On the subject of advising shoppers on pupil mortgage points, many monetary advisors would possibly first take into consideration latest graduates in search of recommendation concerning the simplest approach to pay down their balances. Nevertheless, the variety of Federal pupil mortgage debtors over the age of fifty has elevated considerably up to now 20 years, with many of those debtors holding Mum or dad PLUS loans that have been used to assist fund their kids’s undergraduate schooling.
Whereas pupil debtors of Federal Direct loans are eligible for a variety of Earnings-Pushed Compensation (IDR) plans – together with the newly launched Saving on a Worthwhile Schooling [SAVE] plan – that may cut back required month-to-month funds considerably in comparison with the usual compensation possibility (relying on the borrower’s earnings), out there IDR plans for these with Mum or dad PLUS loans are way more restricted, usually leading to considerably bigger month-to-month mortgage funds. Which not solely cuts right into a mother or father’s present money circulate, but additionally limits their capability to avoid wasting for his or her (doubtlessly fast-approaching) retirement.
Nonetheless, Mum or dad PLUS debtors (and their advisors) have a chance (till July 1, 2025) to entry extra beneficiant IDR plans through the use of a “Double Consolidation” mortgage technique. With this feature, a mother or father borrower first consolidates their current Mum or dad 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 could be eligible for extra favorable IDR plans, together with the SAVE plan, in any other case unavailable for these with Mum or dad PLUS loans. Importantly, whereas this course of may appear comparatively simple on the floor, the multi-step course of should be accomplished precisely and utterly 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 kinds and take 3–6 months in complete) precisely and in a well timed method, advisors can play an necessary position in guiding shoppers with Mum or dad PLUS loans by every step of the method. Additional, advisors might help shoppers who full the method select the perfect IDR possibility for his or her state of affairs and take steps to reduce required funds, from deciding whether or not to elect to file taxes individually (for married {couples}) to discovering methods to cut back the borrower’s Adjusted Gross Earnings.
In the end, the important thing level is that as extra people 50 and older maintain pupil loans, monetary advisors could discover that an rising variety of shoppers are going through the problem of paying down loans taken out for his or her kids’s schooling bills whereas additionally making an attempt to avoid wasting for their very own retirement. And for these shoppers who presently have Mum or dad 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 by the advanced strategy of Double Consolidation, which may very well be an efficient manner to assist them save on their kids’s schooling and, on the identical time, to release extra of their wealth to pursue extra of their different necessary monetary targets!
