The new school year is fully upon us. By now, college students have hopefully developed a routine — and settled any remaining student loan shortfalls. If you took on more debt to do this, you likely did so to get through this semester or year.
Ideally, you also thought about how these decisions could affect your financial future. But that ‘ s not always the case — even when considering your repayment options. At times, borrowers can overlook critical information that could save them money and reduce their student loan debt.
This week, we answer readers’ questions related to instances where additional information could have helped them make different financial decisions about their student loan debt.
Letters have been edited for clarity and to protect readers’ privacy. If you have a question for the Student Loan Ranger, reach out to us at studentloanranger@usnews.com.
Understand the many facets of the [student loan process.]
Q. We have a Parent PLUS loan. When we enrolled our son, the school told us parent loans would be transferred to our son when he graduated. Now, FedLoan says that we can’t do that, and of course, during the time he went to school, there was no one to confirm this.
My son was so happy to do his photography when he went to college, and now that he has finished, the school has made him unhappy and he doesn’t want to take photographs anymore. What do we do?
A. This situation is unfortunate on many levels, especially because some independent research could have helped you avoid this.
Many parents opt for Parent PLUS loans to cover outstanding tuition gaps for their children. As federal loans, these often make more sense to borrow than private loans, due to their generous repayment, postponement and forgiveness options.
One feature they don’t offer borrowers — which is true for all federal loans — is the ability to change the loan holder.
Parents serve as the borrower for a Parent PLUS loan, and they are solely responsible for its repayment. Many parents make plans with their children for the students to take over paying these costs after graduation. However, the loan will always stay in the parent’s name, regardless of whether the student makes those payments.
Learn how to [transfer parent PLUS loans via private loan refinancing.]
Families should also be able to trust their schools to offer accurate information. If a school doesn’t, that’s a big red flag.
That warning sounds warranted based on your student’s dissatisfaction with his educational experience. Still, in almost all instances, borrowers must repay their loans regardless of their happiness with the school or their ability to land a job postgraduation. This is another reason why it’s so important to identify the best school for your student’s specific needs before taking on debt.
Q. I currently work for a nonprofit that meets the employer eligibility requirements for Public Service Loan Forgiveness. I started working for them in late February 2017, and at that time, I consolidated all my student loans.
Before working for my current employer, I did work for three years with a hospital system that is a nonprofit as well. My loans were not consolidated at this time but were direct loans.
Can I retroactively submit a PSLF Employment Certification form for my previous nonprofit employer to see if any of the payments I made during my employment with them would count toward PSLF?
A. Public Service Loan Forgiveness is a great option for borrowers who work for eligible nonprofit organizations. Unfortunately, few borrowers have successfully pursued this option — with a big reason being a lack of understanding around some of its rules. And this can negatively affect those borrowers.
When you consolidate student loans, you replace your old loans with a new one. This means that those old loans essentially disappear, as do their terms, benefits and, in the case of PSLF, any eligible payments made on them.
For your consolidation loan, your eligible payment total was knocked down to zero, regardless of the payment history on the underlying loans.
Learn how to [ensure eligibility for Public Service Loan Forgiveness.]
What ‘ s confusing is that some borrowers must consolidate to become eligible for forgiveness. For example, if you have loans from the Federal Family Education Loan Program, you must consolidate them into the direct loan program to take advantage of PSLF.
Unfortunately, you already had direct loans. So, instead of making your loans eligible, the consolidation actually made your three years of payments ineligible. Otherwise, they potentially would have qualified, since loan payments don’t need to be consecutive to qualify for PSLF.
The Student Loan Ranger hates giving out bad news like this, especially when a negative outcome was potentially avoidable. If you’re unsure about how to handle a specific student loan situation, get clarification before proceeding. In addition to contacting us, the Federal Student Aid website offers many answers, as does your student loan servicer.
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