Don’t make the mistake of thinking a Direct PLUS Loan can be transferred from the parent to the child.
As a parent borrower, can I transfer my loan to my child?
No, a Direct PLUS Loan made to a parent cannot be transferred to the child. You, the parent, are responsible for repaying the loan.
Parents may be lulled into taking on excessive student debt, believing that this obligation can later be easily transferred to their children. A verbal promise by a student to take over his parent’s debt after he graduates is easy to make at the beginning of the college experience. But that promise can become hard to keep later on, especially when job prospects don’t pan out or when a student struggles to get his degree.
Parent PLUS loans are ”both remarkably easy to get and nearly impossible to get out from under“. With good credit, a parent can take out a PLUS Loan up to the total cost of attendance. That can easily exceed $50,000 each year.
A side agreement can be made to shift the PLUS Loan payment obligation from parent to child, but the government still views the parent as ultimately responsible.
Unlike most other debt, federal student loans can rarely be discharged in bankruptcy.
When can my federal student loans be forgiven, canceled, or discharged?
You must repay your loans even if you don’t complete your education, can’t find a job related to your program of study, or are unhappy with the education you paid for with your loan. However, certain circumstances might lead to your loans being forgiven, canceled, or discharged.
Death or Total and Permanent Disability are two circumstances that allow for loan forgiveness.
Be careful. It can be challenging to pay off college loans during your retirement years.