Parent Plus Loan is overwhelming
Hi Terry, I was hoping you can point me in the right direction. I have a parent plus loan and my principal amount owed is $35,793.11. I thought about trying for the public service loan forgiveness plan but it seems that I would have to jump through hoops to do so. I’ve been paying on this loan since 2016 and now I would have to start all over making 120 payments before I possibly see any loan forgiveness. Together, my husband and I make about $88,000 a year and we have a mortgage and other financial responsibilities. FedLoan’s monthly payments would be either $583 or $461 and I can’t afford to pay either of those on a monthly basis. In order to get a lower payment of $273 on an income driven plan, it was suggested that my husband and I change our income filing status to single instead of married filing jointly. I don’t know if we should make the change because my husband works on commission and since my son graduated from college in 2016, we have had to pay back federal taxes each year.
Are there other things that we can do? Or would it be a better idea to use some of our home equity and just pay off the loan? Any help/information you can provide would be greatly appreciated. Thank You
Terry Says
Oh, you are caught in a terrible trap. Parent Plus loans are the worst of all college loans because they are the most expensive. And you can’t default, and eventually they will take your Social Security check in repayment if you still owe money!
I would definitely prefer that you refi your home to a 30 year mortgage and use some of the cash to pay off as much of those loans as you can. The rate will be lower, and the interest may still be at least partially tax deductible. Start the refinance process now, while you can get a 30year fixed rate loan below 3%.
But, by the time you get approved, and before you pay down the outstanding loan, there may be at least partial loan forgiveness from the new administration. So hold on to the cash you get from the refi to see if there is such a plan and if you can get at least some of your borrowings written off.
