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My wife and I are currently about to start our payments for student loans. All of our loans are federal student loans through Direct Loans. We also have a parent plus loan, which is technically under my mother-in-law's name. However, we will be making the payment on this loan. It seem to me that if I'll be paying off this ~$9k loan, it would be nice to have it under my name in order to have it reflect positively on my credit score. Is there any option to transfer this loan to myself/my wife? Is taking out another loan to pay this one off a valid or wise option?

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If the current parent plus loan is not in your wife's name or your name (neither of you is legally responsible for it though you are going to do the moral thing by paying it off for your mother-in-law), then taking out a $9K loan yourself and paying off your mother-in-law's loan (which will be reported as paid off in her name, not your name) doesn't sound like a very wise idea. –  Dilip Sarwate Dec 7 '12 at 13:17
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I agree with @DilipSarwate - you won't get the benefit on your credit report or score, but you might get happier vibes and better birthday presents from your mom-in-law. –  MrChrister Dec 7 '12 at 19:01
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2 Answers

Arguably you want to pay all of these student loans off, and do so as soon as you can. As others have said, it is in your best interest to pay off your MIL's loan, but as long as it is in her name, you will not get credit on your credit report for repaying it. You WILL, however get credit on your own credit reports for repaying the ones that are in your name, and if you do this faithfully and on time, your credit rating will consistently improve.

I can understand your desire to improve your credit rating as much as possible, particularly if your credit history is short, but complicating your life with other loans, etc. just to prove you can pay them back might backfire.

Paying your mother in law back at the same time while you are paying the others will put a different kind of "credit" in your favor, in the view of your mother in law, which might actually be AS important as your federal credit score. Treat the two "credit scores" with the same respect, but don't try to combine them.

There ARE more things to worry about in life than your credit scores.

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Pay off your mother-in-law's loan first. You do not want that kind of financial arrangement causing strain in your relationship. As they say... "The road to hell is paved with good intentions."

If you can convert that student loan to consumer debt while paying less interest over the life of the loan, you put yourself in a better position. First, you pay less interest overall. Perhaps sign up for a 0% introductory APR credit card where purchases are 0% for 1 to 1.5 years. You put your normal purchases on this card, while shifting extra payments to the student loan.

Second, student loans survive bankruptcy while consumer debt does not. If you ever had to file bankruptcy, consumer debt is the better debt to have.

Hope you pay off your student loan quickly and with urgency.

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