Is it better to get a student loan or a parent loan?
Parent loans often have a higher interest rate than federal student loans. They have less flexible payment terms, and they require a credit check.
A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college.
But can Parent PLUS Loans be forgiven? Short answer: Technically, yes—there are a couple ways to have your Parent PLUS Loan forgiven, one with more conditions than the other. But let's dig into the details of both options so you can make the best decision for your situation.
Paying your student loans on time can help you build credit and maintain a positive credit score. In contrast, failure to make payments will hurt your score. Establishing a good credit history and credit score affects your future ability to take out loans and use credit at lower interest rates.
Some experts say your future student loan payments should be no more than 8% to 12% of your monthly salary at the time you begin making payments. Mathematically, this translates to borrowing no more than the equivalent of one year's salary, which is a simple guideline for students to remember.
Most debt belongs to 25- to 34-year-olds; 35- to 49-year-olds owe the most on average, exceeding 50- to 61-year-olds by 8.0%. 104,800 federal borrowers aged 24 years and younger owe an average $14,599 each for a total of $1.53 billion.
If you want to know how to transfer a parent PLUS loan to a student, the answer is simple: Your student can take on the loan by refinancing it in their own name. As long as the student can qualify to refinance on their own, they can assume full responsibility for the debt.
If there are excess funds from other financial aid (non-PLUS aid), they are refunded to the student directly. Occasionally, excess funds are the result of a Parent PLUS Loan. If there are excess funds from a Parent PLUS Loan, it is refunded directly to the borrower.
Biden's Student Loan Forgiveness
In November 2022 the plan was stopped by an appeals court in Texas. The ruling included an injunction that stopped the forgiveness plan from moving forward. In 2023, Supreme Court ultimately blocked this forgiveness plan, leaving borrowers looking elsewhere for relief.
They can be considered good debt because the money you're borrowing to attend school is your ticket to earning a degree and getting hired at a well-paying job. That debt should pay itself off over time with a lucrative career in place.
Why did my student loans disappeared from my credit report?
Federal student loans which have been reported to be in default for seven years or more must be deleted from a consumer's credit record. Under the Department of Education's Fresh Start Program specifically, the Department deleted reporting about loans that were delinquent for more than seven years .
Data Summary. Student loans can take 5-20 years or longer to repay. It would take the average bachelor's degree graduate about 10 years to pay off their student loan debt if they made debt payments of $300 a month. 18 million federal student loan borrowers are on a 10-year repayment plan.
Unlike with federal student loans, forgiveness rarely applies to private student loans. Some lenders offer student loan forgiveness if you die or become permanently disabled, but not all do. In addition, you'll almost certainly still be on the hook for your private student loan if your cosigner dies.
| Company | Forbes Advisor Rating | Fixed APR |
|---|---|---|
| Ascent | 4.5 | 4.13% to 15.46%* |
| Rhode Island Student Loan Authority | 4.5 | 4.40% to 8.86% |
| SoFi® | 4.0 | 4.44% to 14.70% |
| A.M. Money | 4.0 | 8.34% to 8.87% |
The average debt an American owes is $103,358 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans. Data from Experian breaks down the average debt a consumer holds based on type, age, credit score, and state.
Millennials hold the most student debt right now
Meanwhile, 6.8 million Gen Z borrowers 24 and under owe $97 billion in student debt, 5 million Gen X and younger boomer borrowers aged 50 to 61 owe $238 billion in student debt, and 1.7 million boomer borrowers 62 and older owe $82 billion in student debt, per FSA.
| Generation | Share of consumers with student loan debt | Average outstanding balance per consumer |
|---|---|---|
| Gen Z | 28% | $24,473 |
| Millennials | 43% | $42,637 |
| Gen X | 21% | $48,733 |
Globally, student loan debt in the U.S. is second only to the United Kingdom, according to a 2022 Lending Tree report.
In addition, parent PLUS loans aren't eligible for some other types of federal student loan forgiveness programs. To get around this, some borrowers go through two or more federal consolidations to hide the origin of the loans, then request an IDR plan. This process is often called the double consolidation loophole.
- Decide if a student loan refinance is right for you. ...
- Check rates with multiple lenders. ...
- Choose a lender and your loan terms. ...
- Gather documents and fill out the application. ...
- Keep paying your loans as you wait for approval.
Can parent PLUS loan be reduced?
Income-Contingent Repayment
To be eligible, you must first consolidate your parent PLUS loans. Switching to Income-Contingent Repayment could lower your payments significantly if you qualify. But you'll pay more in interest and you'll be required to pay income tax on any amount forgiven.
Repayment plan options for Parent PLUS loans include Standard, Graduated, Extended, or Income-Contingent.
At the same time, the ICR plan extends your repayment term to 25 years. Any remaining loan balances will be forgiven after that time. As of now, you won't be taxed on the amount of student debt forgiven, although this could change in 2026, when the current regulations expire.
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
U.S. student loan debt totals $1.74 trillion as of September 2023. Eliza Haverstock is a lead writer and spokesperson on NerdWallet's education team, where she focuses on student loan repayment and college alternatives.
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