Why Parent Plus Loan Consolidation Is Such A Good Thing
Many parents elect to take on the obligation of paying for the secondary education of their kids. While this is certainly beneficial, after the child or kids graduate it is a good idea to take into account consolidation all of the accumulated student loans.
Parents can find themselves buried under a mountain of debt by the time their kids graduate college. A good solution in many cases is a Parent PLUS consolidation loan.
In the United Says, there is a federal loan program set up to enable parents to take out education loans on behalf of their kids. These loans are called Federal Parent PLUS Loans. These loans can be taken out for each child a parent has, as long as the child is a dependent of that parent and is enrolled in an undergrad university program.
Federal Parent PLUS loans are guaranteed by the United States federal government. Part of that guarantee ensures that the loans keep low interest rates. These loans are beneficial because they grant you to borrow toward all college expenses, like travel, housing, laboratory costs, tuition, and much more.
Checking for the eligibility of parent for a PLUS Loan just depends on a modest checking on the parent’s credit history; the only red light sign on a PLUS loan is adverse credit history. And when we state adverse credit history, we mean that a parent is more than 90 days late on a debt payment within the past five years.
Parent PLUS Loans are more beneficial to parents because the interest rates are capped at eight and a half percent and the interest is tax deductible. This type of loan is also good because it does not require collateral.
Parents who have too many PLUS loans to pay comfortably can reap the benefits of PLUS consolidation. The debt accounts are simplified into one single account. If a parent also took out federal and private loans, they’ll not all be able to be consolidated together, and the parent would have to use both federal and private consolidation.
In any case, with parent plus loan consolidations parents can now take a breather in their debt payments. Not that they do not anymore have to pay their debts, just that the debts are now more manageable. Interest rates on parent plus loan consolidation programs are calculated based on the weighted average of all previous loans -making its interest rate lower.
In many cases, parents are offered an incentive to pay their loans automatically, typically in the form of a reduced interest rate. The interest on these loans is tax deductible up to $2,500 per year.
Beyond all of these great benefits, there’s also the fact that these consolidations can improve your credit score. Outstanding debts, especially defaulted loans, can very negatively impact your credit score. By improving your credit rating, you and your kids can regain the capability to make major buys, like a new home or car.
The interest rates on parent plus loan consolidation varies from lender to lender, but an interest rate would typically include LIBOR plus a percentage rate on the total debt amount.
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