Get Out of Debt Guy - Steve Rhode

Can I Get My Parent PLUS Loans Forgiven Because I’m in Law Enforcement?

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Question:

Dear Steve,

My son went to West Coast University and graduated and now is an RN for Kaiser. When he initially applied, I was told that he did not qualify for a student loan due to him being 21 and living in my home. They advised that I take out a Parent Plus Loan on his behalf. I was very hesitant and wanted my son to have to at least co-sign on the loan. They informed me that he was not allowed to co-sign on the loan. Although it was for him.

Well, my son promised to pay the loan when he got out of school. After he graduated and began working he went back to school for his masters and placed the loans in deferment again. I agreed to allow my son to continue to live in our home rent free with the promise from him to pay the student loans.

Also, I am a peace officer and was told I would qualify for loan forgiven due to civil service. Only to find out when I looked into it that you had to be actively working for the time you are repaying the loan.

I am 45 years old and only have five years left before retiring. When I retire I will have 20 plus years as a peace officer. I was recently told I will not qualify due to me retiring at 50.

My health is failing, my body is wearing down and there is no way I’m going to work in this field for 10 more years. When signing my name on the loans, they told me as long as I worked as a peace officer for 10 years, I qualify. I already had 10 years in by the time I applied for the loans for my son. Now, although it is no ones fault my son has decided to defraud me and put me in a large financial debt. I cannot afford to pay $180,000.00 at this point of my life.

What are my options and do I have any recourse?

Tashi

Answer:

Dear Tashi,

The forgiveness program you mention is called the Public Service Loan Forgiveness Program. The program forgives federal student loan balances after 120 qualifying payments. To be eligible you have to meet two tests. The first is you have to work more than part-time for a non-profit or government entity. Working as a law enforcement officer for a government entity would count.

The kicker is if the loan program you are in qualifies. According to the Department of Education, “Parents who received a Direct PLUS Loan may qualify for forgiveness of the PLUS loan, if the parent borrower—not the student on whose behalf the loan was obtained—is employed by a public service organization.” So it appears you are good there.

But for payments to qualify “You must have made 120 separate monthly payments after Oct. 1, 2007, on the Direct Loans for which you are requesting forgiveness. Payments made before this date do not count toward meeting this requirement. Each of the 120 qualifying payments must be made for the full scheduled installment amount and no later than 15 days after the scheduled payment due date. The 120 required payments do not need to be made consecutively.”

But here is where it gets interesting. If you have not consolidated your Parent PLUS loans and then put them into an income driven repayment then you may be on the standard 10-year repayment plan. Since the standard plan would pay the loans off in full by the forgiveness qualification time period, that would not account for your high balance owed. But what might account for the high balance is if the loans were left in deferment or default and ballooned the balance.

In your situation it would make sense for you to complete the Employment Certification for Public Service Loan Forgiveness form and get an idea about what payments have counted towards forgiveness.

You can learn more about the Public Service Loan Forgiveness Program online.

Maybe a bigger issue here might be the existence of the Parent PLUS loans. I often hear from people who are misinformed about these loans. The parent taking out the loan is the only one legally responsible for repaying the loan. Period. The loans can’t be transferred to another party. And if your son is refusing to make payments on the loan that is certainly a critical issue between you and your son. But his failure to pay does not eliminate your need to keep the loans in good standing and paid. They are your loans, not his.

So considering how big your current balance is, it is probably time to consolidate your Parent PLUS loan into a new Direct Loan and then opt for the Income Contingent Repayment option to get the lowest possible loan payment. More information on this is here. There is no charge to do this through the Department of Education.


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