Federal Parent PLUS student loans offer parents of college students a way to help their children pay for their education. And like other federal student loans, Parent PLUS Loans provide opportunities for loan forgiveness.
However, qualifying for Parent PLUS student loan forgiveness can be somewhat difficult, as there are fewer paths to forgiveness than are offered to federal Direct and Graduate PLUS student loan borrowers.
Here’s what you need to know about qualifying for parent student loan forgiveness:
- What are Parent PLUS Loans?
- Are Parent PLUS Loans eligible for forgiveness?
- Can I consolidate Parent PLUS Loans?
- How to refinance a Parent PLUS Loan
What are Parent PLUS Loans?
When paying for higher education, students may sometimes need more financial aid than they’re eligible to receive from federal student loans in their own name. When this happens, federal Parent PLUS student loans may help fill the gaps. To be eligible for a Parent PLUS Loan, the borrower must be the biological or adoptive parent (or in some cases, the step-parent) of the student, and must not have an adverse credit history.
With a Parent PLUS Loan, the parent can borrow up to the cost of attendance at the student’s school, minus any other financial assistance (including other federal student loans) the student has received.
These loans are unsubsidized, which means the parent is responsible for the interest that accrues while the student is in school. Parents can choose to make interest-only payments while their child is in school or have the interest capitalize (be tacked onto the principal loan balance).
Check Out: Parent PLUS Loans vs. Private Parent Loans: How to Choose
Are Parent PLUS Loans eligible for forgiveness?
Like other federal student loans, Parent PLUS Loans offer a few avenues for forgiveness, provided the borrower meets eligibility and other requirements:
Income-Contingent Repayment Plan
Income-driven repayment plans offer federal student loan borrowers alternate or longer repayment periods to keep their monthly payments affordable. Under income-driven repayment, any remaining balance is forgiven at the end of the repayment period.
Unfortunately, Parent PLUS Loans aren’t directly eligible for any of the income-driven repayment plans. However, Parent PLUS Loan borrowers can access the Income-Contingent Repayment (ICR) Plan if they consolidate their Parent PLUS Loan(s) into a Direct Consolidation loan — provided the borrower started repayment of the Parent PLUS Loan on or after July 1, 2006.
Under the ICR Plan, the monthly payment amount is set at either 20% of your discretionary income or the amount you’d pay under a 12-year repayment plan — whichever is lower. If you’re still making payments on your Parent PLUS Loan after 25 years of on-time payments (for a total of 300 payments), the remaining balance of your loan will be forgiven.
When your remaining balance is forgiven, you can generally expect to owe income tax on the forgiven amount, as it will be considered taxable income. However, if your remaining federal Parent PLUS Loan balance is forgiven anytime before the end of 2025, the forgiven amount will be tax-free as part of the American Rescue Plan of 2021.
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See Also: The Complete List of Student Loan Forgiveness Programs
PSLF for Parent PLUS Loans
Parent borrowers can be eligible for Public Service Loan Forgiveness (PSLF) for their federal Parent PLUS Loans — but the process can be a bit complex.
To start, it’s important to understand how the PSLF Program works. In order to be eligible for this kind of loan forgiveness, you’ll need to meet the following requirements:
- Work full-time for a U.S. federal, state, local, or tribal government or not-for-profit organization
- Are a Direct Loan borrower (Parent PLUS Loan borrowers are considered Direct Loan borrowers)
- Make 120 qualifying payments
Parent PLUS student loan borrowers can potentially qualify for this forgiveness plan. However, under the standard 10-year repayment plan — which is the only repayment plan available to Parent PLUS borrowers — there will be no balance left to forgive after 120 payments. The standard repayment is set up to have the loan paid off after the 120th payment.
However, parent borrowers can access the PSLF Program by consolidating their Parent PLUS Loan(s) into a Direct Consolidation loan. Once they’ve done that, they can sign up for an Income-Contingent Repayment Plan.
Check Out: Up to $20K in Student Loan Forgiveness for Some Borrowers, and Payments Remain Paused
Other options for parent loan forgiveness
In addition to the ICR Plan and PSLF, a Parent PLUS student loan can be forgiven in a few other ways, including:
- Military service: U.S. military service counts toward Public Service Loan Forgiveness. Parent borrowers can potentially be eligible for PSLF if they’re serving in the U.S. military, provided they meet the other eligibility requirements.
- Identity theft: If an identity thief has fraudulently taken a Parent PLUS Loan in your name, you may be eligible for a discharge of the fraudulent loan.
- Bankruptcy: In some cases, federal student loan borrowers may have their loans discharged in bankruptcy, although the process is neither automatic nor guaranteed.
- Disability: Federal student loans, including Parent PLUS Loans, may be eligible for a discharge if the borrower becomes permanently and completely disabled.
- Death: If the student for whom you borrowed the student loan dies, your Parent PLUS Loan may be discharged.
In addition to these types of forgiveness, several additional circumstances could also result in the full or partial discharge of your Parent PLUS Loan, including:
- The student for whom you borrowed the loan couldn’t complete their studies because the school closed.
- The school falsely certified your eligibility to receive the loan.
- The student withdrew from the school, but you didn’t receive a refund of your loan money from the school despite it being required by applicable laws and regulations.
Learn More: What to Know About the $8.5 Billion Corinthian Colleges Loan Forgiveness
Can I consolidate Parent PLUS Loans?
Parent PLUS Loans are eligible for the federal Direct Consolidation Loan program, as long as the borrower started repayment of the loan on or after July 1, 2006. Consolidating your Parent PLUS Loan into a federal Direct Consolidation Loan is the only way that a Parent PLUS borrower can access Public Service Loan Forgiveness . When you consolidate, opt for the Income-Contingent Repayment Plan in order to be eligible for PSLF.
How to refinance a Parent PLUS Loan
In addition to pursuing federal student loan forgiveness, you may also want to look into refinancing your Parent PLUS Loan as another option for reducing your loan costs, repayment timeline, or interest rate.
Refinancing means taking out a new, private loan that you use to pay off the Parent PLUS Loan(s), and then making payments on the private loan until you’ve paid it off. If you have good credit, you may be able to qualify for a more favorable interest rate with a private loan than the current Parent PLUS Loan rate of 7.54%.
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To refinance your Parent PLUS Loan, follow these steps:
- Compare rates and terms. Checking the refinancing options at a variety of lenders can help you find the loan with the best rates and terms for your needs. Credible makes it easy to compare lenders all at once, without affecting your credit.
- Choose your loan and apply. Once you’ve found the right loan for your financial situation, you’ll need to provide some personal information and apply. You can apply online right from Credible’s site.
- Receive your loan. Most borrowers working with Credible lenders get an offer within one business day and receive their loan money within a week.
Once you receive your refinanced loan, begin making your payments regularly.