President Joe Biden recently announced that student loan forgiveness would be available for eligible borrowers. Up to $20,000 in federal student loan debt will be forgiven for those who had Pell Grants, while borrowers who did not receive Pell Grants (but whose income falls below allowable limits) will be eligible for up to $10,000 in loan forgiveness.
While many student borrowers are celebrating this news, parents who borrowed on their children’s behalf may wonder if Parent PLUS student loan forgiveness is available under the Biden Administration’s plan.
The good news is Parent PLUS Loans should be forgiven for those who meet eligibility criteria. Here’s what you need to know to determine if your debt will be wiped clean.
Do You Qualify for Parent PLUS Student Loan Forgiveness?
Parent PLUS Loans are federal student loans, so they are among the types of debt that could be forgiven. Parents should thus be eligible for Parent PLUS student loan forgiveness, provided their income is not too high.
President Biden authorized loan forgiveness for single tax filers who make up to $125,000 and for joint filers with incomes up to $250,000. Any parents who earn below this amount who have PLUS Loans should be able to get part or all of their debt wiped out.
How Much Can You Have Forgiven?
President Biden authorized forgiveness of up to $10,000 for borrowers without Pell Grants and up to $20,000 for borrowers who did receive Pell Grants.
For Parent PLUS student loan forgiveness, the key factor is whether the parent received a Pell Grant while personally attending school. Parents who received Pell Grants can get up to $20,000 forgiven even if their children did not qualify for this type of government assistance when they went to school.
On the flip side, if the child that the loans were taken out for qualified for a Pell Grant but the parents did not know when they were in school, parents would be able to get only $10,000 forgiven.
What if You Borrowed for Multiple Children?
The $10,000 or $20,000 caps on student loan debt apply per borrower. When you take out Parent PLUS Loans, you are the borrower. As a result, you will only be allowed to have $10,000 or $20,000 maximum forgiven, no matter how many kids you helped by taking on PLUS Loans.
What if Both Parents Borrowed?
Since the forgiveness limit is per borrower, if both parents took out loans to help one or more children, each parent would be eligible for Parent PLUS student loan forgiveness. This is true regardless of the number of children that the parents helped by taking on educational debt. If both a mother and father borrowed for their son, they could each qualify for up to $10,000 or $20,000 in loan forgiveness.
What if You Have Your Own Student Loan Debt?
Since the limit on loan forgiveness is per borrower, parents will still be limited to a total of $10,000 or $20,000 in forgiveness — even if they still have their own student loans to pay back and have PLUS Loans as well.
The Department of Education has indicated that loans with higher interest rates will be prioritized when it comes to loan forgiveness. Since your Parent PLUS loans likely have higher rates than your student loan debt would, it’s likely that Parent PLUS Student Loan forgiveness is what will end up happening in this situation.
What Types of Loans Can Be Forgiven?
Parent PLUS loans can be forgiven because they are federal student loans. Only federal student loan debt is being wiped away by the Biden Administration.
If you borrowed via a private lender to help fund your child’s education, the full balance on your private student loans would remain. Loan forgiveness is not available for any private student debt.
If you hope to simplify repayment and make the payoff of this private student loan debt easier, you may wish to refinance your private loans. You could reduce your interest rate by doing so, which would make repayment cheaper.
Since Parent PLUS Loan forgiveness will only happen for federal student debt, you should carefully consider the best approach to deal with all of the educational debt you took on to help your child out.
