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Parent PLUS Loan Forgiveness

By Elaine Rubin

April 20, 2021

Can Parent PLUS Loans Be Forgiven?

When it comes to forgiveness, Parent PLUS loans may only have limited options when compared to other types of federal student loans.

In the federal student loan program, you may see loan cancellation referred to as either forgiveness or discharge. When we talk about forgiveness in the federal student aid program, generally you are qualifying for a loan cancellation for “doing good” like working in public service. When we talk about discharge, that means something bad has happened, like a total and permanent disability or death of the borrower or student.

When it comes to student loan forgiveness, Direct PLUS loans made to parents are only eligible for Public Service Loan Forgiveness if the borrower consolidates the loan into a Direct Consolidation Loan and then repays the loan under an income-contingent repayment plan. In addition, a Direct Consolidation Loan which includes a parent PLUS loan may also be eligible through repayment plan forgiveness under the income-contingent repayment plan. When it comes to other types of forgiveness options, like Teacher Loan Forgiveness, Parent PLUS loans are not eligible.

All federal student loans are eligible for the same type for discharge options. As discussed before, there could be options if you, the borrower, become total and permanently disabled. And your loan could be discharged if you or the student who benefitted from the loan dies. Other discharge options could include False Certification and Identify Theft.

How Can I Get My Parent PLUS Loan Forgiven?

If you are interested in Public Service Loan Forgiveness or forgiveness from an income-driven repayment plan, you will need to consolidate your parent Direct PLUS loan and agree to repay the loan under an income-contingent repayment plan.

The reason for this. There are no income-driven repayment plans, (such as, income-contingent, income-based, pay as you earn, revised pay as you earn etc.) which allow for the repayment of a Direct PLUS loan made to a parent. However, only the income-contingent repayment plan will allow for the repayment of a Direct Consolidation Loan which was used to payoff a Direct PLUS loan made to a parent. When it comes to Public Service Loan Forgiveness, there is a strict requirement of making 120 qualifying payments in a qualifying repayment plan. Qualifying repayment plans require a borrower to repay their loans under an income-driven repayment plan*.

*Payments made under a 10-year Standard Repayment plan will count as a qualifying payment, however, if a borrower chooses to solely repay a loan under a 10-year plan, nothing will be left to forgive after 120 payments.

Parent PLUS Student Loan Forgiveness

After consolidating with a Direct Consolidation Loan, Parent PLUS Loans can be forgiven through two programs: Income-Contingent Repayment (ICR) or Public Service Loan Forgiveness (PSLF).

Income Contingent Parent PLUS Loan Repayment Plan

The only income-driven repayment plan that Parent PLUS Loan borrowers can take advantage of is Income-Contingent Repayment (ICR). This repayment plan factors in your family size and income to help determine your monthly payment. In terms of your monthly payment under ICR, it will be the lesser of 20% of your discretionary income or the fixed monthly payment of your loan with a 12-year term.

As for forgiveness, you want to be aware that the ICR repayment plan affords you the opportunity to have the remaining balance on your loans forgiven after 25 years of qualifying payments. Unlike PSLF, which we will discuss next, the amount may be taxable. In the recently passed American Rescue Plan Act of 2021 (P.L. 117-2), also known as the $1.9 trillion coronavirus relief package which was signed into law by President Biden, student loans forgiven will not be taxable through 2025, with the option to extend or make this provision permanent before its expiration date.

Do note that the 25-year term for the ICR Plan likely means that you will pay more in interest, and it is possible that you could save money by refinancing with a private lender. However, the Income-Contingent Repayment plan could lower your monthly payment, providing some relief for additional expenses.

Parent PLUS Loan Public Service Forgiveness

Public Service Loan Forgiveness can be an effective, and faster repayment option for parents with jobs that qualify for the program. Essentially, following ten years of qualifying payments (120 payments in total), made in an eligible repayment plan, while working in an eligible public service job full-time (in certain circumstances, part-time employment may count as the equivalent as full-time employment), a parent could have the rest of their student loan debt forgiven.

Remember that the only income-driven repayment plan for Parent PLUS loan borrowers is the Income-Contingent Repayment Plan after the loans are consolidated into Direct Consolidation Loan. With the income-contingent repayment plan, parents would be in repayment for 25 years, so parents eligible for Public Service Loan Forgiveness could save themselves 15-years’ worth of payments if they qualify.

How to Consolidate a Parent PLUS Loan

In order to consolidate a Parent PLUS Loan, you will have to complete a federal Direct Consolidation Loan application.

After consolidating your Parent PLUS Loan into a Direct Consolidation Loan, you have different repayment options. You can choose between standard repayment terms of up to 30 years and income-driven repayment plans with repayment terms capped at 25 years.

If your goal is loan forgiveness or Public Service Loan Forgiveness, note that the Income-Contingent Plan is the only income-driven repayment plan under which a consolidated Parent PLUS Loans may be forgiven.

Can a Parent PLUS Loan Be Discharged in Bankruptcy?

Bankruptcy can be a reason for discharge; however, you would have to prove an undue hardship. We recommend speaking to a bankruptcy attorney if you are pursuing a bankruptcy filing.

How Can Parent PLUS Loans Be Discharged?

There are various circumstances and situations in which a Parent PLUS Loan may be discharged:

School closure leading to the inability of your child to complete their program
Your child's school's failure to refund loan money following your child withdrawing from school, withstanding the law
Your death or the death of the child you borrowed for
Your child's school falsely certified your eligibility to borrow
Identity theft led to a false certification of the loan
Discharge via bankruptcy
If you, the borrower (not the student whose behalf you obtained the loan) become totally and permanent disabled.

Parent PLUS Loan Forgiveness Retirement

There is no forgiveness available to Parent PLUS Loan borrowers looking to retire. Remember that Parent PLUS Loan forgiveness is only possible through the Income-Contingent Repayment Plan or PSLF after first consolidating your Parent PLUS Loan into a federal Direct Consolidation Loan.

Although forgiveness might not be a possibility for parents looking to retire, below are some ways for parents with a Parent PLUS Loan to prepare for retirement.

Tuition Reimbursement Expansion for Student Loan Repayment

You may be familiar with employer tuition reimbursement, well, you may be interested hear about how the benefits were expanded in the American Rescue Plan Act of 2021. Employers may pay up to $5,250 annually toward an employee’s student loans, which would be excluded from the employee’s income. However, this is at the discretion of the employer to offer these expanded benefits. You may want to have a chat with HR to see if this is an option for you. These benefits are set to expire in 2025.

If your employer will help you pay your student loan debt down, that can help you tackle your student loan debt, putting yourself in a better position for retirement.

Refinance Parent PLUS Loans

It is possible that refinancing your Parent PLUS Loans could save you some money. The interest rates for Parent PLUS Loans are normally higher than those offered by private student loan lenders, so you may be able to save on your monthly payment and interest paid over the life of the loan. While this decision won’t free you from paying back the loan, it could provide you with extra money that could be invested or put away for retirement.

A private student loan lender will review your eligibility based on their underwriting criteria. In general, they are looking for a minimum credit score, at least two years of work history, and a good debt-to-income ratio.

Best Student Loan Refinance Lenders

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Variable as low as: 2.25% APR¹

Fixed as low as: 2.74% APR¹

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Rates as low as 2.25% variable and 2.74% fixed¹
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Private student loans lenders: SoFi Student Loan Refinancing

¹Fixed rates from 2.74% APR to 6.94% APR (with AutoPay). Variable rates from 2.25% APR to 6.59% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.1% plus 2.40% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

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College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

¹The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.

²This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

³$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

Information advertised valid as of 10/21/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

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¹Visit DiscoverStudentLoans.com/AutoDebitReward for terms and conditions.

²Lowest APRs shown for Discover private consolidation loans are available to the most creditworthy applicants who are approved and choose a shorter repayment term, and include a 0.25% interest rate reduction while enrolled in automatic payments.

The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.125% as of October 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APRs are only available to applicants with the best credit. The APR will be determined after an application is submitted. It will be based on credit history, the selected repayment option and other factors, including a cosigner’s credit history (if applicable). If a student does not have an established credit history, the student may find it difficult to qualify for a private student loan on their own or receive the lowest advertised rate. Learn more about Discover Student Loans interest rates.

³Lowest APRs shown for Discover private consolidation loans are available to the most creditworthy applicants who are approved and include a 0.25% interest rate reduction while enrolled in automatic payments.

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Variable Rates between 1.95% - 5.65% APR¹
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¹Interest Rates

Fixed interest rates range from 2.48% APR (with auto debit discount) to 6.62% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. The fixed interest rate will remain the same for the life of the loan.

Variable interest rates range from 1.95% APR (with auto debit discount) to 5.65% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. Variable rates may increase after consummation. The variable interest rate is equal to the One-Month London Interbank Offered Rate (“One-Month LIBOR”) plus a margin. The One-Month LIBOR in effect for each monthly period (from the first day of the month through and including the last day of the same month) will be the highest One-Month LIBOR published in The Wall Street Journal “Money Rates” table on the twenty-fifth (25th) day (or if such day is not a business day, the next business day thereafter) of the month immediately preceding such calendar month. The Annual Percentage Rate (APR) for a variable interest rate loan will change monthly on the first day of each month if the One-Month LIBOR index changes. This may result in higher monthly payments. The current One-Month LIBOR index is 0.09% as of October 1, 2021.

Auto Debit Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

The lowest rate for each loan type requires automatically withdrawn (“auto debit”) payment. The lowest rate is available only to the most creditworthy applicants. Not all borrowers will receive the lowest rate. The interest rate and Annual Percentage Rate (APR) may be higher depending upon (1) the credit history of the borrower and, if applicable, the cosigner, (2) the repayment option and loan term selected, (3) the loan type selected, and (4) the highest level of education attained. If approved, applicants will be notified of the rate qualified for within the stated range.

²Cosigner Release. A request for the cosigner to be released can be made by either the borrower or cosigner when each of the following conditions has been met:

The account must have been in full principal and interest repayment for at least 24 months.
Twenty-four consecutive, on-time principal and interest payments, or lump sum equivalent, must have been made. NOTE: A lump sum payment does not replace the requirement to have been in full principal and interest repayment for at least 24 months. Interest-only or fixed-pay payments while enrolled in school do not qualify towards the 24 consecutive on-time payments.
The loan must be current at the time of request.
The loan must not have been in deferment, hardship forbearance, or other alternative payment assistance plan within the past 24 months.
The loan must not have been permanently modified from its original terms in the credit agreement.
The primary borrower must be a U.S. citizen or have permanent residency in the United States.
The primary borrower must meet the age of majority requirement in their permanent state of residency.

Requirements are subject to change. If all of these conditions have been met, then an application for cosigner release may be submitted. The primary borrower is required to demonstrate they have the ability to assume sole responsibility for the loan(s) by providing proof of income, meeting debt-to-income requirements, and having a satisfactory credit history. (A credit report will be obtained during the review process).

³Refinance Loan Eligibility: You must be a U.S. citizen or permanent resident alien with a valid U.S. Social Security number, and be the legal age to enter into binding contracts in your state/territory of residency, or be at least 17 years of age and apply with a cosigner who is at least the age of majority in their state/territory. Non-residents can apply with an eligible cosigner who is a U.S. citizen or permanent resident alien with a valid U.S. Social Security number. The student loans you refinance must be in their grace or repayment period, and you can no longer be enrolled in school on a half-time or more basis. You must have at least $5,000 in student loans to refinance. You, or your eligible cosigner, must have an annual income of at least $36,000. Approval subject to credit review. Other credit criteria may apply.

Refinance Loan Limits:

Minimum loan amount: $5,000

Maximum student loan limits:

$125,000 for borrowers with an undergraduate degree.

$175,000 for borrowers with a graduate, MBA, or law degree.

$500,000 for borrowers with a graduate health professional degree.

Nelnet Bank, and any associated logos or design marks, are trademarks or service marks of Nelnet, Inc. All loan programs and terms are subject to change or may be discontinued at any time without notice. Certain restrictions and limitations may apply.

Transfer Parent PLUS Loans to Your Child

Another option for Parent PLUS Loan borrowers is transferring your loans to your child. To accomplish this, your child will have to qualify for a refinance loan on their own (or with a creditworthy cosigner), and you will have to refinance with a private lender. This would place the burden of repaying the loan on your child; however, you would be in a better position to establish or increase your retirement savings.

Parent PLUS Loan Forgiveness for Teachers

PLUS Loans, namely Parent PLUS or Grad PLUS Loans, are exempt from the federal Teacher Loan Forgiveness Program. The loans that are eligible for teacher loan forgiveness are Direct Subsidized and Unsubsidized Loans.

Parent PLUS Loan Forgiveness Disability

Parent PLUS Loan cancellation is possible for borrowers who experience a total and permanent disability (TPD). In order to file for TPD discharge, you have to fill out an application and provide documentation that verifies your condition. You can gather documentation from a physician, the Social Security Administration (SSA), or the U.S. Department of Veterans Affairs (VA).

Are Parent PLUS Loans Forgiven If the Parent Dies?

Yes, if the parent dies, Parent PLUS Loans will be discharged. This is also the case in the death of the student on whose behalf the parent borrowed. Documentation such as an original death certificate will need to be provided to the loan servicer to prove the death of the parent or child.

Refinance and Repay With a Private Lender

For Parent PLUS Loan borrowers, there are several scenarios when refinancing and repaying with a private lender can be a smart decision. Here are a few of those situations:

You’re approaching retirement and need to save for that
You want to transfer your Parent PLUS Loan to your child
You’re paying more in interest than what you could be paying with a private lender
You’re not eligible for the loan forgiveness programs out there
You want a lower monthly payment

Best Student Loan Refinance Lenders

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Recommendation

Best for Student Loan Refinancing

Interest Rates

Variable as low as: 2.25% APR¹

Fixed as low as: 2.74% APR¹

Repayment Terms

5, 7, 10, 15, 20 years

Apply Now More Info