PLUS loans can be consolidated; it’s just that they cannot be consolidated along with student debt under certain circumstances.
The nature of PLUS loans is different from the rest of student loans and thus there are some obstacles for achieving student debt consolidation and including these loans on the package. Though there may not be economical reasons for this, the source of this difficulty is legal and has to do with who is the real holder of the loan. This problem, however, can be overcome by other means.
Nature of PLUS loans and Obstacles For Joint Consolidation
PLUS loans are meant for providing finance for the parents of students so they can aid their children pay for their college studies. Thus, the obligation of repayment is not the student’s burden but the parents’. PLUS loans constitute a personal loan contract with three parties: the lender (financial institution), the taker or borrower (the student’s parents) and the final beneficiary of the loan (the student).
Thus, legally speaking, the ones obliged to repay the loan are the actual takers, the parents. And since consolidation of federal student loans implies replacing all the debts for which the student is obliged with a single loan, PLUS loans are left out due to being a parents’ debt and not a student’s debt. However, this doesn’t imply that PLUS loans cannot be consolidated as there are other means to fulfill that purpose.
Independent Consolidation of PLUS Loans
PLUS loans can be consolidated independently from student debt in which case, what parents are actually doing is refinancing their PLUS loan to obtain better terms like lower rates and more commonly lowest monthly payments by means of extending the repayment programs. The problem is that this doesn’t get you a single monthly payment packing together all the student debt.
The alternative is for the parents to consolidate PLUS loans along with other personal debt that can include consumer debt. This reduces debt payments to a single monthly payment but keeps the student part of the debt on one side and the parents’ on the other. Nevertheless, thousands of dollars can be saved by resorting to debt consolidation through these means.
Joint Consolidation: Other Means To Achieve It
A final alternative that can provide a comprehensive solution is to consolidate all debt through home equity loan. These loans can provide higher loan amounts with no particular purpose for the cash and thus the money obtained can be used for repaying both the federal and private student loans and the PLUS loans too. Then, the student can take charge of the PLUS loan debt by repaying the whole new loan or the loan installments can be spread. However, bear in mind that the owner of the property is the one running the risk under this financial transaction.
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