Generally, it’s best for the student to get a loan for college, especially for federal student loans, which are generally the best type. Federal student loans have better rates, terms and more flexible payment plans than federal parent loans do.
For example, the student versions are eligible for various income-driven repayment plans. In contrast, Parent PLUS loans can only apply for an income-driven repayment plan after consolidating the loan first. However, a parent loan can help cover remaining financial gaps after the child has exhausted all federal student loan options.
If the loan’s only borrower is the parent, then that parent will assume full responsibility for repayment. However, if the loan has a cosigner, both parties will equally share responsibility — although the primary borrower is usually the one to make payments.
Make sure you understand your loan’s terms because sometimes a lender might refer to a “parent loan” which is actually a student loan with a parent cosigner.
Typically, no. The parent loan stays in the parent’s name until the debt is paid in full. However, you might be able to refinance the loan into your child’s name. (But note that you’ll lose federal protections if you refinance a Parent PLUS loan.)
Yes. If you have a Parent PLUS loan, you can consolidate your loan and enroll in an income-contingent repayment plan, which results in student loan forgiveness after 25 years. You can also apply for the Public Service Loan Forgiveness program, although make sure you understand the criteria and process first.
Unfortunately, the Department of Education doesn’t forgive Parent PLUS loans when you retire. You must repay the total debt unless you die or become permanently disabled. However, you may qualify for an income-contingent repayment plan or student loan forgiveness. You can also consider a student loan refinance if you find a lower rate with a private lender, although you’ll lose government protections when you refinance federal student loans.