With regards to advising shoppers on scholar mortgage points, many monetary advisors would possibly first take into consideration latest graduates searching for recommendation concerning the best strategy to pay down their balances. Nonetheless, the variety of Federal scholar mortgage debtors over the age of fifty has elevated considerably previously 20 years, with many of those debtors holding Father or mother PLUS loans that have been used to assist fund their youngsters’s undergraduate training.
Whereas scholar debtors of Federal Direct loans are eligible for a variety of Earnings-Pushed Reimbursement (IDR) plans – together with the newly launched Saving on a Invaluable Training [SAVE] plan – that may cut back required month-to-month funds considerably in comparison with the usual compensation choice (relying on the borrower’s revenue), obtainable IDR plans for these with Father or mother PLUS loans are rather more restricted, typically leading to considerably bigger month-to-month mortgage funds. Which not solely cuts right into a father or mother’s present money circulation, but in addition limits their capability to avoid wasting for his or her (probably fast-approaching) retirement.
Nonetheless, Father or mother PLUS debtors (and their advisors) have a possibility (till July 1, 2025) to entry extra beneficiant IDR plans by utilizing a “Double Consolidation” mortgage technique. With this feature, a father or mother borrower first consolidates their present Father or mother PLUS loans into 2 Direct Consolidation loans, after which consolidates these 2 Direct Consolidation loans right into a single new Direct Consolidation mortgage. The ensuing mortgage can be eligible for extra favorable IDR plans, together with the SAVE plan, in any other case unavailable for these with Father or mother PLUS loans. Importantly, whereas this course of may appear comparatively easy on the floor, the multi-step course of have to be accomplished precisely and fully to make sure that the ensuing Direct Consolidation mortgage is eligible for preferential IDR choices.
Notably, given the looming July 2025 deadline and the significance of finishing the Double Consolidation course of (which may contain many paper types and take 3–6 months in whole) precisely and in a well timed method, advisors can play an necessary position in guiding shoppers with Father or mother PLUS loans via every step of the method. Additional, advisors will help shoppers who full the method select the most effective IDR choice for his or her state of affairs and take steps to attenuate required funds, from deciding whether or not to elect to file taxes individually (for married {couples}) to discovering methods to scale back the borrower’s Adjusted Gross Earnings.
In the end, the important thing level is that as extra people 50 and older maintain scholar loans, monetary advisors might discover that an rising variety of shoppers are going through the problem of paying down loans taken out for his or her youngsters’s training bills whereas additionally making an attempt to avoid wasting for their very own retirement. And for these shoppers who presently have Father or mother PLUS loans (or who’re planning to have such loans and who can full the consolidation course of earlier than July 2025), advisors can add important worth by supporting them via the advanced means of Double Consolidation, which may very well be an efficient manner to assist them save on their youngsters’s training and, on the identical time, to unencumber extra of their wealth to pursue extra of their different necessary monetary objectives!
