How To Do Double Consolidation Parent Plus Loans?

How To Do Double Consolidation Parent Plus Loans? To do double consolidation for Parent PLUS Loans, first consolidate the loans through Direct Consolidation, then consolidate the new loan again.

There is also the challenge of juggling multiple student loan payments—an aggravation any Parent PLUS Loan parent knows all too well. If you’re paying on these, the odds are likely that you have multiple.

If you are overburdened, double consolidation may be a great way to simplify the process and manage loans. In this post, we’ll explain double consolidation, how to do it, and whether or not it’s the right choice for you.

Parent PLUS Loans: What Do They Do?

So, what are Parent PLUS Loans? Before we get into consolidation, let’s first define Parent PLUS Loans. There are federal loans called Parent PLUS Loans that allow parents to borrow money to help pay for their child’s education.

These loans, issued by the U.S. Department of Education, are typically used to cover any remaining costs after other forms of financial assistance have been applied.

Parent PLUS Loans can have their perks, like fixed interest rates and deferred payments until your child graduates, but they also come with some unique challenges.

And many of the repayment options available to students, such as income-driven repayment plans, don’t apply to these loans.

Thus, consolidating your Parent PLUS Loans can enable you to better keep track of them, especially if you’re struggling to make multiple payments.

What is loan consolidation?

Loan consolidation is the process of combining multiple loans into one. By combining, you may extend your repayment period, make your monthly payments simpler, and even lower them. This can be very beneficial if you have several loans with different due dates, interest rates, or services.

You can apply for a Direct Consolidation Loan from the U.S. Department of Education.

This loan allows you to combine all of your federal student loans, including Parent PLUS Loans, into one loan with a fixed interest rate. This can help you stay organized and streamline the management of multiple payments.

Double Consolidation: What is it?

Double consolidation means you consolidate your Parent PLUS Loans into one loan through the Direct Consolidation Loan program, and then, if you need to, consolidate that newly consolidated loan into one consolidation loan.

This second step can give you access to more benefits, such as income-driven repayment plans, which are not typically available to Parent PLUS Loan borrowers, or further change your repayment terms.

It is not an option frequently discussed, but parents needing greater flexibility or wanting to decrease their monthly payments further might consider using double consolidation. Yet, before you decide, it’s essential to understand the pros and cons.

See Also: Does The VA Offer Debt Consolidation Loans?

What If You Have Parent PLUS Loans?

The process of consolidating your Parent PLUS Loans is relatively straightforward. To have stormy clouds gather, do the following:

Step 1: Find Out How Much You Can Borrow

Check if you are eligible to consolidate your Parent PLUS loans. Consolidation is an option for most federal student loans, including Parent PLUS Loans. If your loans are in default, you may need to rehabilitate them before consolidation.

Step 2: Choose a Servicer for Consolidation Loans

Once your eligibility has been confirmed, you need to choose a consolidation loan servicer. The most popular type is a Direct Consolidation Loan from the U.S. Department of Education. You can apply for this loan on the Federal Student Aid (FSA) website.

Step 3: Submit the Necessary Documents

To request consolidation, you will have to log onto the loan servicer’s website. This may involve providing your personal information, such as your name, address, and loan details, along with selecting which of your loans you want to consolidate.

Step 4: Wait for the Loans to Consolidate

The final step of documenting that process typically takes 30 to 60 days after the application is received. You’ll receive a new loan based on the weighted average interest rate of the loans you consolidated during this time, plus pay off your existing loans.

Step-by-Step Double Consolidation Process

If you do want to make additional modifications to your loans, double consolidation is probably the best solution. Here’s how to approach it:

Step 1: You Can Combine All Parent PLUS Loans into One Direct Consolidation Loan

The first stage is identical to that of the traditional consolidation procedure. Your Parent PLUS loans will become a Direct Consolidation Loan. It will help simplify your payments and combine all of your debts into a single debt.

Step 2: Combine the new loan (optional) and make a second consolidation loan

Once your Parent PLUS Loans are consolidated, you can consider using the new loan to do YOUR consolidation.

Generally, parental loans are consolidated to qualify for other repayment options, such as income-driven repayment plans, which are usually not an option for Parent PLUS Loans unless they are consolidated.

While this second consolidation may lengthen the payback period, and consequently, your monthly payments might go lower, it may also increase your total interest payments over the life of the loans.

Advantages & Disadvantages of Double Consolidation

Like any other financial decision, double consolidation has its pros and cons. Let’s examine both.

Advantages

Simplified Payments: Consolidating on fewer cards takes the complexity out of what payments you need to make. With double consolidation, you’re really streamlining your debt even further.

Lower Monthly Payments: Consolidation essentially lengthens your repayment period and can lower your monthly payments, which can be helpful if you’re on a budget.

Eligibility for Income-Driven Repayment Plans: Parent PLUS Loans are generally not eligible to be paid based on an income-driven repayment plan.

However, should you take out a Direct Consolidation Loan and consolidate your Parent PLUS Loans, you could gain access to these repayment options, which would allow you to manage payments according to your income.

Disadvantages

More extended repayment period: Although double consolidation can help reduce your monthly payment, it will also increase the life of the loan, which may mean that you pay much more in interest in total.

Loss of Borrower Benefits: Some Parent PLUS Loans come with specific borrower benefits, including deferment or forbearance eligibility. Consolidating may cause you to lose these benefits.

Higher Interest Costs: When consolidating loans into one loan, the new interest rate will be the weighted average of the rates of the loans you are consolidating. That may ultimately be higher than the initial rates of your Parent PLUS Loans, costing you more in the long run.

See Also: Do Credit Unions Offer Debt Consolidation Loans?

When Should You Look Into Double Consolidation?

Double consolidation might be a good idea if you want more flexibility with your payments or if you need to lengthen the repayment period (lowering your monthly fee). But it isn’t the right choice for everyone.

You may need to go through the extra step of double consolidation only if you don’t need access to income-driven repayment plans or you are not particularly attached to your current loan terms.

If you are sure which route to take, it may be wise to talk to a financial advisor to determine whether double consolidation is the right option for you.

FAQs

After double consolidation, what happens to my interest rate?

The interest rate after double consolidation will be the weighted average of the interest rates of the loans you consolidate, rounded up to the next one-eighth percent.

Can I combine Parent PLUS Loans with other federal loans?

Yes, you can consolidate Parent PLUS Loans with other federal loans in the Direct Consolidation Loan program. However, the Parent PLUS Loans will be treated as separate loans in the consolidation.

Does double consolidation affect my eligibility for forgiveness programs?

If you were double-consolidating, then depending on the terms of those loans or the type of loans involved, this could change your eligibility for any programs such as Public Service Loan Forgiveness (PSLF).

How long do you think double consolidation would take?

Usually, the consolidation process takes about 30–60 days to complete (but this varies depending on the loan servicer and the loan’s volatility).

Does double consolidation work for everyone?

Double consolidation can be helpful in some cases, particularly if you want additional repayment options or lower monthly payments. Still, it isn’t the right solution for everyone, so you should do the math on your financial picture before moving forward.

Conclusion: How To Do Double Consolidation Parent Plus Loans?

So, when it comes to Parent Plus loans, double consolidation can be an essential tool in terms of simplifying your Parent Plus loans and getting better repayment options.

Though it comes with advantages, such as lower monthly payments and easier management, it’s essential to consider the potential downsides, like more interest paid and loss of borrower benefits.

It’s all about learning and understanding how double consolidation works and deciding what’s best for you and your financial situation.

Shuman Das