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Saddled with debt from a Parent PLUS loan?

Data from the Sallie Mae program indicates that a mere 48 percent of today's parents have savings earmarked for their children's college education. As a result, many find themselves needing to take loans out to pay, or supplement, the kids' tuition bills.

Older parents often find themselves in the difficult position of needing to subsidize their children's college tuition at the same time that they are approaching (or entering) their retirement years. When these financial circumstances converge, fiscal crises can emerge in formerly solvent families.

The burden of a Parent PLUS loan

If tuition repayment plans place onerous burdens on parents, their college-graduate sons and daughters may step up to the plate and take over these payments or refinance loans only in their names. However, the road to college does not always end in graduation for some students. Even when it does, there is no guarantee that the newly-minted grads will be able to land lucrative positions, as over-educated Starbucks baristas around the country can attest.

Is there any hope in sight for these parents who invested in their children's continuing education only to face their golden years saddled with debt?

What the law says about Parent PLUS loans

Under the current laws of the United States, the ones who initially took out the Parent PLUS loans, i.e., the parents, are responsible for repaying them. However, a handful of private lenders -- CommonBond, Laurel Road and SoFi -- have demonstrated their willingness to refinance loans in the students' names only.

But not all children will qualify to refinance these loans. Some make too few dollars per paycheck to be able to manage the payments in addition to their monthly living expenses. In these cases, parents may have another option.

Check eligibility for Income-Contingent Repayment plans

Lower-income and retired parents can may qualify for Income-Contingent Repayment plans. These are designed so that parents pay only as much as 20 percent of their total discretionary income toward student loan payments every month. In 25 years, whatever balance remains on the loans is wiped out.

One final option remains

Sometimes parents can simply not afford to even make lowered payments on student loans without enduring great financial hardship. If this is your situation, it's important to understand that while student loans cannot typically be discharged in a bankruptcy, most other debts can.

Filing for Chapter 7 bankruptcy can free up funds to pay down these student loans. It may not be the option you want to take, but in these uncertain financial times, it may be the only one that makes sense.

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