Falling behind on your Parent PLUS Loan payments puts you in a situation called ‘delinquency.’ If student loan delinquency continues for over 270 days, your loan status escalates to ‘default,’ with far-reaching consequences. To give this context, a startling 20% of Black Parent PLUS borrowers default, compared to just 5% of white borrowers.
Many parents are acutely aware of the domino effect that missed payments can have on their credit scores. While it’s worrisome, fortunately, delinquency won’t hit your credit report until you’ve missed payments for 90 days or more. But if this trend continues, you risk defaulting, which can severely affect your financial standing.
Beyond the credit score, there’s the harsh reality of wage garnishments and potential legal action. As of 2015, 40,000 disabled or retired Parent PLUS borrowers had their Social Security benefits partially withheld due to default on their loans.
Suppose you’re concerned about managing payments as they resume. In that case, you should know a temporary on-ramp period that lasts through September 30, 2024. This grace period offers relief by holding off on the worst consequences of nonpayment, such as negative credit reporting, for up to twelve months. Still, interest continues to collect on your loan, making it imperative to consider other repayment options.