Parents Who Took Out Student Loans for Their Kids Left Out of New Repayment Plans
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Hey, your money briefing listeners. This is J.R. Whelan. Here at YMB, we're all about bringing you important personal finance and career news to help you make better decisions about your money. But we want to learn more about you. What kind of financial knowledge do you have? And where could you stand to learn more? If you're listening on Spotify, look for our poll under the episode description. Or you can send us an email to ymb at wsj.com. That's ymb at wsj.com. Now on to the show. Here's your Money Briefing for Wednesday, November 1st. I'm J.R. Whelan for The Wall Street Journal. Many student loan borrowers who've begun repaying their loans have taken advantage of government programs that can help ease the financial pressure.
But that's not the case for borrowers who took out Parent PLUS loans.
They're not able to take advantage of some of these income-based repayment programs like SAVE. unless they consolidate their loans. But in consolidating their loans, they are then risking either having a higher interest rate than the one that they already have, or they are risking losing out on some of the benefits that they have from their existing loan.
We'll talk to Wall Street Journal personal finance reporter Julia Carpenter after the break.
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Millions of student loan borrowers who took out Parent PLUS loans are facing a hard time taking advantage of some of the government's repayment programs. Wall Street Journal personal finance reporter Julia Carpenter joins me. So, Julia, first of all, what are Parent PLUS loans and how do they differ from other federal student loans?
Parent PLUS loans are loans taken out on behalf of a student by a parent. So it's a parent who's paying for their child's education. And with the rules for Parent PLUS loans, they can take out the entire cost of attending the institution minus whatever student aid they receive from the institution.
What are the interest rates like?
The interest rates are slightly higher than on other federal student loans. Right now, it's around 8.05%. And that's as of July 2023.
Why is the rate higher?
Parents are able to take out more money than otherwise a student would be able to take out for their own education.
Who typically takes out Parent PLUS loans?
Parent PLUS loans are geared toward parents who would be able to fund their child's education but don't want the child to be liable for the loan. But what we know is that oftentimes these are lower income borrowers and borrowers from minority backgrounds.
So why haven't Parent PLUS borrowers been able to benefit from some of the Biden administration's repayment programs like SAVE?
SAVE and other income-based repayment programs are hugely beneficial for many federal student loan borrowers. But unfortunately, in the rules written about who qualifies for SAVE and who can take advantage of it, Parent PLUS loan borrowers are specifically omitted from that program.
What kind of situation does that put the borrowers in?
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