayment options. In their original form, Parent PLUS loans don’t have access to income-driven repayment plans. With a consolidation, they gain access to only one: Income Contingent Repayment, or ICR. This is arguably the worst of all the plans as it – for one – calculates the monthly payment at a higher percentage of discretionary income than the other plans. One option is better than nothing, but certainly not the best. Luckily it does give loan forgiveness (especially good for the most burdened borrowers), but only after 25 years. You can learn more about the ICR plan here.

There’s another strategy out there called double consolidation to gain access to more income-driven repayment plans, but I won’t cover it here.

Another option for Parent PLUS borrowers is to pay off the original loan through refinancing or borrowing funds from another course, for instance, the equity built up in a home. This could save money over time, although not a good fit for everyone. For instance, if the parents have mediocre credit or don’t own a home, these likely wouldn’t be great options.

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