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Home » Is There Any Relief for Parent PLUS Loans?

Is There Any Relief for Parent PLUS Loans?

June 14, 2025 by TinyGrab Team Leave a Comment

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  • Is There Any Relief for Parent PLUS Loans?
    • Understanding Parent PLUS Loan Relief Options
      • 1. Direct Consolidation Loan and Income-Contingent Repayment (ICR) Plan
      • 2. Temporary Expanded Public Service Loan Forgiveness (TEPSLF)
      • 3. Loan Discharge Options
      • 4. Settlement and Compromise
    • Frequently Asked Questions (FAQs) About Parent PLUS Loan Relief

Is There Any Relief for Parent PLUS Loans?

The short answer is yes, there is relief available for Parent PLUS loans, but navigating the options can feel like traversing a bureaucratic labyrinth. While Parent PLUS loans don’t qualify for all the same forgiveness programs as other federal student loans, strategic planning and a deep understanding of the available pathways can lead to significant financial relief. Let’s delve into the details.

Understanding Parent PLUS Loan Relief Options

Parent PLUS loans, designed to help parents finance their children’s education, come with unique rules. Unlike loans taken out by students themselves, these loans are the direct responsibility of the parent borrower. This distinction impacts the types of relief available. Here’s a breakdown of your primary options:

1. Direct Consolidation Loan and Income-Contingent Repayment (ICR) Plan

This is often the first step and most widely available path to income-driven repayment (IDR) for Parent PLUS loans. Parent PLUS loans themselves aren’t eligible for IDR plans like Income-Based Repayment (IBR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE). However, by consolidating your Parent PLUS loans into a Direct Consolidation Loan, you unlock access to the Income-Contingent Repayment (ICR) plan.

  • How it works: Your monthly payment under ICR is capped at the lesser of 20% of your discretionary income or what you would pay on a fixed 12-year repayment plan, adjusted according to your income.
  • The forgiveness aspect: After 25 years of qualifying payments under ICR, the remaining loan balance is forgiven. Note that this forgiven amount may be subject to income tax.

2. Temporary Expanded Public Service Loan Forgiveness (TEPSLF)

While the Public Service Loan Forgiveness (PSLF) program is designed for borrowers working in qualifying public service jobs, it is rarely accessible for Parent PLUS loans. The reason? To qualify for PSLF, a borrower must be on an IDR plan. While consolidating into a Direct Consolidation Loan allows access to ICR, historically, certain technicalities prevented ICR payments from fully qualifying as PSLF-eligible payments.

  • TEPSLF – A Potential Lifeline: TEPSLF was a temporary program designed to correct some of these issues. While TEPSLF funding has been exhausted, the limited waiver offered by the Department of Education on October 6, 2021, offers a pathway. This waiver allowed past payments made on any repayment plan to count towards PSLF, given the borrower works for a qualifying employer.
  • The crucial catch: You must consolidate and apply for PSLF before the waiver expires. Keep a keen eye on announcements from the Department of Education regarding any extensions or updates to this critical waiver.
  • Qualifying employment: This requires working full-time for a government organization (federal, state, local, or tribal) or a qualifying non-profit organization. Certain types of non-profits are excluded, so careful review is essential.

3. Loan Discharge Options

Circumstances can arise that may warrant a full loan discharge. This means the loan is completely forgiven. Here are a few potential grounds for discharge:

  • Death of the student or parent borrower: If either the student for whom the loan was taken out or the parent borrower dies, the loan is eligible for discharge. Proper documentation, such as a death certificate, is required.
  • Total and Permanent Disability (TPD) Discharge: If the parent borrower becomes totally and permanently disabled, they may be eligible for a TPD discharge. This requires documentation from a physician or the Social Security Administration.
  • Closed School Discharge: While less common with Parent PLUS loans, if the school the student attended closes while they were enrolled or shortly thereafter, the parent borrower may be eligible for a closed school discharge.
  • False Certification Discharge: This applies in rare cases where the school falsely certified the student’s eligibility for the loan. This is a complex process requiring substantial evidence.

4. Settlement and Compromise

In situations of severe financial hardship, it may be possible to negotiate a settlement with the loan servicer or the Department of Education. This involves offering a lump-sum payment that is less than the total outstanding balance in exchange for the loan being considered satisfied.

  • Considerations: Settlements are difficult to obtain and often require demonstrating extreme financial distress. They also have tax implications, as the forgiven amount may be considered taxable income.

Frequently Asked Questions (FAQs) About Parent PLUS Loan Relief

Here are some frequently asked questions to further clarify the options and potential pitfalls of Parent PLUS loan relief:

1. Can I transfer my Parent PLUS loan to my child?

Unfortunately, no, you cannot directly transfer a Parent PLUS loan to your child. These loans are legally the parent’s responsibility. The only way for your child to assume the debt burden indirectly is to provide you with financial assistance to make the loan payments.

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

Both forbearance and deferment allow you to temporarily postpone your loan payments. Deferment is typically granted for situations like economic hardship or unemployment, while forbearance is often used for more general financial difficulties. During both forbearance and deferment, interest continues to accrue on your loan, increasing the overall amount you owe.

3. Does consolidating my Parent PLUS loans affect my interest rate?

Yes, consolidating your Parent PLUS loans into a Direct Consolidation Loan results in a weighted average interest rate of the loans being consolidated, rounded up to the nearest one-eighth of one percent. While this doesn’t necessarily decrease your interest rate, it can simplify your loan management by combining multiple loans into a single one.

4. What happens to my Parent PLUS loan if my child is deceased?

If the student for whom the Parent PLUS loan was taken out dies, the loan is eligible for discharge. You will need to provide documentation, such as a death certificate, to your loan servicer to initiate the discharge process.

5. Can I get a refund of payments made on my Parent PLUS loan if it’s later discharged?

Generally, no. Refunds are typically not provided for payments made prior to the discharge of a Parent PLUS loan.

6. How does divorce impact my responsibility for Parent PLUS loans?

Divorce does not absolve a parent of their responsibility for Parent PLUS loans. The loan remains the legal obligation of the parent borrower, regardless of any divorce decree stipulations.

7. What is the current interest rate on Parent PLUS loans?

The interest rate for Parent PLUS loans is determined by the loan disbursement date and is fixed for the life of the loan. You can find the specific interest rate for your loan on the loan documents or by contacting your loan servicer. New rates are set each year.

8. How do I find my loan servicer for my Parent PLUS loans?

You can find your loan servicer by logging into your account on the Federal Student Aid website (studentaid.gov).

9. Are there any state-specific programs for Parent PLUS loan relief?

While less common than federal programs, some states offer loan repayment assistance programs (LRAPs) for individuals working in certain professions, such as teachers or healthcare providers. Check with your state’s higher education agency to see if any such programs are available.

10. What is the impact of Parent PLUS loans on my credit score?

Like any loan, Parent PLUS loans can impact your credit score. On-time payments can positively impact your score, while missed payments can negatively impact it. Defaulting on your Parent PLUS loan can severely damage your credit.

11. Can I refinance my Parent PLUS loan with a private lender?

Yes, you can refinance your Parent PLUS loan with a private lender. However, this means you’ll lose the federal loan protections and benefits, such as access to income-driven repayment plans and potential loan forgiveness programs. Carefully weigh the pros and cons before refinancing.

12. What are the tax implications of Parent PLUS loan forgiveness?

Under current law, any loan balance forgiven under the ICR plan may be considered taxable income by the IRS. This means you could owe federal and potentially state income taxes on the forgiven amount. Consult with a tax professional for personalized advice. However, there may be temporary exceptions due to ongoing legislative changes. Keep abreast of the latest tax regulations.

Navigating the complexities of Parent PLUS loan relief requires patience, diligence, and a thorough understanding of the available options. Don’t hesitate to seek guidance from a qualified financial advisor or student loan expert to develop a strategy tailored to your specific circumstances. While the process can be challenging, securing relief from burdensome Parent PLUS loans is often achievable with the right approach.

Filed Under: Personal Finance

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