Student loan forgiveness programs do not only benefit students. Parent Plus loan forgiveness is also feasible, depending on lender qualification conditions and borrower history. Many parents who are struggling to repay their student loan debt may be eligible for loan forgiveness. An income-contingent repayment plan or the Public Service Loan Forgiveness (PSLF) program may be used for federal parent PLUS loan forgiveness. Are parent PLUS loans eligible for forgiveness? Read along to find out.
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What are Parent PLUS loans?
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A parent PLUS loan, also known as a Direct PLUS loan, is a form of federal student aid. When a student’s federal student loan maximum is reached, parent borrowers will frequently take out a PLUS loan. A parent PLUS loan is a federal direct loan that is not subsidized. Because these loans are not subsidized, interest accumulates while the student is in college.
Some parents, though, borrow more than they can afford to return. The federal government lifted annual and lifetime borrowing limits from parent PLUS loans in 2013, allowing parents to borrow the whole cost of a college education. More parents have defaulted on their PLUS loans since the government abolished the limits. So, does Parent PLUS loan forgiveness exist? YES! but only in some circumstances.
Biden’s student loan forgiveness
Joe Biden announced a broad federal student loan forgiveness order on August 24, 2022, which includes Parent PLUS Loans. When they obtained student loans, the proposal aimed to forgive $10,000 for everyone and up to $20,000 for those who were eligible for the Federal pell grant program. Before many lawsuits were filed, the scheme began accepting applications in October 2022. An appeals court in Texas halted the scheme in November 2022. The verdict included an injunction that prevented the parent PLUS loan forgiveness plan from proceeding. The Supreme Court will hear arguments on whether the President has the authority to cancel student debt in its entirety on February 28, 2023. Student loan payments will begin within 60 days of
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3 options for parent PLUS loan forgiveness
- Income-Contingent Repayment
Parent PLUS loans do not qualify for income-driven repayment options. Income-contingent repayment may be available for a Federal Direct Consolidation loan that includes Parent PLUS loans (ICR). According to the regulations at 34 CFR 685.208(a)(2)(iv), the borrower must have begun payments on or after July 1, 2006. If a parent PLUS loan from the Direct Loan program or the Federal Family Education Loan Program (FFELP) is included in a Federal Direct Consolidation Loan, it is eligible. The monthly payment for income-contingent repayment is based on 20% of the borrower’s discretionary income. This is defined as the amount by which the borrower’s AGI exceeds 100% of the poverty level.
- Public Service Loan Forgiveness
After making 120 qualifying payments, parent borrowers may be eligible for Public Service Loan Forgiveness (PSLF) (ten years). Parent PLUS loans are eligible if they are part of the Direct Loan program or a Federal Direct Consolidation Loan. The borrower must be employed full-time in a qualifying public sector position. Standard repayment plans and income-driven repayment plans are both eligible. If a borrower follows the typical repayment plan for ten years, there will be nothing to forgive. As a result, the borrower will need to return their loans through an income-driven repayment plan in order to qualify for public service loan forgiveness.
- Temporary Expanded Public Service Loan Forgiveness
Another alternative is the Consolidated Appropriations Act, 2018’s Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program (P.L. 115-141). A Federal Direct Consolidation Loan that repaid a Federal PLUS Loan is eligible for TEPSLF if some or all of the 120 qualifying payments were made through a graduated repayment or extended repayment plan, as long as the last year of payments was at least as much as the borrower would have paid through an income-driven repayment plan.
Others options for parent PLUS loans forgiveness include:
- Federal Agencies
Federal agencies may repay federal student loans, including Parent PLUS loans, as a recruiting or retention strategy for employees. But this is only if the employee is a parent PLUS loan borrower. Consequently, if the parent works for the federal government, the Parent PLUS loan may be forgiven, but not if the student works for the government.
- Military Forgiveness Program
Depending on the military service, parent PLUS loans may be eligible for repayment under the various military loan forgiveness programs. Loan forgiveness may be limited to Parent PLUS loans acquired on behalf of a Service member student. Private parent loans can not be forgiven under this program.
- State Student Loan Forgiveness
Some states provide student loan repayment help to residents who relocate to the state or specified towns or counties within the state. Parent loans, including Parent PLUS loans as well as private parent loans, may be eligible.
- Employer-paid Student Loan Assistance
Several employer-paid student loan repayment assistance programs, known as LRAPs, are available for parent loans. This includes Parent PLUS loans as well as private parent loans. This isn’t complete forgiveness, but it can help you reduce your overall bill and pay it off faster.
- Loan discharge
Some discharges are also available for Parent PLUS loans, including:
- Death of a parent or death of the student for whom the Parent PLUS loan was obtained
- The parent (but not the student) suffers a total and permanent disability.
- Bankruptcy release (rare)
- Discharge from a closed school
- Discharge for false certification
- Discharged for identity theft
- Discharge of unpaid refunds
- Repayment defense
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Refinancing Parent PLUS loan
If you are not eligible for loan forgiveness, you may be able to reduce your payments by refinancing your Parent PLUS Loan. A federal loan, however, can only be refinanced into a private loan. That means that if you have a federal loan, you will lose federal loan benefits like:
- Deferment and forbearance
- Optional repayment plan
- Student loan forgiveness may be possible.
You may also be able to refinance your parent loan in the name of your child. This make sense if your child has graduated and is now working, and you are reaching retirement age. Nevertheless, keep in mind that not every loan servicer will provide this form of student loan refinancing for parents.
