Dear Steve,
I have several parent plus loans that I took out for my sons college. He also has some stafford loans. I am now concerned of the amount of loans I have under my name. I have three other children who will be attending college, and was hoping to buy a house in the next five years.
He and I were wanting to combine the parent plus loan and his stafford loans into one loan with his name being first and my name being the cosigner. I will help pay half but wanted to get my name off of the debt since I am older and trying to help other children, etc. If this is possible where do we go to do this?
Lee
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Dear Lee,
I understand the premise but the underlying problem is you can't mix loans of two responsible parties. The Parent PLUS loans are your loans and your responsibility. The loans he has are his loans. They are apple and oranges.
As far as transferring the responsibility/liability of the Parent PLUS loans to your son, that can't be done. According to the Department of Education, "a Direct PLUS Loan made to a parent cannot be transferred to the child. You, the parent, are responsible for repaying the loan." - Source
To get some payment relief from your loans, you would be eligible to use a Direct Loan to consolidate the Parent PLUS loans into one loan. You could then elect either the Pay As You Earn (PAYE) or Income Contingent Repayment (ICR) programs to lower your monthly payment based on your income.
The Pay as You Earn payment would be 10 percent of your discretionary income and the ICR would be 20 percent of your discretionary income. Under the PAYE program you would make 20 years of qualifying payment before the loans would be forgiven. Under ICR it would be 25 years.
Discretionary Income - For Income-Based Repayment and Pay As You Earn, discretionary income is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence. For Income-Contingent Repayment, discretionary income is the difference between your income and 100 percent of the poverty guideline for your family size and state of residence. The poverty guidelines are maintained by the U.S. Department of Health and Human Services and are available at www.aspe.hhs.gov/poverty.
For more information on these types of programs, click here.
All of that being said, the PAYE and ICR programs could very well turn out to be far more expensive over time than the standard 10-year repayment program you have now. The ten year payment you have is the fastest way to eliminate the loans.
You also listed two future goals. You wanted to help your other children to pay for college and buy a house.
Your ability to attain those goals is going to be dependent on your income and expenses. It clearly seems the desire to go further into debt for more college expenses will directly impact your ability to afford a house. As your liability for more Parent PLUS, or other types of loans increases, your buying power decreases. There is no way around that.
Once option is to direct your children to find a way to pay for their own tuition by doing the first two years at a community college, working to cover their tuition, searching for scholarships and an affordable school.
Just because you want to pay to send your other children to school, doesn't mean you can. So only you can determine which goal is more important to you. Would you rather put steps in place to buy a house or go into debt for more student loan debt. Post your answer in the comments below.
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