Get Out of Debt Guy

Why Can't I Put My Parent PLUS Loan in an Income Based Repayment Program?

Posted May 11, 2015

Question:

Dear Steve,

I have significant student loan debt and applied for IBR and was denied, due to there being a PLUS (parent) loan in my record.

I did not participate in anyway in the creation of any PLUS loan. My suspicion is that it was created fraudulently using my identifying information from when I co-signed on a loan for my daughter (three years prior to this fraudulent loan). This situation goes bask to 1999.

What is your take on why having a PLUS loan in one's loan consolidation bars an individual from IBR?

Additionally, any thoughts out how to get an erroneous or fraudulent PLUS loan removed from one's "portfolio"? In this case there is no legitimate signed loan application in the file. This loan was "robo" created most likely.

Michele

Answer:

Dear Michele,

Sadly I don't make the government rules, just report on them. A Parent PLUS loan can be put into an income driven repayment program, just not an Income Based Repayment (IBR) plan.

Let's assume the loan was created fraudulently. But the question is after 16 years, how are you going to prove that? Are you willing or able to hire an attorney to pursue this matter and even so, what is the statute of limitations for going after any party involved? You can always file a complaint with the Consumer Financial Protection Bureau or the Department of Education Ombudsman and ask for help with the presumed fraud.

You can certainly ask for documentation from the servicer but it would be a horrible long-shot to get that loan unwound now.

Parent PLUS loans are handled through a different repayment plan, the Income Contingent Repayment (ICR) plan. See this article for details on what you can do, "The Best Way to Lower Parent PLUS Loan Payments."

So you should be able to deal with the PLUS loan separately and the rest of the loans in an IBR. But while you pursue these options, just keep in mind an income driven repayment program is now a silver bullet or magic wand. There are big consequences people rarely talk about. Read this.

Before I go I wanted to leave you with three easy action items you jump on right now to address your situation. Just click here.

This article by Steve Rhode first appeared on Get Out of Debt and was distributed by the Personal Finance Syndication Network.

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.