Can Parent PLUS Loans Be Deferred During Graduate School? A Comprehensive Guide

Absolutely, Parent PLUS Loans can indeed be deferred while the student for whom the loan was taken is enrolled in graduate school, at least half-time. This is a common question, and navigating the nuances of deferment options is crucial for parents managing these educational debts. Let’s delve into the specifics and address other frequently asked questions surrounding this important topic.

Understanding Deferment Options for Parent PLUS Loans

The Core Principle: In-School Deferment

The most straightforward path to deferment for a Parent PLUS Loan during the student’s graduate studies hinges on the “in-school deferment.” This allows parents to temporarily postpone loan payments while the student is enrolled at least half-time in an eligible college or career school. The key is that this deferment is tied to the student’s enrollment, not the parent’s circumstances (though other deferment options might exist for the parent).

How to Initiate a Deferment

Usually, the process is initiated by the graduate student’s school notifying the loan servicer of their enrollment status. Many loan servicers will automatically place Parent PLUS Loans into deferment once they receive this notification. However, it is critical to proactively confirm with your loan servicer that the deferment has been applied. Don’t just assume it will happen automatically. Keep records of your enrollment and any communication with the servicer.

Documentation is Your Friend

Sometimes, the automatic deferment doesn’t kick in, or there may be a delay. In these cases, you’ll need to provide documentation directly to your loan servicer. This usually involves submitting a deferment request form (available on the servicer’s website) along with proof of your child’s enrollment in graduate school. This proof could be an enrollment verification certificate from the school’s registrar.

Accrued Interest: The Silent Accumulator

Deferment offers temporary payment relief, but it’s crucial to remember that interest typically continues to accrue on Parent PLUS Loans during the deferment period. This means the loan balance will grow while payments are paused. You have the option to pay the accruing interest during deferment to prevent it from capitalizing (being added to the principal balance), which is generally the more cost-effective route in the long run.

Considering Forbearance as an Alternative

While deferment is generally preferable, forbearance is another option to temporarily suspend payments. However, unlike some deferment options, interest always accrues during forbearance. It should be considered a last resort, especially when deferment is available.

Frequently Asked Questions (FAQs) About Parent PLUS Loan Deferment During Graduate School

1. What happens if my child drops below half-time enrollment?

The in-school deferment is contingent on at least half-time enrollment. If your child drops below this threshold, the deferment will likely end, and you will be required to resume loan payments. Immediately contact your loan servicer to discuss your options.

2. Do I need to reapply for deferment each year my child is in graduate school?

The frequency of required application depends on your loan servicer’s policies. Some servicers require annual renewal, while others will maintain the deferment as long as the student’s enrollment is confirmed. Contact your loan servicer to determine their specific requirements.

3. Can I defer Parent PLUS Loans if I, the parent, go back to school?

While the primary deferment discussed here focuses on the student’s enrollment, you may be eligible for deferment based on your enrollment as a student. This depends on the specific terms of your loan and the lender’s policies. Check with your loan servicer about “in-school deferment” based on your enrollment.

4. What if I’m already in a repayment plan for my Parent PLUS Loan?

Being in a repayment plan doesn’t disqualify you from deferment. The deferment will temporarily pause your repayment plan. Once the deferment ends, your repayment plan will resume. Confirm with your loan servicer how the deferment impacts your specific repayment plan.

5. How does deferment affect my credit score?

Deferment itself, when properly documented and approved, should not negatively impact your credit score. It’s a temporary suspension of payments, not a missed payment. However, failing to properly apply for deferment or missing payments while awaiting approval will harm your credit score.

6. What is the difference between deferment and income-driven repayment (IDR) plans for Parent PLUS Loans?

Deferment is a temporary postponement of payments, while IDR plans adjust your monthly payments based on your income and family size. Deferment is shorter-term and doesn’t consider your income. IDR plans can provide longer-term payment relief and even potential loan forgiveness after a set period.

7. My child is pursuing a PhD. Can I defer my Parent PLUS Loans for the entire duration of their doctoral program?

Yes, typically, you can defer Parent PLUS Loans for the entire duration of a PhD program, as long as the student maintains at least half-time enrollment and you continue to meet the eligibility requirements for the in-school deferment. Consistent communication with your loan servicer is key to ensure continuous deferment.

8. Are there any fees associated with deferring my Parent PLUS Loans?

Generally, there are no fees associated with deferring Parent PLUS Loans. However, always double-check with your loan servicer to confirm this and to be aware of any potential processing fees (though these are rare for deferment).

9. What happens to the accrued interest if I don’t pay it during the deferment period?

If you don’t pay the accrued interest during the deferment period, it will capitalize. This means the unpaid interest will be added to your loan’s principal balance. This increases the total amount you owe and the amount of interest you’ll pay over the life of the loan.

10. Can I make payments on my Parent PLUS Loan during the deferment period?

Yes, you are always allowed to make payments on your Parent PLUS Loan, even during a deferment. This is a smart strategy if you can afford it, as it will reduce the principal balance faster and minimize the amount of interest you pay overall.

11. My deferment was denied. What can I do?

If your deferment application is denied, first, understand the reason for the denial. Common reasons include incomplete applications, ineligible enrollment status, or outstanding documentation. Correct the issue and resubmit your application. If the denial seems incorrect, contact your loan servicer to appeal the decision.

12. Where can I find the deferment request form for my Parent PLUS Loan?

You can find the deferment request form on your loan servicer’s website. Look for a section related to “Deferment” or “Forbearance.” You can also contact your loan servicer directly and request that they mail or email you the form.