Get your child to make the payments
Repayment on a Federal PLUS Loan typically starts 30 to 60 days after final disbursement, and many parents use this as an opportunity to teach their children financial responsibility.
You can do this, too, by thinking of the loan as student debt and handing over repayment to your child. Even though a Federal PLUS Loan is taken out in your name and you’re ultimately responsible for repayment, this helps to share the burden of responsibility.
Formalize a contract – Write a contract between you and your child, spelling out your expectations regarding loan repayment and the consequences of non-payment. It’s easy for students to assume their parents will make the payments, and not take the debt seriously. This helps impart the seriousness and importance of their education investment.
Monetary penalties – Assess monetary penalties for late or missed payments according to an agreed-upon schedule.
“Garnish” wages – If your child has difficulty making a full monthly payment, require partial payments based on a percentage of wages or other income.
This arrangement can work for many families, but be careful. If your child misses a payment, you’ll have to make the payment so you don’t damage your credit rating. And you don’t want to force your child into debt, so you’ll want to prepare yourself in the event the monthly payments become too much for your child to handle.
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