Can Students Take Over Parent PLUS Loans?

Student loan borrowers can’t directly take over their parents’ Parent Plus Loans from the federal government as it isn’t in the students’ names. However, there may be options available if you’re considering student loan refinancing through a private lender. Below, we explain everything you need to know about Parent Plus Loans, how they’re paid back, and how students can take on this debt.

What Are Parent PLUS Loans?

A girl graduate student is smiling and looking far away.Direct PLUS Loans, also known as Parent PLUS loans, are student loans through the U.S Department of Education. While Direct Subsidized Loans and Direct Unsubsidized Loans are taken out by the student, Direct Plus Loans are taken out by the parents.

To qualify, parents usually need to meet certain income and credit history requirements. In the event of adverse credit history, parents can apply with an endorser, similar to a co-signer, or explain extenuating circumstances that affected their finances. Their student must also be attending college at least half-time and meet other federal loan requirements.

Parents can borrow up to the student’s cost of attendance minus any other financial assistance the student received. These types of loans can be particularly helpful if the child’s federal student loans aren’t enough to cover the gap between the cost of attendance and any scholarships or grants they’ve received.

How Are Direct PLUS Loans Paid Back?

Since the parents took out the Direct PLUS Loan, they’re responsible for paying it back. In most cases, payments are due right away. However, borrowers can request a deferment when applying for the loan. This delays required payments until six months after the child graduates, attends college less than half time, or leaves school. Interest will continue to accrue during this time.

Parents may also be able to qualify for income repayment plans, deferment, forbearance, and loan consolidation through the federal government.

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Can Students Directly Take Over Parent PLUS Loans?

Students can’t directly take over their parents’ Direct PLUS Loans through the federal government. According to the U.S. Department of Education, the parents are legally responsible for paying it back.

There are several reasons you might want to take on your parents’ loans that helped pay for your education. For example, you might be financially able to take on the additional debt and repayments, or the student loan could be negatively affecting your parents’ credit score.

If either of these is the case, there are generally two options: give money directly to your parents or refinance through a private lender.

Give Money Directly to Parents

Parents are legally responsible for parent PLUS loans, which means if the money isn’t paid back, the loan goes into default. This can result in credit score damage, wage garnishment, and other financial consequences.

However, just because a parent is legally responsible for the loan, it doesn’t mean they have to be the one making the payments. You can give money directly to your parents that can then be put towards the loan.

Refinance Through Private Lenders

If you’d like to take legal responsibility for the parent PLUS loans, you’ll need to refinance them through a private lender, such as a bank or credit union. You’ll have to meet credit score and income requirements to qualify. If approved, you might be able to also refinance and consolidate other federal or private student loans.

Keep in mind that refinancing federal student loans through a private lender means giving up access to federal benefits and programs, including income repayment plans and longer default periods.

Should You Refinance Your Parents’ Direct PLUS Loans?

Whether you refinance your parents’ Direct PLUS loans and put the loan in your name depends on your preferences, financial situation, and goals. If your parents’ credit and borrowing power isn’t drastically affected by the debt, it might be beneficial for both parties to simply give the money to your parents directly to then be applied towards the loan.

If the federal student loans are affecting your parents’ credit score and you’re financially stable, you could want to consider refinancing. Remember, though, that you’ll be giving up access to many federal programs, such as federal student loan consolidation, income repayment plans, and more.

Before refinancing a parent PLUS loan, consider the impact on your credit rating, debt-to-income (DTI) ratio, and future finances. For example, if you have a large amount of student loan debt, but a lower salary, you could further restrict your borrowing ability for years by taking on additional loans. Until you’ve paid back a significant portion of the debt, you could find it difficult to get approved for a car loan or mortgage.

While you can’t directly take over your parents Direct PLUS loans through the federal government, you could give them the money to repay the debt or you might qualify for a refinanced private loan. Before accepting legal responsibility for this debt, consider talking over your financial situation, goals, and options with your parents.

Are you ready to refinance? Check out your student loan refinance options here!

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