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
College Ave Student Loans
- Variable rate range: 3.44% – 7.99% APR1
- Fixed rate range: 3.99% – 7.99% APR1
- No application or prepayment fees
- Apply in 3 minutes or less for instant credit decision
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community 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 8/11/2022. 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.
ELFI Student Loan Refinance
- Customers are saving an average of $309 every month and an average of $20,936 in total savings after refinancing their student loans with Education Loan Finance1
- Variable and fixed rates starting from 1.86% APR and 3.99% APR2
- Prequalify in as little as two minutes
- Award winning customer service from your dedicated Personal Loan Advisor who is matched to you from the moment you sign up
1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
2Rates accurate as of 8/10/22. The interest rate and monthly payment for variable rate loans may increase after closing. Your actual interest rate may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10 year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. To qualify for refinancing or student loan consolidation through Education Loan Finance, you must have at least $15,000 in qualified student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary Education Loan Finance institution. Education Loan Finance Parent Loans are limited to a maximum of the 10-year term.
SoFi Student Loans
- Rates as low as 2.24% variable and 3.99% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 2.24% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. 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. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
Splash Financial Refinance Loan
- Rates as low as 1.74%1 Variable APR and 2.59%1 Fixed APR
- No pre-payment penalties, origination, or application fees
- See rates in 3 minutes without affecting your credit score2
1The rates displayed may include a 0.25% autopay discount.
2To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Earnest Student Loan Refinancing
- Variable rates starting at 1.89% APR (including 0.25% Auto Pay discount)*
- Fixed rates starting at 3.24% APR (including 0.25% Auto Pay discount)*
- Choose your own monthly payment
- No fees of any kind and exceptional customer service for the life of your loan
- Check your rate in under 2 minutes
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.49% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.14% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
*Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. Not all borrowers will qualify for our lowest rates, and your rate will be based on creditworthiness at time of application.
The information provided on this page is updated as of 7/27/2022. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
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
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