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How Can I Eliminate the Interest on Our Parent PLUS Consolidation Loan? – Jenifer

Written by Steve Rhode


Dear Steve,

We have a Federal Consolidation PLUS loan for putting our two kids through college. Original total loan amount was $118,000. Unfortunately at the same time the payments were to begin, in 2008, my husband lost his job. It was the financial meltdown and he worked at Fannie Mae. Terrible times for several years at least because mortgage business wasn’t exactly looking for too many new employees!! Life was more than crazy and I cannot even say for certain how it all went down. The capitalized interest over time brought total balance due to $165,000. Insane

I have already called and gotten nowhere. We have never actually defaulted and have been making $1000 payments for several years. I am looking for any suggestions to negotiate with Navient to reduce at least a portion of the capitalized interest, $55,000. I am more than happy to give you any additional details. It is a very big dark hole!!!



Dear Jenifer,

I’m afraid there is no known way to get the accumulated interest to be removed since this sounds like allowed interest under the terms of the federal loan. If this was a private student loan you could decide to default, hurt your credit, risk being sued, but get to a point where a settlement offer might be available.

Since this is a federal student loan the only time I’ve seen balances reduced or eliminated is if the consumer has been sued by the Department of Justice for defaulted loans or through a consumer bankruptcy and Adversary Proceeding when the consumer can show the repayment of the loans is an undue hardship.

Since you were never in default, during those bad years the loans might have been in forbearance where you did not need to make a payment. However according to the loan agreement, interest continues to accumulate.

Outside of what I’ve mentioned, the only logical solution would be to get the consolidation loan you have into a new Direct Consolidation Loan and then enroll that in the Income Contingent Repayment (ICR) program.

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In the ICR plan your payment would be 20 percent of your discretionary income, that’s not what you have left over but has a different meaning with the Department of Education.

For Income-Contingent Repayment, discretionary income is the difference between your income and 100 percent of the poverty guideline for your family size and state of residence. The poverty guidelines are maintained by the U.S. Department of Health and Human Services and are available at

While your payment might be lower, interest will continue to build. After 25 years of payments in the ICR the remaining balance would be forgiven. If you wanted to estimate what your payment would be under the ICR, you can click here.


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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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