Paying Off Parent Plus Student Loans

If you have a teen going into University and a bunch of kids down the lien going into school then you will probably want to know about the Parent Plus Student Loanda.

A Parent Plus Student Loan is a kind of federal student loan that is taken out by a parent on behalf of a child. These loans are never transferred to the student's names after they graduate. As the mom or dad you are always responsible for them.

This means that the student has absolutely no obligation to pay this loan, which kind of takes the pressure off the kid. But not off me. The parent loan is the easiest type of loan to get because of this. Thankfully student loan consolidation and refinancing measures are available for this type of parent-sponsored loan after you have had one out for a few years.

These loans can be gotten easily and very cheaply at low interest rates. However there is a hitch. There is no grace period of three months or so after the student graduates. Payments on these types of loans start immediately. You need to be ready with the money. However the sooner you pay it off the easier it will be for you in the long run. The sooner your kid gets a job after graduation the sooner you will be able to get payments from him and her as well.

Just as an aside it is also important to know that this type of Parent Plus student loan can never be a joint loan that is arranged between one parent and another. It can only be taken out by one parent – either the mom or dad. Two people cannot be responsible for it and only one name can be on the signed form. This is true even if the parents have been married for forty years.

Also these loans require a bit of paperwork. You have to take out one for each school year. So this means that the one parent will apply for the school loan four years in a row. This loan is typically acquired in the summer and half of the student loan is released out of an escrow type fund to the student in the fall and the other half in the spring.

I have the secret to cutting the interest on these student loans. You can immediately refinance them as soon as the second half of the loans is given to the student in the Spring. For example took out a Parent Plus loan in the first year. As soon as the second half of the loan is released you will begin to pay it off. Then your child may enter a second year of school. During that time you will likely take out a second loan. The secret is to take those two loans and consolidate them into one. Your payment will be much lower if you refinance the two loans into one rather than pay them both off separately.