November 12, 2009
Yes, you may consolidate a Parent Plus Loan, but there a few things you should know.
- The parent who took out the Plus loan owns the Plus loan for the life of the loan. What I mean by that is you can not have your student, who the loan was taken out for, roll your Plus loan in with their federal Stafford or Perkins loans. The loan is in your name and tied to your social security number.
- If you have your own federal loans you are allowed to consolidate your Plus loan with them.
- Your fixed consolidated interest rate will depend on the loans you are rolling into your federal consolidation. A weighted average will be taken based on the interest rates attached to said loans.
So what are the Parent Plus loan interest rates that exist today? They vary widely, which is why your friend could have a really low fixed rate while you are stuck in the eight percent rate. Again, your consolidated rate is a reflection of the interest rates attached to your current loans. It is not strictly a market gage, as is the case with a home refinance.
Parent Plus Loan Rates
- Any FFEL Parent Plus loan taken out after 7/1/06 holds an 8.5% fixed rate, however, if you consolidate that loan there is an immediate interest rate deduction of .25% as the consolidation rate is capped at 8.25%.
- Within the Direct Loan program Plus loan are fixed at 7.9% for those disbursed after 7/1/06.
- For all other Parent Plus loans that have not been previously consolidated and which were disbursed prior to 7/1/06 the interest rate is at a historically low level, 3.28%. The previous low was during the 2004-05 academic year when Plus loans were are 4.17%.
May 19, 2009
While this won’t help parents as it doesn’t apply to PLUS Loans, this will help your students. Starting July 1, 2009 a new Income-Based-Repayment (IBR) plan will be offered to students for Stafford, GradPLUS and Consolidation loans that are not used to pay back Parent PLUS Loans.
According to the Team FFELP IBR Workgroup, “A borrower must have a partial financial hardship to qualify for an income-based repayment plan. A borrower who at one time had a partial financial hardship, but ceases to have a partial financial hardship may remain in the IBR plan.”
Partial Financial Hardship is calculated with the equation:
Standard Payment > 15%[AGI – (150% Poverty line applicable to family size)]
This means, partial financial hardship occurs when the standard repayment plan based on a 10-year repayment period at the time the borrower initially starts repayment is greater than 15 percent of the difference between the borrower’s adjusted gross income and 150% of the poverty line for the borrower’s family size.
Family size is defined as members of your household, such as spouse, children, grandparents who live in your residence with you and receive more than half their support from you. So a parent with Alzheimer’s that you take care of would count, but a roommate would not. It does include unborn children that will be born over the next year.
To qualify, you will need to authorize your loan company to receive the current year and past 3 years worth of tax returns from the IRS using IRS Form4506-T. Contact your lender to learn more!
March 13, 2009
Last month, the federal Dept. of Education released new guidelines about qualifying for Public Service student loan forgiveness program.
- The borrower must not be in default on the loans for which forgiveness is requested.
- The borrower must be employed full time by a public service organization –
- When making the required 120 monthly loan payments (certain repayment conditions apply – see below);
- At the time the borrower applies for loan forgiveness; and
- At the time the remaining balance on the borrower’s eligible loans is forgiven.
loan repayment requirements:
- The borrower must have made 120 separate monthly payments beginning after October 1, 2007 on the Direct Loan Program loans for which forgiveness is requested. Earlier payments do not count toward meeting this requirement. Each of the 120 monthly payments must be made for the full scheduled installment amount within 15 days of the due date
- The 120 required payments must be made under one or more of the following Direct Loan Program repayment plans–
- Income Based Repayment (IBR) Plan (not available to parent Direct PLUS Loan borrowers)
- Income Contingent Repayment Plan (not available to parent Direct PLUS Loan borrowers)
- Standard Repayment Plan with a 10-year repayment period
- Any other Direct Loan Program repayment plan, but only payments that are at least equal to the monthly payment amount that would have been required under the Standard Repayment Plan with a 10-year repayment period may be counted toward the required 120 payments.
The borrower must be employed full time (in any position) by a public service organization, or must be serving in a full-time AmeriCorps or Peace Corps position. For purposes of the Public Service Loan Forgiveness Program, the term “public service organization” means –
- A federal, state, local, or Tribal government organization, agency, or entity (includes most public schools, colleges anduniversities);
- A public child or family service agency;
- A non-profit organization under section 501(c)(3) of the Internal Revenue Code that is exempt from taxation under section 501(a) of the Internal Revenue Code (includes most not-for-profit private schools, colleges, and universities);
- A Tribal college or university; or
- A private organization that is not a for-profit business, a labor union, a partisan political organization, or an organization engaged in religious activities (unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing) and that provides the following public services –
- Emergency management;
- Military service;
- Public safety;
- Law enforcement;
- Public interest law services;
- Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten);
- Public service for individuals with disabilities and the elderly;
- Public health (including nurses, nurse practioners, nurses in a clinical setting, and full-time professionals engaged in health care practioner occupations and health care support occupations);
- Public education;
- Public library services; and
- School library or other school-based services.
March 3, 2009
I’ve heard this question alot recently – during the current economic crisis, more and more lenders will not offer consolidations, and students hold up their hands in frustration and shout that no one will consolidate their loans.
Well, that’s not entirely accurate. There is at least one place that will still consolidate loans that are not in default – Direct Loans, also known as the federal Department of Education.
Yes, Virginia, there is a Santa Clause and yes you can consolidate your loans if they’re still in good stnading.
So get your butts over to their website, ASAP and request information:
October 28, 2008
Just a few years ago, consolidating your student loans was almost a right of passage. Six months after graduating your grace period ends, and students scrambeled to consolidate the Federal student loans at the last minue while retaining that lower grace=period interest rate.
That’s just not happening any more. Private companies aren’t offering consolidations for federal loans any more. Only the Department of Education is left.
The Chicago Tribune has a great article chronicling why this is and how you can get yourself consolidated. Here’s an excerpt:
“This time of year, millions of college graduates face a reality of life after academia: With the six-month grace period on student loan repayment coming to an end, it’s time for them to start making good on their debt.
But this year, one popular option–student loan consolidation–is harder to come by.
Consolidation loans are a type of refinancing for student debt. Graduates can lump all their college loans together, merging multiple bills into one and potentially lowering the interest rate.
Lenders used to eagerly consolidate student debt.
The credit crunch has made it expensive for many lenders to raise the funds they need to create new loans. In addition, a law passed last year by Congress reduced the subsidies on federal loans that lenders receive from the government.
Virtually no private lender will consolidate federal student loans anymore. But there is another option: You can consolidate your loans through the U.S. Department of Education’s Federal Direct Loan Program.
The government has become, in a sense, the lender of last resort, but the consolidation loans are the same as those offered from private lenders. You even receive a 0.25 percentage point discount on your interest rate if you pay your monthly bill with automatic debit.”
July 22, 2008
In short, most likely. In most cases, you will pay less each month when you consolidate all your federal loans together. In some cases, for example if all your interest rates are identical and you have a low balance, you might not save much.
Consolidation loans take the weighted average of your loan balances times your interest rates to calculate your new rate. Then, depending on the balance, they extend the loan repayment time normally to 10 to 30 years.
You will likely pay more in the long run if you have a longer repayment period, but it’ll help you pay your bills right after college graduation.
Also, for federal loan consolidations, there are no early repayment penalties, so you can get all the low-payment benefits now then later when you have a higher salary put a bit more money towards the loan and pay it off early!
Here’s a calculator you can use to determine if consolidation can help you.
April 30, 2008
I’ve been asked a LOT of questions about this since the new legislation was passed in October, and I finally have some concrete details to share with you.
You can view a PDF from the Department of Education that explains the changes. Access the PDF here. These are guidelines. Final regulations will be issued in November 2008.
Here are the highlights:
- You MUST make 10 years of payments (120 payments ) after October 2007 before your loans are forgiven – that means loan forgiveness won’t even start until October 2017.
- You MUST be employed in the public sector for all of those 120 payments.
- You MUST be employed in the public sector at the time the loans are forgiven.
- In the case of Parent PLUS loans, it is the parent who must mee the above 2 requirements, not the student.
- Your loans MUST be Direct Loans. Now those of you in the FFELP program, don’t panic – you can consolidate (or re-consolidate) your loans into the Direct Loan program to qualify.
IMPORTANT: As many of you know, the standard repayment period for student loans is 10 years. Essentially, those of you with high balances that you consolidate (ans thus extend the repayment period), or those of you on a reduced-income repayment plan will be eligible.
Here is a list of public-service full-time positions that are eligible:
• Emergency management
• Military service
• Public safety
• Law enforcement
• Public health
• Public education (including early childhood education)
• Social work in a public child or family service agency
• Public child care
• Public service for individuals with disabilities
• Public interest law services (including prosecution or public defense or legal advocacy in low income communities at a nonprofit organization)
• Public service for the elderly
• Public library sciences
• School-based library sciences and other school-based services
• Certain tax-exempt organizations
• Faculty teaching in high-needs areas, as determined by the Secretary
• Full-time faculty member at a Tribal College or University
October 5, 2007
Your grace period ends 6 months after you graduate. For most people, that’s coming up fairly soon!
Now is the time to apply for a consolidation, to make sure your loans are consolidated before your grace period ends. Why?
Because the day after your grace period ends, your interest rates go up! Consolidate before the end of your grace period to lock in the lower rates. One day later can literally cost you thousands of dollars, depending on your loan balance.
June 15, 2007
A very interesting article on nchelp.org:
House Passes College Cost Reduction Act of 2007
As reported in yesterday’s briefing, the House Education and Labor Committee passed legislation by a 30 to 16 vote with all Democrats supporting the bill and the support of three Republicans.
The bill would cut roughly $19 billion from lender and guarantor fees and redirect these funds to student aid. Republican committee members stated that the Democrat’s proposal was “extracting too much blood” from lenders. Congressman Keller (R-FL) stated, “We’ve gone clean to the muscle and all the way to the bone,” in reference to the reduction of subsidies.
Ranking Member McKeon (R-CA) offered substitute legislation that would have cut lender and guarantor payments by roughly $13.8 billion and redirected those funds to Pell grants. Additionally, his legislation would have corrected current law to equalize Direct Loan and FFEL PLUS loan rates at 7.9 percent, invested $12 billion in Pell grants to increase the maximum grant by $350 in 2008, provided approximately $2 billion for deficit reduction and created no new entitlement spending. His proposal was not approved by the committee.
Press releases from Congressmen Miller and McKeon and further coverage by Congress Daily, CQ, Reuters, NASFAA, Inside Higher Ed, and the New York Times are included in the expanded edition of the Briefing.
May 31, 2007
So we have the info on the new rate changes – what does that mean to people who want to consolidate?
Well, it means we probably won’t have the crush of consolidations leading up to last July 1 because the rate increases are quite small. Which, I admit, is good for my sanity. 🙂
But what does it mean for the you all? We’re at a rather unique occurrence in terms of student loans, historically speaking. The rate increase is so minuscule that, depending on your situation, consolidating may or may not be in your best interest
Lets start with “time to repay”. What do I mean by that? Federal student loans have a repay term of 10 years. So each of those Stafford Loans you have or your child has must be repaid within 10 years of when you start repayment, barring any forbearances or deferments. If you can’t afford to repay them all now, you can consolidate and it will roll all those loans into one consolidation loan that can have up to a 30 year loan repayment term.
+ You have longer to pay it back – if you’re broke this could be a godsend
– You have longer to pay it back, so you’ll end up paying more money in the log run
+If you’ve used up all your forbearances and deferments on your federal loans, they renew when you consolidate and you can go into forbearance or deferment again if you qualify
-/+You’ll be dealing with a new company – that could be scary or could be wonderful!
More to come later…