Children grow fast, and responsibilities for them, even faster. Parent PLUS loans allow parents to get the debt to finance their children’s education. While it is a great initiative, parents might face challenges to repay the debt. Luckily, there exist Parent PLUS loan forgiveness programs to eliminate the debt. This guide discusses several options like Public Service Loan Forgiveness, Income-Contingent repayment plan, Disability, and Death discharge to eliminate debt obligations. If you do not qualify for forgiveness, you can also benefit from loan refinancing to reduce the interest rates and save money in the long run.
We tried to provide the most detailed and up-to-date information on Parent PLUS loan forgiveness in this guide. However, it is advisable to check the fit of each option to your specific conditions- finances, income and expense level, family size, eligibility conditions, plans, etc. In this way, you can decide which program is the most suitable solution to your debt challenges.
Can a Parent PLUS Loan be Forgiven?
Parent PLUS loan forgiveness can be accessible through the Public Service Loan Forgiveness program. This program is one of the best options to get forgiveness by providing public service. Alternatively, you can choose to repay the debt through an Income-Contingent plan which will bring forgiveness in 25 years. We will discuss the details of the mentioned opportunity in the next sections.
Besides this program, discharge can happen. Student loan discharge options eliminate the debt, in most cases fully, due to external reasons that the borrowers do not control. For example, if a parent or the student dies, the school closes, the family declares bankruptcy, or the parent becomes disabled, discharge can be possible.
Parent PLUS Loan Forgiveness through the PSLF
Public Service Loan Forgiveness is a federally provided forgiveness opportunity that eliminates debt after 120 payments. It covers Direct Loans, and Parent PLUS loans belong to this category. Once the borrower makes 120 qualifying payments for a minimum of 10 years, the rest of the debt is forgiven.
The Eligibility
This Parent PLUS loan forgiveness program is one of the most accessible options for borrowers. The government also puts much focus on this forgiveness program because it benefits people who serve the country. However, the eligibility conditions for this program can be extensive.
First, there exist conditions for the employment type. As mentioned, you need to work in the public sector, in a federal, state, local or tribal organization. Working in a non-profit organization is also acceptable. Your employment should be full-time, defined as a minimum of 30 hours of work per week. Alternatively, you can work part-time, but in more than one position. In this way, your total work hours should meet the full-time requirement. When it comes to the loan type, only Direct Loans qualify for this program. Perkins, FFEL, or Private loans are not eligible.
Qualifying Payments
What you need to pay most attention to for this Parent PLUS loan forgiveness program is the qualification for payments. The program is built on 120 payment requirements. Hence, you have to ensure that your payments meet the required conditions. Otherwise, you can find out that the years you spent reaching this target were just a waste of time.
First, your qualifying payments start at least from October 2007. You need to make these payments while being enrolled with an eligible employer. Remember that even when you finally apply for the Parent PLUS loan forgiveness after 120 payments, you still need to keep your employment position.
All 120 payments should be in full amount as shown on the bill. You need to make the payment within 15 days after the due date. Besides, payments are made through an eligible repayment plan.
Under certain conditions, you do not need to make payments, and these months of non-payment will not affect your progress. When you are still studying or during the grace period after graduation, you can avoid making payments. Alternatively, if you face financial difficulties and utilize student loan forbearance benefits, non-collection can be accessible.
Qualifying Repayment Plan
In general, the Public Service Loan Forgiveness program requires borrowers to enroll in income-driven repayment plans such as Income-based, Income-Contingent, Pay as You Earn, or Revised Pay as You Earn.
However, not all of these repayment plans involve Parent PLUS loans. Only Income-Contingent repayment plans are available to Direct PLUS Loans made to students. Parent borrowers can utilize this option by consolidating their parent PLUS loans into Direct Consolidation Loan.
Income-Contingent Plan
ICP for Parent PLUS loan forgiveness has many similar points with other Income-Driven repayment plans. As the amount of monthly payments is adjusted to income and family size, the borrowers can enjoy payments that fit their budgets.
In general, this repayment plan requires either 20% of the discretionary income or a fixed amount that equals repayment in 12 years. This repayment plan forgives any remaining balance after repaying the debt for 25 years. However, if you utilize this plan only for Parent PLUS loan forgiveness, you will receive forgiveness much faster- minimum in 10 years.
If your loan is made to parents and not to students, you will need to first consolidate the Parent Plus loan. Only then can you access the Income-Contingent Plan. We will discuss the Income-Contingent plan as a Parent PLUS loan forgiveness option in the following section.
Application to the PSLF
For now, let’s ignore forgiveness through an Income-Contingent repayment plan and discuss the previous option- Public Service Loan Forgiveness. As mentioned, you need to first make 120 qualifying payments to become eligible for debt elimination.
However, it will take you a fairly long time- a minimum of 10 years. During these years, regulations or loan servicers can change, making it hard to monitor your payments. Therefore, it is advisable to submit the PSLF form regularly, at least once a year, to the loan servicer. In this way, the loan servicer will check your progress and inform you how many qualifying payments you have made.
If you do not check your payments, there can be problems. For example, till now, there have been issues like when borrowers complained that their qualifying payments were not recorded. Hence, it is advisable to monitor them and report if there is something wrong.
Employment Certification
Besides PSLF Form, this Parent PLUS loan forgiveness requires certification from the employer. As we mentioned, your employment type matters highly for this program. Therefore, you need to certify that you are working for a qualifying employer while making progress toward 120 payments.
This certificate can be signed by a supervisor or another individual in the Human Resources Department to validate your full-time work. If you do not provide it regularly, at least when you change work, you will be required to submit multiple certificates for each employer you worked with during the 120 payment period at the time of application.
You need to provide all documents and application forms to the loan servicer for this Parent PLUS loan forgiveness. The only loan servicer for this opportunity is FedLoan Servicing. You can find the exact address on the official Student Aid website.
Taxation
Some forgiveness programs require taxes on forgiven debt amounts. When borrowers finally receive forgiveness and get rid of thousands of dollars worth of debt, they face another problem- the payment for huge taxes. Luckily, with this parent PLUS loan forgiveness option, you will not be required to pay additional income taxes for the eliminated amount.
What Could be Expected from the PSLF in the Future?
Many people are worried that the PSLF program might not even exist after ten years. Hence, dedicating effort to this program can be a waste of time and nerves. Indeed, we cannot make any exact forecast about the existence of a program. Congress created the program, and only Congress can decide whether to adjust or eliminate it.
However, it should also be mentioned that President Joe Biden approaches this Parent PLUS loan forgiveness favorably. He mentioned in his “Plan for Education beyond High School” that the current PSLF program is overly complicated. He noted that the forgiveness opportunity that benefits people who serve this country should be simplified. Hence, his recommendation was to change the program.
Instead of waiting for ten years to get forgiveness, he suggested receiving $10,000 worth of forgiveness per year of service. The borrowers can apply for the benefit five times, which means the borrower will enjoy $50,000 forgiveness in the best case.
The offered changes make Parent PLUS loan forgiveness more accessible and faster to receive. However, the current program does not put any limit on the forgiven amount. Once you make 120 payments, you can get rid of any remaining amount. If changed, the maximum limit will be $50,000.
Sure, there is no guarantee that the suggestions will be applied to this Parent PLUS loan forgiveness. First, Congress needs to approve the changes so that they can be applied from a law perspective. One way or another, the future of the Public Service Loan Forgiveness for Parent PLUS loan forgiveness seems positive.
Income-Contingent Repayment Plan
It is possible that you would not qualify for the Public Service Loan Forgiveness if you do not have work in the public sector or have only a part-time job. In general, the program has demanding eligibility conditions. Therefore, not everyone is lucky to benefit from this Parent PLUS loan forgiveness option.
In such cases, Income-Contingent Repayment plans can come to the rescue. The government provides multiple repayment plans to borrowers such as Standard, Extended, Income-Driven repayment, etc. Each plan has its conditions, payback period, or rate.
As its name suggests, income-driven repayment considers the income level as a base to determine monthly payment amounts. Hence, if you receive low income, your payments would be lower. Alternatively, higher-income people will pay more. As a result, borrowers can easily pay out the debt through Income-Driven Repayment as the payment amount fits the budget.
Income-Driven repayment has different subcategories, one of which is the Income-Contingent plan. This plan requires 25 years of repayment. Once you repay the debt for 25 years, the remaining amount is forgiven. Hence, Income-Contingent plans can be an alternative to Parent PLUS loan forgiveness.
Eligibility
This repayment plan is the only option available to Parent PLUS loan borrowers. In general, Parent loans made to parents are not eligible for any of the Income-Driven repayment options, including the Income-Contingent plan. However, the ICR can be accessible to borrowers with Parent PLUS loans if they agree to consolidate the loan. After Direct Consolidation Loan, you can enjoy this repayment option.
If you have a Direct PLUS loan to students, it perfectly fits the eligibility. However, Direct PLUS loan to parents, FFEL PLUS Loan to parents or students can become eligible only if they are consolidated.
Adjustments to Payment
Keep in mind that your repayment amount would not be fixed under the Income-Driven repayment plans. Each year, you will be required to recertify your income level and family size. In this way, the ED decides how much your monthly repayment amount should be.
Missing the recertification is not advisable. In case of this Parent PLUS loan forgiveness, you will still be on ICR repayment if you do not recertify the income and family size. However, the monthly loan payment amounts will not be calculated based on the income level. Rather, you will pay the amount required under the Standard Repayment plan within ten years. Once you provide the necessary information, you can return to your ICR plan.
Parent PLUS Loan Transfer to Student: Is It Possible?
Many opportunities are accessible to PLUS loans made to students, while only a few involve Parent PLUS loans made to parents. Hence, parents might think about Parent PLUS Loan transfer to students to become eligible for other forgiveness options. Unfortunately, such a transfer is not possible. When you get a loan made to you instead of the child, you take full responsibility, and there is no way to get rid of this debt obligation.
Parent PLUS Student Loan Refinance
Loan refinancing is not as significant as Parent PLUS loan forgiveness options because it does not eliminate any debt. However, it brings some benefits.
Federal student aid programs do not provide an opportunity to refinance a parent PLUS student loan. Refinancing involves getting a new loan with better terms to pay out the existing loan. In this way, you change the lender and save money if you get lower interest rates. Besides, some lenders allow Parent PLUS Loan transfer to students through refinancing. Therefore, you can even get rid of the debt and let your child pay the rest.
Some lenders make Parent PLUS student loan refinance possible, such as SoFi, Commonbond, Laurel Road, etc. Each lender has its eligibility conditions. However, there are some common points. For example, the borrower should have a stable income source and reliable credit history. Usually, the credit score should be at least 600. In this way, the borrower guarantees the payback. Some refinancing companies can also ask for a cosigner, who is a third party. A cosigner agrees to repay the debt in case the borrower fails to do so.
When to Refinance?
Refinancing a Parent PLUS Student Loan is not always desirable. Sure, many government programs do not involve Parent PLUS loans, which are made to parents. Hence, such borrowers can find no other option than refinancing.
However, refinancing is most desirable when better loan terms can be achieved. For example, the new loan can have a lower interest rate because the market interest rates are decreasing or because the borrower improved the credit performance. Besides, if you wish to move from a fixed-rate loan to a variable rate (or vice versa), you can refinance the loan. Lastly, some lenders allow refinancing the loan to the student, which means the parent will no longer be responsible for the repayment.
It can be most beneficial if you access any of the parent PLUS loan forgiveness options. However, refinancing a Parent PLUS Student Loan can be the best option if you are not eligible for them.
Parent PLUS Loan Forgiveness for Disability
Another option for Parent PLUS loan forgiveness is disability discharge. This discharge program is designed to eliminate the debt of people who are totally and permanently disabled. It can erase 100% of the debt if the borrower can provide supporting documentation for Disability, such as documentation from Veteran Affairs, Social Security Administration, and a Physician.
Keep in mind that Parent PLUS Loan Forgiveness for Disability is only applicable when parents have a disability. If one parent has a disability the other can be required to pay the debt. Besides, the Disability of a child might not make the loan eligible for forgiveness.
Parent PLUS Loan Forgiveness for Death
Another Parent PLUS Loan Forgiveness option is the Death discharge. If the borrower dies or the student on whose behalf the loan was taken, the loan will be discharged. To apply for Parent PLUS Loan Forgiveness for Death, a family member or representative should submit the proof of death (death certificate) to the loan servicer.
Is Getting a Parent PLUS Loan for an Independent Student Possible?
Unfortunately, Parent PLUS loans are designed for dependent children. There is no such option as getting a Parent PLUS loan for an independent student. Dependent children are usually born after 1997, not married, not studying for a master’s or doctorate, not a veteran or active duty server, etc.
Parent PLUS loan vs. Private Student Loan
The government provides Parent PLUS loans while private lenders offer private student loans. The main distinction between the two options is that student aid programs like Parent PLUS loan forgiveness are not available to private loans. If a federal borrower wants to get rid of the debt, he/she will find some programs.
Meanwhile, private loan borrowers do not have many options. Some lenders offer death and disability discharge, together with student loan forbearance, for a short time. Otherwise, it is not possible to request forgiveness for private loans.
However, above mentioned Parent PLUS loan forgiveness programs are available to Parent PLUS loans. Additionally, usually, federal loans have lower interest rates than private loans.
Final Words
Getting student loans for your children to educate them is easy through Parent PLUS loans. These loans have lower interest rates and are more accessible than private loans.
Besides, several programs exist for Parent PLUS loan forgiveness, such as Public Service Loan Forgiveness, Income-Contingent repayment plan, Disability, or Death discharge. It is also possible to refinance the debt to get lower interest rates or transfer the parent PLUS loan to students. However, each option has its disadvantages and advantages depending on your finances. There is no “one fits all” option for borrowers. Therefore, before selecting a program, you need to read about your options and analyze them carefully. If it is hard for you to understand the terms, you can access third-party debt experts, like those in Student Loans Resolved. Our specialists can check your finances and recommend a reliable debt resolution strategy. Contact us now for a free consultation. Take a step toward a debt-free future.
