Unless your daughter promised you or otherwise agreed to be responsible for some or all of her student loan that you took out for her (under the Parent Plus student loan program, no doubt), you have no recourse. If she did promise to pay it back, then you can sue on that promise.
You, the parent borrower, are legally responsible for repaying the loan.
How to Use the Double Consolidation Loophole: The key to using the double consolidation loophole is to consolidate each of your Parent PLUS Loans twice. In this scenario, a borrower can have as few as two Parent PLUS Loans.
Defaulting on a Parent PLUS Loan can lead to serious consequences, including wage garnishment, credit score damage, and the loss of federal benefits. But you can recover through loan rehabilitation or consolidation with the U.S. Department of Education.
Parents can file an appeal after being denied a Parent PLUS Loan. Reach out to your school's financial aid office as soon as possible to get the appeal process started.
The Bottom Line. Yes, borrowers with Parent PLUS Loans can have their debts forgiven after 10 years (or 120 eligible monthly payments) with the PSLF program.
The $100,000 Loophole.
With a larger below-market loan, the $100,000 loophole can save you from unwanted tax results. To qualify for this loophole, all outstanding loans between you and the borrower must aggregate to $100,000 or less.
Your parent PLUS loan may be discharged if you (not the child) become totally and permanently disabled, die, or (in some cases) file for bankruptcy. Your parent PLUS loan also may be discharged if the student for whom you borrowed dies.
If approved, the student can pay off the Parent PLUS loan with their new loan and begin making payments on the new loan. Transferring a Parent PLUS loan to a student involves refinancing through a private lender. The student must apply for a new loan to pay off the Parent PLUS loan.
What Are Some Reasons to Avoid PLUS Loans? First, PLUS loans have no automatic grace period. Then there's the fact they aren't eligible for most IDR plans. Then, borrowing too much is easy to do, and finally, they're nearly impossible to get out of, even in bankruptcy.
You will lose repayment plan options and restart the clock on PSLF and other forgiveness programs. You can learn more about the consolidation process here . Act quickly to avoid default. Default can result in consequences like garnishment of your wages, federal tax return, or Social Security.
You, the parent borrower, are legally responsible for repaying the loan.
Cosigners can take the primary borrower to court if the primary borrower fails to repay the loan or otherwise fails to fulfill the terms of their agreement.
Steps for how to transfer a Parent PLUS loan to your child:
Your child must apply for a student loan refinance in their own name. The application is based on your child's information alone. This is why it's important to ensure they have a steady income and meet the lender's criteria.
What's more, if the loan exceeds $10,000 or the recipient of the loan uses the money to produce income (such as using it to invest in stocks or bonds), you'll need to report the interest income on your taxes.
A loan between family members, or even friends, isn't help—it's a trap for both parties. Whenever you loan money to a friend or family member, you've become their creditor. You're now a lender, and they're a borrower.
Gift loans up to $100,000 might also qualify as an exception to the rules under particular circumstances. The loan must be granted to a relative or child to buy a home or launch a business. Furthermore, the borrower's net investment income must be $1,000 or less for the year.
Transfer the loan to your child
If you can't pay but your kid can, consider having them refinance the parent PLUS loan in their name through a private lender. They'll need good credit to qualify and enough income to comfortably afford their expenses, student loan payments and other debts.
Unlike all other federal student loans, there are no explicit borrowing limits for parent PLUS loans. Parents may borrow up to the full cost of attendance, which is determined by the institution, not the government, and includes books, travel and living expenses. There are no ability-to-repay standards for PLUS loans.
Your parent's PLUS loan will be discharged if your parent dies or if you (the student on whose behalf your parent obtained the loan) die.
The parent's only legal recourse would be to sue the child for breaking the contract between the parent and child. In short, both the law and the loan terms are clear that the repayment of a Parent PLUS loan is the parent's obligation.
One way to have your parent PLUS loans forgiven is by enrolling in an Income-Contingent Repayment plan (ICR). Just like other income-driven repayment plans, this plan calculates your monthly payment based on a percentage of your disposable income and allows you to pay off the loan over a longer period of time.
A refund is issued to the parent-borrower 7-10 days after the loan has been disbursed to the student's account. The parent-borrow may elect to receive their refund via Digital Disbursement via Zelle or by Paper check.