Parent PLUS loans can be a significant burden, especially when trying to manage your repayment and take advantage of programs like Public Service Loan Forgiveness (PSLF).
Double Consolidation is a strategy that allows Parent PLUS borrowers to convert their loans into a new loan that qualifies for all income-driven repayment plans. This strategy is particularly beneficial for:
Parents with multiple Parent PLUS loans: If you have taken out multiple loans over the years to support your children’s education, consolidating them twice can be a game-changer.
Public servants: If you work for a government or non-profit organization and plan to pursue PSLF, Double Consolidation is crucial to access more income-driven repayment (IDR) plans, which give you lower repayment options when pursuing PSLF.
Parent borrowers working to retire in the near future: If your current payments are unaffordable, accessing an IDR plan through Double Consolidation can potentially reduce your payments to a manageable percentage of your discretionary income.
Why Double Consolidation is Important
The main reason Double Consolidation is essential is that it opens the door to repayment options otherwise unavailable to Parent PLUS borrowers. A standard consolidation of Parent PLUS loans only qualifies for the Income-Contingent Repayment (ICR) plan, which often leads to higher monthly payments compared to other IDR plans.
However, by consolidating your loans twice, you can access the more favorable Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Saving on A Valuable Education (SAVE) plans. These plans typically offer lower payments and make it easier to manage your debt while working toward PSLF.
How Double Consolidation Helps with PSLF
Public Service Loan Forgiveness requires 120 qualifying payments under an IDR plan while working full-time for a qualifying employer. The standard Direct Consolidation of Parent PLUS loans only makes you eligible for the ICR plan, but Double Consolidation allows you to access the other IDR plans, which can potentially lower your monthly payment.
Here’s how Double Consolidation aids in PSLF:
Access to IDR Plans: After double consolidating, you can choose from IBR, PAYE, or SAVE, which often result in lower payments than ICR.
Lower Monthly Payments: Lower payments under these plans mean that more of your income can be directed toward other financial goals while you work toward forgiveness.
Maximizing Forgiveness: Since PSLF forgives the remaining loan balance after 120 qualifying payments, having lower payments means you could potentially have a larger portion of your loans forgiven.
When the Opportunity Ends
It’s important to note that while Double Consolidation is currently a viable strategy, the future of this option isn’t guaranteed. Legislative changes or Department of Education policy shifts could eliminate or modify the ability to double consolidate Parent PLUS loans.
It is currently scheduled to end on July 1, 2025, which means that NOW is the time to be making moves if you are wanting to do the Double Consolidation.
Common Missteps and Mistakes in Double Consolidation
While Double Consolidation can be incredibly beneficial, it’s also a process with many potential pitfalls. Here are some common mistakes to avoid:
Not following the correct order: Double Consolidation requires specific timing and order in how you consolidate your loans. If done incorrectly, you might end up with a single consolidation that doesn’t qualify for the desired repayment plans.
Missing deadlines: Consolidating your loans involves strict timelines, especially if you’re aiming to complete the process before policy changes. Missing key deadlines can derail your efforts.
Misunderstanding eligibility: Not all Parent PLUS loans may be eligible for Double Consolidation, particularly if they’ve already been consolidated. Understanding the details of your loans is crucial before starting the process.
Neglecting paperwork: The Double Consolidation process involves multiple rounds of paperwork, and errors or omissions can cause delays or disqualify you from accessing better repayment plans.
Failing to seek expert advice: Given the complexity of Double Consolidation, it’s wise to consult with a financial planner or student loan expert who can guide you through the process and help you avoid costly mistakes.
Step-by-Step Process for Double Consolidation
1. Gather Information on Your Loans
Log in to your Federal Student Aid (FSA) account: Start by gathering detailed information about all your Parent PLUS loans. Make sure you know the balances, interest rates, and loan servicers.
Verify that your loans are eligible: Ensure that your loans are not already consolidated into a single loan. Double Consolidation only works with at least two loans.
2. Complete the First Consolidation
Choose two loan servicers: You’ll need to split your Parent PLUS loans and consolidate them with two different loan servicers. This is a critical step.
Create two separate Direct Consolidation Loans:
Divide your Parent PLUS loans into two groups.
Consolidate each group separately with two different servicers using paper application forms.
For example, if you have four Parent PLUS loans, you could consolidate two loans with one servicer and the other two with a different servicer.
I generally have my clients choose the ICR Repayment plan or the Standard Repayment plan during this step.
3. Wait for Consolidation to Be Completed
Monitor the consolidation process: This step typically takes 30-60 days. Ensure that both consolidations are completed successfully.
Review new loans: Once the consolidation is complete, you will have two new Direct Consolidation Loans, each with a different loan servicer.
4. Initiate the Second Consolidation
Apply for a second consolidation: Now, you’ll consolidate these two Direct Consolidation Loans into a single Direct Consolidation Loan. I have my clients do this consolidation electronically.
Select your preferred loan servicer: I suggest using a 3rd loan servicer that is different from the first two, potentially finishing at MOHELA.
5. Verify the Final Consolidation
Confirm the consolidation is complete: After the second consolidation is processed, you should have a single Direct Consolidation Loan that is eligible for IDR plans and, by extension, PSLF if you meet all other criteria.
Choose/Enroll in an Income-Driven Repayment (IDR) plan: This is the key step where you select an IDR plan like IBR, PAYE, or SAVE, which are typically not available for Parent PLUS loans without Double Consolidation.
Important Tips:
Document Everything: Keep meticulous records of every step, including application forms, confirmation emails, and correspondence with loan servicers.
Timing: The entire Double Consolidation process can take many months, especially right now as the loan servicers aren’t processing paperwork quickly, so start early and be patient.
Seek Expert Help: If you're unsure about any step, it’s wise to consult with a student loan expert to ensure the process is completed correctly.
This process allows you to access more favorable repayment plans and sets you up for success in pursuing PSLF.
Final Thoughts
Double Consolidation for Parent PLUS loans is a powerful strategy for borrowers looking to manage their debt, reduce monthly payments, and qualify for PSLF. However, the process is complex and requires careful planning and execution.
If you’re considering Double Consolidation, make sure to understand the steps involved, seek professional guidance, and act quickly to secure your financial future.
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