Question:
Dear Steve,
Recent grad.
Loans are coming up.
Consolidated my loans, and mom doesn’t know I took out loans in her name (13,000).
Need help figure out which plan is best to repay hers so that she won’t find out and possibly kill, sue, or stab me.
Have a few questions on what am i to do.
I just graduated from college a few moths ago and my personal student loans are coming up soon. I have worked mine out with a consolidation firm (student advocates) and my payment is $50 a month.
However My mothers is coming up as well. She’s 52 and she wasn’t really supportive of me through college, and she has no idea I took out 13,000 of Parent Plus loans in her name. Because I can’t transfer the loans into my name (because I don’t have a good cosigner) I need to figure out what is the best options for me right now.
I’m not sure if I can work something out with fedloan servicing on a monthly rate that is low enough for them to cover. Because I’m able to cover my $50, but I can’t cover the $200-400 payment they may want for her. I could at least do $100 a month for her and I’m not sure if they would be that generous of helping me with (her) loan.
Should I go with the standard, or graduated repayment plan for her Parent Plus loans and try my best to pay them off? I just don’t ever want her to find out or even put her in a bad situation because she has her own worries.
Lisa
Answer:
Dear Lisa,
Lisa, Lisa, Lisa. What am I going to do with you?
I sure don’t want you to get stabbed but I have to be honest with you about a couple of things. First, the least traumatic.
If money is that restricted for you then I feel I must ask you to look at your agreement with Student Advocates and figure out how much of your $50 payment is going towards your student loans and how much is fees. I want you to be fully aware of what you have agreed and signed up for. I’ve seen similar situation where people are working with student loan assistance companies and get wide-eyed surprised when they discover most of the monthly fee is going to the company than the loans. If you wanted to consolidate and put your federal student loans on an income based repayment plan there is no charge for that if you work with your servicer or follow the free Department of Education advice online.
On the Parent Plus loans the issue is you’ve broken the law and committed identity theft and financial fraud. Parent Plus loans are not the legal liability of the student, but the parent who signed for them. They will also appear on the credit report of the parent and your mother may discover them that way.
You can either hope she does not accidently discover this fraud or you can come clean and come up with a plan on how to deal with them. There are reduced payment plans available but they are not as attractive as the $0 income based repayment plans you may be on.
Parent Plus loans are eligible for the Income Contingent Repayment (ICR) plan. But to become eligible you are going to have to commit more fraud and enter two more plans. I’m not going to help you do that or tell you how to access her income tax returns illegally to apply.
As much as you are not going to like my advice, I would urge you to come clean with your mother and then let’s deal with this together. She deserves to know the truth and not be a victim of identity theft. Continuing to perpetrate this fraud will only make it much worse when it gets discovered. And they always seem to.
Steve Rhode
Get Out of Debt Guy – Twitter, G+, Facebook
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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.