Parent PLUS Double Consolidation Loophole: Pay 10-15% of Your Income Instead of 20%

Debtors who’ve Guardian PLUS Loans take care of considerably of a unique beast than when a scholar borrows federal scholar loans. Guardian PLUS Loans keep within the identify of the mum or dad who pulled them out, if stored within the federal system. They typically have a lot larger rates of interest than Direct Loans and don’t supply forgiveness alternatives. Guardian PLUS Loans even have far fewer compensation choices out there (e.g. amortized normal fastened and graduated compensation plans).

We’re going to cowl a loophole you in all probability haven’t heard about earlier than: the Guardian PLUS double consolidation. It’s a sport changer. This technique might drop your fee from 20% of your earnings to 10% of your earnings.

Refinancing Guardian PLUS Loans to non-public scholar loans

A couple of choices we’ve written about prior to now have included non-public refinancing and consolidation. With Guardian PLUS Mortgage refinancing, you are taking these federal loans out of the federal system and procure a brand new mortgage with a non-public lender like Commonbond or Laurel Street. The aim is to get a decrease rate of interest and snag extra favorable phrases.

Pupil mortgage refinancing works nice for folk in a few totally different conditions assuming their credit score is in a very good place, corresponding to:

  1. When the coed mortgage debt stability is decrease than their annual earnings they usually really feel assured in committing to that fee and time period.
  2. When there’s a necessity or need to switch possession of the mortgage to the coed/baby and their credit score and monetary state of affairs permits them to decide to that fee and time period.

If refinancing doesn’t appear to be the appropriate match — due to poor credit score or the stability is far larger than earnings making the compensation phrases tough to decide to — consolidating throughout the federal system is a strategy to open the door to at least one income-driven compensation plan (IDR): Revenue-Contingent Compensation (ICR).

Guardian PLUS double consolidation

You may consolidate right into a Direct Consolidation Mortgage even with out one other mortgage and have entry to ICR. This plan is predicated on 20% of discretionary earnings and has a most compensation interval of 25 years. It additionally qualifies for mortgage forgiveness packages, just like the Public Service Mortgage Forgiveness program in case your employment meets eligibility necessities.

If refinancing isn’t a viable possibility, and consolidation doesn’t carry reduction with the 20% calculation, you may entertain a course of referred to as Guardian PLUS double consolidation.

How Guardian PLUS double consolidation works

Double consolidation will not be one thing your servicer will supply as a technique for compensation. The federal Direct Consolidation Mortgage utility and course of can be very tedious and time-consuming. Nonetheless, it CAN open the door for entry to Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), and IBR.

These are decrease IDR compensation choices that weren’t initially out there to Guardian PLUS Loans or consolidated Guardian PLUS Loans. Let’s get technical:

  • A consolidation mortgage that features a consolidation that paid off a Guardian PLUS Mortgage is NOT the identical as a Consolidation mortgage that paid off a Guardian PLUS Mortgage.

You basically wipe out the Guardian PLUS Mortgage code by consolidating twice.

This technicality is vital due to the way in which scholar loans are administered and the way the legal guidelines had been written for figuring out what compensation choices can be found for a mortgage code. This authorized “loophole” permits the double-consolidation course of to open the door for accessing REPAYE, PAYE (should you hadn’t borrowed previous to October 1, 2007) and IBR.

Might this give you the results you want?

At the start, let’s evaluation some terminology and the way consolidations work:

  • Guardian PLUS Loans can consolidate themselves right into a Direct Consolidation Mortgage. This implies the double-consolidation course of could possibly be profitable with as little as two Guardian PLUS Loans consolidating individually on the primary spherical.
  • In contrast to Guardian PLUS Loans, Direct Consolidation Loans want one different mortgage to consolidate with.
  • Guardian PLUS Loans can consolidate with non-Guardian PLUS Loans. But it surely could be greatest to maintain them separate if potential.
  • In case you solely have one Guardian PLUS Mortgage (and no different federal loans), your solely alternative is to consolidate that one mortgage into one Direct Consolidation Mortgage and have entry to ICR or non-public scholar mortgage refinance.

Guardian PLUS double consolidation steps

If it appears like this might give you the results you want, listed below are some subsequent steps and notes:

1. Fill out paper consolidation purposes. For the primary spherical of consolidations, it would be best to submit paper purposes. This consists of one utility for consolidating a number of loans, and the second utility for consolidating the opposite mortgage(s) neglected from the primary utility. You’ll mail to 2 totally different servicers to keep away from having them added into the identical consolidation (which defeats this course of’s function). Mortgage servicers and get in touch with data will be discovered on the Federal Pupil Assist web site.

2. Embody an IDR utility for ICR. Within the utility mailer, embrace an IDR utility electing the ICR plan. In case you don’t, the consolidation will likely be denied for no compensation plan elected.

3. Mail your consolidation paperwork. Use licensed mail to make sure supply to the servicers.

In case you’re going for PSLF, don’t ship an utility to FedLoan first. Consolidations take 30 to 90 days to finish wherein your loans will likely be put into forbearance or deferment whereas the method is underway.

You will discover your corresponding mortgage codes and account numbers by logging into Click on on the “consolidate my loans” part. You must see a protracted listing of your loans. You may see the titles of every particular person mortgage by hovering over the query mark field together with your mouse and the identify ought to pop up.

Reminder: DON’T submit your utility on-line this manner — the primary spherical must be by way of paper utility.

Last steps

Wait to your affirmation that each consolidations had been processed by the totally different servicers and you’ve got fee schedules. As soon as that’s confirmed, you may proceed to the final steps:

4. Do the net consolidation utility for the ultimate consolidation.

5. Select your ultimate servicer. You’ll choose this from the drop-down menu within the on-line utility. If going for PSLF, select FedLoan Servicing. If not, select a servicer you haven’t despatched a consolidation utility to but.

6. Full the net IDR utility. When finishing the net IDR utility, elect REPAYE, PAYE, or IBR compensation plans.

7. Make your month-to-month funds and recertify yearly.

Case research #1: Guardian PLUS double consolidation with PSLF

Sara is a single mother and borrowed loans to ship her two sons to varsity. She works for a 501(c)(3) nonprofit and is interested by pursuing PSLF.

Right here’s Sarah’s mortgage listing:




Direct PLUS Guardian

$43,000 (Son #1)


Direct PLUS Guardian

$35,000 (Son #2)


Her present fee on the Normal Prolonged Fastened Plan is $575 monthly for 300 months. She is aware of there may be effectivity to be achieved with PSLF, so she must have the appropriate kind of loans (Direct) and be on an IDR plan to qualify.

Consolidation course of #1

Sara consolidates every Direct PLUS Guardian mortgage individually.

  • She mails in a paper consolidation utility to Nelnet consolidating one Direct PLUS Guardian Mortgage. Moreover, she consists of an IDR utility for ICR within the mailing packet.
  • Sara mails a second paper consolidation utility to Nice Lakes, consolidating the opposite Direct PLUS Guardian Mortgage she didn’t embrace on the primary utility. She additionally consists of an IDR utility for ICR within the mailing packet.
  • She waits. Her Direct PLUS Guardian loans are efficiently consolidated right into a Direct Consolidation Mortgage at each Nelnet and Nice Lakes.

Consolidation course of #2

Sara then completes the net consolidation utility.

  • She now consolidates BOTH loans collectively by logging into and together with them each in her on-line utility.
  • Sara sends them to FedLoan Servicing since she’s going for PSLF.
  • She completes a web based IDR utility for REPAYE. This plan is predicated on 10% of discretionary earnings and family measurement. She additionally submits her Employer Certification Kind (ECF) for PSLF.

Sara’s adjusted gross earnings (AGI) is $80,000, so her new fee below REPAYE is $511 monthly. This fee is barely decrease than the 25-year plan she was on and now she is going to obtain PSLF forgiveness after 120 funds (10 years). Her estimated forgiven stability will likely be $65,000!

Case research #2: Consolidating Guardian PLUS Loans and Direct Loans

A second case research is for Sam who has Direct PLUS Guardian loans and his personal federal loans.

Sam borrowed for his daughter’s training. He additionally has loans from his personal training funding.

Right here is Sam’s mortgage listing:




Direct Consolidated Unsubsidized

$35,000 (Sam’s)


FFEL Consolidated

$35,000 (Sam’s)


Direct PLUS Guardian

$44,000 (Daughter’s)


Direct PLUS Guardian

$37,000 (Daughter’s)


Direct PLUS Guardian

$36,000 (Daughter’s)


Sam’s present fee on the Prolonged Graduated Plan is $1200 monthly. He’s getting into retirement and this may severely affect his money stream. So, he begins the double-consolidation course of.

Consolidation course of #1

Since Sam has his personal loans, we wish to depart these out of this consolidation for now.

  • Sam places his Direct consolidated unsubsidized and FFEL consolidated loans in forbearance for six months. This pauses his funds whereas he completes the consolidation for the Guardian PLUS Loans.
  • He mails in a paper consolidation utility to Nelnet consolidating one Direct PLUS Guardian mortgage. Sam consists of an IDR utility for ICR within the mailing packet.
  • Then, he mails within the second paper Consolidation utility to Nice Lakes consolidating the opposite two Direct PLUS Guardian Loans he didn’t embrace on the primary utility. Sam consists of an IDR utility for ICR within the mailing packet.
  • He waits. His Direct PLUS Guardian loans are efficiently consolidated right into a Direct Consolidation Mortgage at each Nelnet and Nice Lakes.

Consolidation Course of #2

Sam then completes the net consolidation utility.

  • He now consolidates simply the consolidated loans at Nelnet and Nice lakes collectively by logging into, and nonetheless leaving his personal loans out.
  • Sam sends all of them to the servicer, Navient.
  • He completes a web based IDR utility for REPAYE, which is predicated on 10% of discretionary earnings and family measurement.

Sam’s joint AGI for him and his spouse is $60,000. So, his new fee below REPAYE is barely larger than $288 monthly.

*Since Sam has one FFEL mortgage that’s not eligible for REPAYE, this mortgage’s fee is particularly primarily based on 15% of discretionary earnings as a substitute of 10%, barely rising his fee. Sam might full one other consolidation sooner or later consolidating his two training loans collectively, however that utility would seemingly should be completed by way of paper and despatched to FedLoan.

This decrease fee will assist him handle retirement higher, giving him about $900 monthly again in his money stream. It is a large distinction in comparison with his authentic fee of $1200 monthly (which might enhance each two years on the graduated compensation plan).

Refinance scholar loans, get a bonus in 2021

1 Disclosures
$1,050 BONUS1 For 100k+. $300 bonus for 50k to 99k.1
VISIT LAUREL ROAD Variable 1.64-5.65percent1 Fastened 2.25-5.75percent1

2 Disclosures
$1,050 BONUS2 For 100k+. $300 bonus for 50k to 99k.2
VISIT COMMONBOND Variable 2.49-6.84%%2 Fastened 2.59-6.74percent2

3 Disclosures
$1,000 BONUS3  For 100k or extra. $200 for 50k to $99,9993
VISIT EARNEST Variable 1.88-5.64percent3 Fastened 2.44-5.79percent3

4 Disclosures
$1,000 BONUS4 For 100k+. $300 bonus for 50k to 99k.4
VISIT SPLASH Variable 1.88-6.15percent4 Fastened 2.44-6.62percent4

5 Disclosures
$1,275 BONUS5  For 150k+. Tiered 300 to 575 bonus for 50k to 149k.5
VISIT ELFI Variable 2.39-6.01percent5 Fastened 2.47-5.99percent5

6 Disclosures
$1,000 BONUS6 For $100k or extra. $200 for $50k to $99,9996
VISIT SOFI Variable 2.25-6.59percent6 Fastened 2.49-6.94percent6

7 Disclosures
$1,250 BONUS7  $350 for 50k to 100k7
VISIT CREDIBL Variable 1.80-8.90percent7 Fastened 2.15-9.15percent7

Undecided what to do together with your scholar loans?

Take our 11 query quiz to get a personalised advice of whether or not you must pursue PSLF, IDR forgiveness, or refinancing (together with the one lender we predict might provide the greatest price).

Related Stories