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Can Parent PLUS Loans Be Deferred? Your Definitive Guide

Yes, Parent PLUS loans can be deferred, but the process and requirements differ slightly compared to other federal student loans. Navigating the world of student loan repayment can feel like traversing a dense jungle. Let’s equip you with the knowledge you need to successfully navigate the deferment options for your Parent PLUS loans.

Understanding Parent PLUS Loan Deferment

Deferment is a temporary postponement of your loan payments. During a deferment, you usually don’t have to make any payments, though interest may still accrue, depending on the type of deferment. This accumulated interest is often capitalized, meaning it’s added to your loan’s principal balance, potentially increasing the total amount you’ll eventually repay. Understanding how deferment works is crucial before applying.

Deferment Options for Parent PLUS Loans

Several deferment options are available for Parent PLUS loans, each with its specific eligibility criteria:

In-School Deferment: This is available if the parent borrower returns to school and is enrolled at least half-time at an eligible educational institution. The Parent PLUS loan can be deferred until six months after the parent ceases to be enrolled at least half-time.
Graduate Fellowship Deferment: If the parent is enrolled in a graduate fellowship program or rehabilitation training program for individuals with disabilities.
Economic Hardship Deferment: This option is available if the borrower is experiencing economic hardship. To qualify, you’ll generally need to provide documentation that proves you’re receiving benefits under a federal or state public assistance program (like SNAP) or are working full-time and earning no more than 150% of the poverty guideline for your family size.
Military Service Deferment: For parents serving on active duty or performing qualifying National Guard duty during a war or other military operation or national emergency, and for the 180-day period following such service.
Unemployment Deferment: This deferment is available if the parent is diligently seeking, but unable to find, full-time employment.

The Application Process

To apply for deferment, you’ll generally need to contact your loan servicer. They will provide you with the necessary application forms and instructions. Be prepared to provide documentation supporting your eligibility, such as proof of enrollment, income verification, or information about your military service. Timely submission is crucial. Your loan servicer can approve or deny your application.

Weighing the Pros and Cons of Deferment

Before you rush to defer your Parent PLUS loans, it’s essential to weigh the pros and cons:

Pros:

Temporary Payment Relief: Deferment provides a temporary respite from monthly loan payments, freeing up cash flow during periods of financial hardship.
Avoidance of Default: By obtaining a deferment, you can prevent your loan from going into default, which can have serious consequences for your credit score and overall financial well-being.

Cons:

Interest Accrual: As mentioned, interest typically continues to accrue during deferment, increasing the overall cost of the loan. This is especially true for unsubsidized loans.
Capitalization of Interest: When the deferment period ends, the accrued interest is often added to the principal balance, leading to higher monthly payments in the long run.

Alternatives to Deferment

Deferment isn’t always the best solution. Consider these alternatives:

Income-Contingent Repayment (ICR): This federal program sets your monthly payments based on your income and family size. While it may extend the repayment period, it can significantly lower your monthly obligations. Note that only Direct Parent PLUS Loans are eligible for the Income Contingent Repayment plan.
Consolidation: Consolidating your federal loans into a Direct Consolidation Loan can make you eligible for ICR, which isn’t normally available for Parent PLUS loans. However, consolidating doesn’t remove your obligation to pay back your loans.
Refinancing: Refinancing with a private lender may offer a lower interest rate, but be aware that you’ll lose federal loan protections and benefits, such as deferment and forbearance options.
Forbearance: Similar to deferment, forbearance allows you to temporarily suspend or reduce your loan payments. However, interest always accrues during forbearance.

Key Considerations for Parent PLUS Borrowers

Parent PLUS loans differ from other federal student loans in some important ways. They are specifically designed for parents borrowing to pay for their child’s education. This distinction impacts eligibility for certain repayment plans and forgiveness programs. Always check the most current regulations and eligibility criteria with your loan servicer or the Department of Education.

FAQs: Parent PLUS Loan Deferment

Here are 12 frequently asked questions to further clarify the nuances of Parent PLUS loan deferment:

1. What documentation do I need to apply for an economic hardship deferment for my Parent PLUS loan?

You’ll typically need documentation that proves you’re receiving benefits under a federal or state public assistance program (like SNAP) or are working full-time and earning no more than 150% of the poverty guideline for your family size. Specific requirements can vary, so check with your loan servicer.

2. Will interest accrue on my Parent PLUS loan during deferment?

Yes, interest will accrue on your Parent PLUS loan during deferment. This is because Parent PLUS loans are unsubsidized, meaning the government doesn’t pay the interest while the loan is deferred.

3. How does the capitalization of interest affect my Parent PLUS loan repayment?

When interest is capitalized, it’s added to the principal balance of your loan. This increases the total amount you owe and can lead to higher monthly payments and a longer repayment period.

4. Can I defer my Parent PLUS loan if my child is attending graduate school?

No, a Parent PLUS loan can only be deferred if the parent borrower is enrolled at least half-time in an eligible educational institution. The student’s enrollment status does not affect the parent’s eligibility for deferment, though your child may be able to take out loans in their own name for grad school expenses.

5. What is the difference between deferment and forbearance for Parent PLUS loans?

The main difference is that with deferment, you might qualify for a situation where interest does not accrue (though this is not the case with Parent PLUS loans). With forbearance, interest always accrues. Both allow you to temporarily postpone or reduce your loan payments.

6. How long can I defer my Parent PLUS loans?

The maximum deferment period depends on the type of deferment. For example, economic hardship deferments are generally granted for up to three years. Military service deferments can extend for the duration of qualifying service.

7. What happens if I don’t qualify for deferment?

If you don’t qualify for deferment, explore other options like forbearance, income-contingent repayment (if you consolidate into a Direct Consolidation Loan), or refinancing with a private lender.

8. How do I find out who my loan servicer is?

You can find out who your loan servicer is by logging into the Federal Student Aid website (studentaid.gov) using your FSA ID.

9. If I am granted a deferment, when do I need to start making payments again?

Your loan servicer will notify you of the date your deferment ends and when your first payment is due. It’s crucial to keep your contact information updated with your servicer to receive these notifications.

10. Can I cancel a deferment if my financial situation improves?

Yes, you can cancel a deferment at any time by contacting your loan servicer. You’ll then resume making your regular monthly payments.

11. Does deferment affect my credit score?

Deferment itself doesn’t negatively affect your credit score as long as you’re meeting the requirements of the deferment and not defaulting on your loans. However, if you were already behind on payments before the deferment, those missed payments may still impact your credit.

12. Are Parent PLUS loans eligible for public service loan forgiveness if I consolidate?

Direct PLUS Loans made to parents are not eligible for Public Service Loan Forgiveness (PSLF) unless they are consolidated into a Direct Consolidation Loan and repaid under the Income Contingent Repayment (ICR) plan. Even then, you must be employed full-time by a qualifying employer. You need to consider if you have a high loan balance compared to your income, you’re working in public service, and you need income-driven repayment to afford your payments.

Final Thoughts

Navigating Parent PLUS loan deferment can be complex, but understanding your options and responsibilities is the first step towards managing your debt effectively. Don’t hesitate to contact your loan servicer or a qualified financial advisor for personalized guidance. With careful planning and informed decision-making, you can successfully manage your Parent PLUS loans and achieve your financial goals.