As of the end of 2022, 3.7 million borrowers had outstanding Parent PLUS Loans, owing over $108 billion. On average, parent borrowers owe $29,189 in federal PLUS Loans. Parent PLUS Loans can be particularly difficult to repay since they have the highest interest rate of any federal loan. The current interest rate for Parent PLUS Loans is 7.54%. With such a high rate, you may be looking into Parent PLUS Loan forgiveness. Apart from Joe Biden’s student loan forgiveness plan, which includes Parent PLUS Loans but is on hold for now, some options are available. Here’s what to know.
What are Parent PLUS Loans?
Many parents opt to contribute to the cost of their child’s college education, and Parent PLUS Loans are available for this purpose. Once a student has exhausted their federal aid options, their parent can opt to borrow a Parent PLUS Loan as additional financing to help cover tuition and fee costs. Parent PLUS Loans are unsubsidized, meaning they aren’t need-based. Parents can borrow up to the cost of attendance, accounting for any federal student aid their child has received. Interest on unsubsidized loans accrues while a student is in school, meaning that it’s wise for parents to start repaying Parent PLUS Loans before graduation to help keep interest costs low.
Parent PLUS Student Loan Forgiveness Options
If you’re considering Parent PLUS student loan forgiveness, there are two programs that parents can qualify for:
- Public Service Loan Forgiveness
- Income-Contingent Repayment Forgiveness
Parent PLUS Public Service Loan Forgiveness (PSLF)
Public Service Loan Forgiveness (PSLF) is a program that encourages people to work in public service. Eligible borrowers can have their remaining balance forgiven tax-free. One of the most common questions people have about PSLF is, “Can Parent PLUS Loans be forgiven?” PSLF is frequently misunderstood, and many people falsely believe that Parent PLUS Loans are ineligible. Borrowers who took out Parent PLUS Loans to pay for their child’s undergraduate education may qualify for PSLF if they meet the following criteria:
- Employment: Parent borrowers must work for a non-profit organization or government agency for at least ten years.
- Payment plan: Payments must be made under an income-driven repayment (IDR) plan. Parent PLUS Loans aren’t eligible for IDR plans, but there is a workaround. Parent borrowers can consolidate their loans with a Direct Consolidation Loan. Once they do so, they can enroll in income-contingent repayment, a qualifying payment plan for PSLF.
- Payments: Borrowers must make 120 monthly payments under a qualifying payment plan — such as income-contingent repayment — to get forgiveness. To speed up the process, consider skipping the Parent PLUS Loan deferment period and start making payments as soon as your child graduates.
If you aren’t sure if you meet the requirements for PSLF, check with a financial advisor or use the Office of Federal Student Aid’s PSLF Help Tool. It will check your loans, employment, and payment plan to see if you’re eligible and generate the forms you need to complete to stay on track. After you’ve made 120 monthly payments, you can submit a PSLF application to request forgiveness. Note that Federal Direct Consolidation loans used to repay a PLUS loan may qualify for Temporary Expanded PSLF. [Tip: While not required, it’s a good idea to ask your employer to fill out the PSLF Employment Certification form every year. When you submit your form annually or whenever you switch jobs, the government will inform you if your employment qualifies and how many payments you’ve made that count toward the necessary 120 for PSLF.]
Parent Student Loan Forgiveness With Income-Contingent Repayment (ICR)
If you don’t work for a non-profit organization or government office, there is another way you could qualify for Parent PLUS Loan forgiveness: income-contingent repayment (ICR). ICR is one of four income-driven repayment plans, and it’s the only plan available to parents. However, parent borrowers can only take advantage of ICR if they first consolidate their loans with a Direct Consolidation Loan. Afterward, they can submit an application for ICR online or through their loan servicer. Under ICR, your payments are either 20% of your discretionary income or what you would pay with a fixed payment plan and a 12-year term, whichever is less. Borrowers make payments over 25 years. The government will forgive the remaining amount if you still have a balance at the end of your repayment term. Normally, there is one major caveat with ICR loan forgiveness: the forgiven amount is generally considered taxable income. But the American Rescue Plan Act of 2021 made student loan forgiveness tax-free through 2025.
Parent PLUS Loan Forgiveness Through the Biden Administration
Under President Biden’s proposed student loan forgiveness plan, Pell Grant borrowers could be eligible for up to $20,000 in federal student loan debt forgiveness, while borrowers without Pell Grants may qualify for up to $10,000 in loan forgiveness. Biden’s student loan forgiveness affects Parent PLUS Loans, too, as they’re eligible for forgiveness. Despite many viewing Biden’s plan as a step in the right direction, it’s currently facing challenges in the Supreme Court. So if you’re interested in student loan forgiveness or discharge, it’s best to research other options.
Other Ways Parent PLUS Student Loans Could Be Discharged
If you’re wondering how to get Parent PLUS Loan forgiveness and aren’t eligible for PSLF or ICR forgiveness, there are other conditions which student loans may be eligible for loan forgiveness or discharge. Federal Parent PLUS Loans can qualify for the following programs:
- Parent PLUS Loan forgiveness disability discharge: With this type of discharge, if you, the parent borrower, become totally and permanently disabled, the remaining balance of the Parent PLUS Loan is discharged. However, the loans are not discharged if the child on whose behalf you took out the loan becomes disabled.
- Parent PLUS Loan discharge due to death: Parent PLUS Loans are discharged if the student or the parent borrower dies. Documentation — such as a death certificate — must be submitted to the loan servicer to qualify for discharge due to death.
- Parent PLUS Loan discharge due to false certification or school closure: If the school your child attended closes while they’re enrolled, the college deceived you into taking out the loans, or the loans were taken out in your name due to identity theft, you may qualify for a loan discharge. More information on this type of student loan discharge is available here.
- Parent PLUS Loan discharge due to fraudulent loan: If your identity is stolen and the perpetrator takes out a Parent PLUS Loan in your name, you might be able to get the loan discharged.
- Parent PLUS Loan forgiveness due to military service: The U.S. military offers student loan forgiveness for qualifying borrowers. If you or your child is an enlisted service member, research this option to determine if you’re eligible.
- Parent PLUS Loan discharge due to bankruptcy: Though rare, it’s possible that you could qualify for a Parent PLUS Loan discharge if you file for bankruptcy. However, eligibility requirements are fairly strict.
Alternatives to Parent PLUS Student Loan Forgiveness
If your Parent PLUS Loan isn’t eligible for forgiveness or discharge, other options may be available to you, including the following.
Deferment and Forbearance
While COVID-related payment pauses are still in place until at least summer 2023, borrowers can also consider general deferment and forbearance once the payment pause ends. If you qualify, deferment and forbearance both allow you to pause or modify your student loan payments temporarily. Keep in mind that while interest won’t accrue for certain federal loans during deferment, interest does accrue during both deferment and forbearance for Parent PLUS Loans. Thus, this option should only be considered if you’re facing significant financial hardship.
Parent PLUS Loan Repayment Assistance
Depending on your career, you may be eligible for loan repayment assistance programs. Some states offer loan repayment assistance to healthcare professionals, lawyers, social workers, and teachers to encourage workers to live and work in high-need areas. Visit your state department of education website to find out if student loan programs are available where you live. Or, you may qualify for employer-assisted student loan repayment. Some employers will contribute money to pay off a portion of your student loans as part of their compensation packages. Contact your human resources department to see if that’s a benefit your employer offers its employees.
Parent PLUS Loan Consolidation
You might consider consolidating your Parent PLUS Loan through the federal Direct Consolidation Loan program as an alternative to a payment pause or loan assistance. To do so, you apply for a federal Direct Consolidation loan and use the proceeds to repay your Parent PLUS Loan. While you won’t get a lower interest rate by refinancing with a Direct Consolidation loan, you could end up with a longer repayment term and lower monthly payments. And if you have multiple loans, Parent PLUS Loan consolidation could make it simpler to manage your monthly payments.
Student Loan Refinancing With a Private Lender
Another option for managing your debt is student loan refinancing with a private lender. This could result in getting better loan terms than you have now. Here are a few more benefits of student loan refinancing:
- Transfer your loan to your child: Some refinancing lenders allow parent borrowers to transfer the loans to their children, removing your responsibility to repay the loan.
- Earn a lower interest rate: By refinancing your loans, you could qualify for a lower interest rate and save money over the length of your repayment term.
- Reduce your monthly payment: When you refinance, you can get a lower interest rate and a different loan term. If you opt for a longer loan term, you can reduce your monthly payment and free up more money in your monthly budget.
[Tip: Think carefully about the pros and cons before refinancing your debt. When you refinance your Parent PLUS Loans, they transfer from federal loans to private ones. You’ll no longer be eligible for benefits like PSLF, income-driven repayment plans, or the CARES Act payment suspension or interest waiver.]
Refinance Your Parent PLUS Loans With ELFI
If you don’t qualify for Parent PLUS Loan Forgiveness and decide that student loan refinancing is right for you, consider ELFI. ELFI offers Parent PLUS student loan refinancing, and you can get a rate quote from ELFI without affecting your credit score.* To find out how much you can save by refinancing your Parent PLUS Loans, use ELFI’s Student Loan Refinancing Calculator.
