Q. I now have approximately $ 120,000 in Parent Plus and Student Loans. Can the responsibility for these loans be legally transferred to the student himself?
A. That’s a lot of college debt.
Unfortunately, you cannot transfer a Parent Plus loan to a student.
As a parent borrower, you are legally responsible for loan repayment, said Jeanne Kane, certified financial planner at JFL Total Wealth Management in Boonton.
However, she said, you can refinance the Parent Plus loan to a private loan on behalf of the student.
But there are a few caveats:
First of all, Kane said, the student will have to qualify.
“As with qualifying for other loans, they would have to have a credit history and income to repay the loan,” she said.
Then you will most likely have to co-sign the loan, defeating the goal of transferring legal responsibility for the loan entirely to the student.
Refinancing the loan means that all of the Parent Plus loan repayment options may not be available to your student with the new loan, so it’s important to keep that in mind, Kane said.
Also, the interest rate can be higher or lower with a private loan compared to the Parent Plus loan, she said.
“Parent Plus loan rates for loans first disbursed on or after July 1, 2021 and before July 1, 2022 have a fixed rate for the term of the loan of 6.28%,” she said. “The rates for a new loan will be based on the student’s credit rating or yours as a co-signer. “
Private loan interest rates will vary, so you’ll want to help your student find the best rates and terms, she said.
“We recommend that parents start talking with their children early, well before they apply to college, about how much they’re willing to contribute or go into debt,” she said. “This discussion also sets the student’s expectations so they know how responsible they will be. “
For example, a student pursuing a rewarding but low-paying career in social work may make a different choice as to where to attend college if he knows how much he will personally have to pay in loans upon graduation, said Kane.
Email your questions to [email protected].
Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.