July 30, 2010
Many parents, who take out the Parent PLUS Loan, believe they could always transfer the loan to the child, once he or she has graduated and secured a reasonable income. Unfortunately, that is not the case. The PLUS Loan is the responsibility solely of the parent, and is taken out in the parent’s name. He or she is the borrower, not the student.
One option, if finances become an issue for the parent, is to simply have the student reimburse the parent for the cost of the monthly payment, but continue to make the payments in the parent’s name.
If, as a parent, you would prefer a loan that allows you to eventually transfer the repayment obligation, consider a private student loan. These loans are in the student’s name, and depending on the lender, generally have a cosigner release option. After a certain number of consecutive on time payments, the parent (as a co-signer) can apply to be released from the loan, making it entirely the student’s obligation for repayment.
October 16, 2009
In today’s uncertain world where every dime counts and most are on a tight budget the Parent Plus loan makes good economic sense as it provides a fixed interest rate for its borrowers. That is an important benefit to note because most private student loans, which parents co-sign for their students, are variable interest rates. Wouldn’t you rather have the piece of mind of knowing what your monthly payment will be? Private student loans fluctuate with the market – Parent Plus loans do not.
So while private student loans may offer you a lower variable interest rate now, it may be worth it to take out a Parent Plus loan which holds a higher fixed interest rate to protect yourself later.