How to Consolidate Your Parent Plus Loan
- Deferment and forbearance suspend Parent Plus Loan payments temporarily.
- Parents also have two options for consolidating their Direct Loans.
Learn All About Deferment, Forbearance, Consolidation, and 3 Repayment Plans for Parent Plus Direct Loans.
Parents have several options if they cannot afford or otherwise want lower payments on their Direct Plus Loan for Parents, sometimes called a Parent Plus Loan. Direct Plus is federal student loan designed to help parents pay for their child’s education expenses.
Parent Plus Loan Deferment or Forbearance
Borrowers who cannot afford their monthly Direct Plus Loan for Parents may receive a deferment or forbearance to stop or lower the loan payments temporarily. Deferment postpones student loan repayment for a designated period, but is not granted if the loan is in default. Forbearance allows the borrower to stop making payments for a set period of time, and up to a year. Interest continues to accrue when a loan is in forbearance. In general, forbearance are easier to obtain than deferments or cancellations. Borrowers in default can, in some circumstances, obtain a forbearance. See the Bills.com resource Federal Student Loan Default and the Dept. of Education Postponing Repayment page to learn more.
Parent Plus Loan Repayment Plans
The Dept. of Education offers three repayment plans for Direct Loans. The terms differ between the repayment programs, but generally borrowers will have 10 to 25 years to repay a loan. The repayment plans are:
- Standard: Pay a fixed amount each month until the loans are paid in full. Minimum monthly payments are $50, and the term is up to 10 years.
- Extended: Pay a fixed annual or graduated repayment amount over a term of up to 25 years. The Extended plan’s advantage is low monthly payments. The disadvantage is the long term increases the loan's lifetime interest cost.
- Graduated: Payments start low and increase every two years. Repayment period is up to ten years. Designed for borrowers who expect to see an increase in income.
See the Dept. of Education's Direct Loans: Standard, extended, and graduated repayment calculator for specific information tailored to your circumstances.
Parent Plus Loan Consolidation
Federal Direct Loans can be combined into one Direct Consolidation Loan. See the Dept. of Education Direct Consolidation Loan Web page to learn more.
Two other consolidation alternatives are a home equity loan or a cash-out refinance. These are options if you have good credit and equity in your home. If you have excellent credit, the interest rate available on a home equity loan could be significantly less than the rate you are paying on the PLUS loans. You should shop around with several different lenders to discuss the interest rates and payment amounts they can offer you.
Visit the Bills.com Debt Coach calculator for a customized, no-cost, no-nonsense analysis of your situation to learn if a refinance or home equity loan will save money for you.
Think carefully before you borrow money against your home to pay off your unsecured Parent Plus Loans. You are converting what was previously unsecured debt into secured debt. This could cause you problems in the future if for some reason you are unable to make your payments.
Parent Plus Loans, Income Tax Deductions, and Transferring a Loan
The interest a borrower pays on a Direct Plus Loan for Parents may be deductible on their federal income taxes. See the Bills.com resource Tax Deductibility of Student Loans to learn more about this possible tax deduction.
Some Direct Plus Loan for Parents borrowers have asked Bills.com if they can transfer their Parent Plus Loans to the student after graduation so that the student can benefit from the student loan deduction. Generally speaking, Direct Plus Loan for Parents may not be transferred to a former student once he or she has completed school, whether the reason is for tax planning or any other purpose.
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