Navigating student loan repayment is often challenging, even in the best of circumstances. When a parent and child disagree about Parent PLUS Loan payments, the situation can become particularly stressful.
Today’s article is about perspective and available options. I’ll explore what the rules say and discuss strategies for preventing conflicts.
Does the Student or Child Have a Legal Obligation to Pay for the Parent PLUS Loan?
I’ve received many emails from parents frustrated that their child hasn’t been making Parent PLUS loan payments.
Legally, the responsibility to make these monthly payments falls squarely on the parent. The student loan contract is between the government and the parent. The loan was taken out in the parent’s name and, so, it’s the parent who has the obligation to repay the entire loan balance. Although the child is the one who benefited from the loan, they are not required to repay the debt.
In theory, a parent and child could have a separately created contract requiring the child to repay the parent. However, such an agreement wouldn’t affect the parent’s legal obligation to the government. If repayment isn’t made, the Department of Education would look to collect the money from the parent. The parent’s only legal recourse would be to sue the child for breaking the contract between the parent and child.
In short, both the law and the loan terms are clear that the repayment of a Parent PLUS loan is the parent’s obligation.
Children May Have a Moral or Ethical Duty to Help
Although the legal responsibility for repaying Parent PLUS loans rests with the parents, a case can be made that the child has a moral obligation.
Parents don’t personally benefit from Parent PLUS loans. The sole purpose of taking on such a loan is to help the child further their education. Taking on a Parent PLUS loan is a selfless act. If you benefited from a Parent PLUS loan, you should do your best to ensure that the borrower doesn’t regret their decision.
Even if making payments is financially challenging for the child, there are various ways they can contribute and show appreciation for the support received.
Even if the child cannot afford to make payments, there are other ways in which they can contribute and show appreciation for the support they received.
Getting Parents and Children on the Same Page
The strange thing about Parent PLUS loan repayment is the ambiguity about repayment responsibility.
Under the law, it is the parent’s job. Morally and ethically speaking, the child should help whenever possible.
There are a variety of options for managing Parent PLUS loans, including:
- Income-Driven Repayment
- Student Loan Forgiveness
- Public Service Loan Forgiveness
Programs like these provide borrowers with ways to reduce their monthly payments and, in some cases, qualify for debt forgiveness. This article breaks down the many options available for Parent PLUS loan repayment. It is even possible for Parent PLUS loan borrowers to manage the debt living on limited income sources, such as social security.
Given the breadth of available repayment options, parents and their children can usually devise a reasonable plan for managing the debt together. The key is maintaining open and honest communication about everyone’s financial realities and focusing on finding solutions rather than finger-pointing and making accusations.
Transferring Parent PLUS Loans to the Student
I often hear from children who would like to transfer Parent PLUS loans into their name.
While commendable, this decision isn’t without its drawbacks.
Some student loan refinancing companies, like SoFi, offer services to pay off existing Parent PLUS loans and replace them with a new loan in the child’s name. While this move might seem like an ideal solution, it’s important to understand the implications and risks.
Refinancing in this manner changes the loan from a federal to a private one, which means it loses eligibility for federal benefits like income-driven repayment plans and student loan forgiveness programs. While refinancing to a private loan might offer lower interest rates, it also removes these federal protections. This decision should be made with caution, especially if there’s any uncertainty about the ability to repay the debt fully
This option converts federal student debt into a private loan. As a private loan, the debt loses its eligibility for federal benefits like income-driven repayment or student loan forgiveness. It’s true that borrowers may qualify for lower interest rates by choosing the private refinancing route. However, unless the borrower is certain they can afford to fully repay the debt, this decision should be made with caution.
When Your Child Isn’t Making Payments
Unfortunately, there isn’t an easy answer to this problem.
In most cases, the best path forward is recognizing that working together is the best way to manage the debt.
If I were interested in paying off my student loan in full, is there a way to negotiate a smaller than balance due settlement? Say for example, reducing loan payoff by the interest accumulated in the past?
I’ve never heard of a settlement like the one you are describing working for a federal loan in good standing. Generally speaking, settling student debt balances for any sort of relief is difficult.
It’s a good question and a reasonable theory, but the government doesn’t have any incentive to accept a negotiated settlement.
I am curious as to whether it is possible for a parent to sue a child, who benefited from student loans, for unjust enrichment.
The DOE agents, when March came around, told me that in order for students to get grants and their own loans, that credit-worthy parents needed to take out parent-plus loans. I hear, now, mixed stories on that. What is the truth?
You may be interested in contributing your expertise to our MR website(s).
A civil suit brought by a parent over non-payment of Parent PLUS loans would depend upon the tort laws of the state in which you reside. Its a question about student loans, but it is best answered by a local attorney.
As far as parent plus loans being required to secure grants or other student loans, that is not accurate. There have been many different grant programs over the years, but I’ve never heard of one that required the parent to borrow a Parent PLUS loan.