I have $ 120,000 in parental loans. Can I pass them on to a student?

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Q. I currently have about $ 120,000 in Parent Plus and student loans. Is it legal to transfer responsibility for these loans to a real student?

– Parent

A. This is a great debt of the college.

Unfortunately, you cannot transfer a Parent Plus loan to a student.

As a parent borrower, you are legally responsible for repayment of loans, said Jeanne Kane, a certified financial planner from JFL Total Wealth Management in Bunton.

However, according to her, you can refinancing a Parent Plus loan into a private loan in the student’s name.

But there are a few caveats:

First, Kane said, the student must qualify.

“As with other loans, they must have a credit history and income to pay off the loan,” she said.

Next, you will most likely need co-sign the loan, which is contrary to your goal of fully transferring legal responsibility for the student loan.

Loan refinancing means that all of the repayment options for Parent Plus loans may not be available to your student with a new loan, so it’s important to keep that in mind, Kane said.

In addition, according to her, the interest rate on a private loan may be higher or lower than on a Parent Plus loan.

“The rates on Parent Plus loans for loans first issued on or after July 1, 2021, but before July 1, 2022, have a fixed rate for the entire life of the loan of 6.28%,” she said. “New loan rates will be based on the student’s credit rating or your rating as a co-signer.”

Interest rates on private loans will vary, so you will want to help your student shop around at the best prices and terms, she said.

“We recommend that parents start talking to their children early, well before they apply to college, about how much they are willing to contribute or take as debt,” she said. “This discussion also sets expectations for the student so that he / she knows what they will be held accountable for.”

For example, a student looking to pursue a rewarding but low-paying social work career may make different choices about where he will attend college if he knows how much he will personally have to pay in loans upon graduation, Kane said. …

Send your questions by email Ask@NJMoneyHelp.com

Karin Price Mueller writes Deceived column for NJ Advance Media and is the founder NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Subscribe to NJMoneyHelp.comwith weekly email newsletter.



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