My son is a senior in high school this year. He’s applied to several colleges, and for each, we’ve received a financial aid award. Each time, I’m shocked by the amount they expect parents to pay, even after the colleges have factored in the student taking out the maximum amount of student loans. My son didn’t apply to prestigious schools. They were all state schools–two in-state and two out-of-state. (We quickly dismissed the out-of-state options due to the expense.)
About Parent PLUS Loans
Many parents face the same issue when covering their child’s college education. As a result, they turn to Parent PLUS loans. However, these loans can be overwhelming because you’re allowed to borrow the full amount your child needs for college minus whatever aid he receives. You can easily borrow more than you can comfortably repay.
Why Consolidate?
Even if parents only have one Parent PLUS loan, they may choose to consolidate the loan. When they do, they open up different repayment options. They can choose between standard repayment over 10 years, graduated, extended, and income-contingent.
What Is Double Consolidation?
Double consolidation on a Parent PLUS loan is a loophole that benefits borrowers. If you have more than one Parent PLUS loan, you can double consolidate. To do so, you need to consolidate some of your loans with one loan servicer and some with another servicer. Both should be different servicers than the one that currently holds your loans. You must file for consolidation on paper, not electronically, because if you choose the latter method, one company will consolidate all of the loans, which you don’t want.
When the loans are consolidated between two servicers, you then ask another servicer to consolidate the two separate loans. Once you do that, you open up the many different payment options mentioned above.
When Should You Consider Double Consolidation on Your Parent PLUS Loan?
Consider double consolidation on your Parent PLUS loan in a few instances.
You Need a Smaller Monthly Payment
Double consolidation frequently gives you a lower monthly payment, making repayment more manageable. Remember, if you default on Parent PLUS loans, the government can garnish your social security or your tax refund.
In addition, if you plan to pay the minimum amount until you can get your loans forgiven in 20 to 25 years, receiving a smaller monthly payment through double consolidation is beneficial.
You Haven’t Been Repaying the Loans for Long
If you’ve been repaying the loans for 10 years and are eyeing loan forgiveness, you probably don’t want to double consolidate because when you do, the clock starts over. After consolidation, you must make another 20 to 25 years of repayments to have the loans forgiven. For this reason, double consolidation is best for those who’ve been repaying paying for only a short amount of time.
Final Thoughts
Double consolidation on your Parent PLUS loan is a legal loophole that can provide you financial relief from loans that aren’t dismissible by bankruptcy. However, this strategy isn’t for everyone.
Read More
5 Things You Should Know Before You Take Out a Direct PLUS Loan
This Man Escaped His Student Loan Debt by Moving to the Jungle
Why I Didn’t Pay Down My Student Loans During the Pandemic
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Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in Arizona where she dislikes the summer heat but loves the natural beauty of the area.