I have parent plus loans left on my last kid out of 3 who went to college. I am holding off paying on these loans. I have a plan for using excess funds that otherwise are earmarked for student loans plus the current savings from not having to pay principal or interest.
My plan is to use these excess funds to buy I Bonds which fluctuate based on inflation. Currently they are paying 7%. So while inflation ramps up I win by taking advantage of Biden’s inflation economy. I also win by taking advantage of Biden’s socialism policies to take advantage of changes in the loan terms like forgiveness, rate reductions, payment deferrals etc.
Further, if I really want to squeeze every dime. I could consider using up to $10k of I bond proceeds as a contribution to a 529 plan which makes the interest earned tax free and be eligible for a state tax credit. Then using the 529 plan to make a $10k payment against the loans.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
Thus sayeth Raycpa “I have parent plus loans left on my last kid out of 3 who went to college. I am holding off paying on these loans. I have a plan for using excess funds that otherwise are earmarked for student loans plus the current savings from not having to pay principal or interest.”
A good plan provided you avoid capitalization of your parents plus loan.
To give the example of myself, we took out a parents plus loan for our daughter in 2012 ($21K, dispersed in 2012-13) she left school with a degree in 2017, we started payments in feb 2018. The suggested payment was $358.00/month but we sent in $400
When all fed loans went into forbearance in March 2020 we continued payments of $400/month then in Aug 2020 upped it to $800/month. Then we made 10 or 11 big payments of $1000 or $2000 this resulted in a paid off loan in October 29, 2021.
Between the time the loan went into forbearance and the pay off day we sent in payments totaling $19,500 on a $21,000 loan that we had been making regular payments even above the minimum amount. We paid about $33,000 for a $21,000 federal student parents plus loan.
So some might be asking why so much considering we were current on our payments? Answer: capitalization. Capitalization is when the lender adds the interest to the principal. So in effect you pay interest on interest, sort of like compound interest paid on a passport savings account (in the old days).
I don’t think most student loan borrowers are aware of this. Here is a link which explains. https://studentdebtwarriors.com/students/interest-capitalization-increases-student-loan-debt/#:~:text=Student%20loan%20interest%20capitalizes%20at%20various%20times%20over,plan%20changes%3B%205%20When%20you%20consolidate%20your%20loans.
My personal opinion is at best the government will forgive less than $50K if Biden wants to shut up the progs at the taxpayers expense he might try to throw them a bone but the political implications of student loan forgiveness when mortgage foreclosures are ramping up would be a political headache with little gain for the Dems. Even so I doubt Biden will fight for middle class taxpayers forgiveness of parents plus loans.