Defer Parent PLUS Loans: How to Do It

You can defer Parent PLUS Loans while your child is in school or up to six months after graduation or if they drop to less than half-time enrollment. During this time you can pause your monthly payments. This option is specifically designed to provide financial flexibility for parents facing financial strain or other challenges.

However, deferring these payments can lead to a loss of credit toward loan forgiveness programs like Public Service Loan Forgiveness and income-based repayment plan forgiveness. So there are a few things to consider.

Ahead, we’ll break down both the considerations and the process to defer Parent PLUS Loans.

Related: How Does a Parent PLUS Loan Work

For Parent PLUS Loans, the repayment period begins on the date the loan is fully disbursed, and the first payment is due within 60 days after the final loan disbursement. However, parents have the option to defer repayment while the student for whom the loan was obtained is enrolled in school at least half-time and for an additional six months after the student graduates or drops below half-time enrollment.

If your loan payments are about to start or have already begun and you are facing financial strain, deferment is one of a few options to consider. Here’s what you should know.

Choosing to defer payments on your Parent PLUS Loan is an important decision that can impact your financial future. Consider these aspects to make an informed choice:

• Parent PLUS Loans accrue student loan interest during the deferment period, so it’s crucial to understand how this affects the total balance and therefore your go-forward monthly payments or repayment period as the total amount to be paid back after the deferment period may significantly increase. Unpaid interest can be capitalized, i.e., added to the principal balance, which can also result in paying interest on interest.

• Some loan forgiveness programs count periods of deferment towards their forgiveness schedule, while others do not. Depending on the specific program you’re enrolled in, deferment might delay reaching forgiveness milestones.

• Deferment does not directly affect the borrower’s credit score. However, it can indirectly impact the credit score, especially if the increased loan amount results in a higher credit utilization ratio or if the borrower defaults on the loan after the deferment period.

• Income-Contingent Repayment Plan: Explore options like income-contingent repayment (ICR – which is a type of income-driven repayment) which could lower your monthly payment. The ICR caps monthly loan payments at 20% of discretionary income or what one would pay on a fixed 12-year repayment plan, whichever is less.

• Extended Repayment Plan: This form of repayment extends the loan term to up to 25 years, effectively reducing the monthly payment amount.

• Graduated Repayment Plan: Under this plan, the payments start out low and then increase, generally every two years. This is a good option for borrowers who expect their income to increase over time.

• Refinancing: Refinancing parent PLUS loans with a private lender can potentially lower the interest rate and monthly payment. However, this option should be considered carefully as it eliminates access to federal loan protections including deferment, forbearance, and income-driven repayment plans.

• Loan Forgiveness Programs: Although rare, some Parent PLUS loans qualify for Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness. However, the requirements for these programs can be quite strict.

• Interest-Only Payments: If reducing the balance of the loan isn’t currently feasible, making interest-only payments can prevent the loan from growing and keep it in good standing.

If those payments are still too high, check out our comprehensive guide on Parent PLUS Loan Double Consolidation Loophole for advanced techniques, which can lead to more favorable repayment terms.

In this scenario you must create consolidation loans and when you do you become eligible for many additional programs including Biden’s SAVE Plan – a favorable income-driven repayment plan – that can offer much better loan repayment terms.

Is Deferment Right for Your Parent PLUS Loans?

• Understand your unique situation, such as temporary financial hardship, to determine whether deferment is the right choice.

• Weigh deferment against alternatives like refinancing or borrowing private student loans. Consult a financial aid or FAFSA advisor if needed.

When to Resort to Loan Deferment?

Parent PLUS loan deferment can be a viable option when the borrower is unable to make the required payments, particularly when the student for whom the loan was taken out is still in school at least half-time or just after they graduate.

Deferment can provide temporary financial relief.

However, it’s crucial to remember that interest continues to accrue on these loans during deferment which can increase the total cost of the loan in the long run. Therefore, this option should be weighed carefully, after exploring other possibilities such as Income-Contingent Repayment plans or potentially refinancing.

How to Manage Payments During and After Deferment?

• Create a budget that considers monthly payments during and after deferment to maintain financial stability.

• Use Parent PLUS Loan-specific strategies for effective loan repayment.

Related: Do Parent PLUS Loans Affect Getting a Mortgage?

How to Keep Interest in Check if You Defer Payments

• Find out about the loan interest rate applied to your Parent PLUS Loan to anticipate how the balance will grow.

• Consider making interest-only payments to prevent interest from capitalizing, or explore refinancing options with a private lender.

• Speak with a financial aid advisor to weigh refinancing, especially considering the potential loss of federal benefits like income-driven repayment plans.

Related: Parent PLUS Loan Repayment Options

Unlike some other loans, interest does accrue during the deferment period for Parent PLUS Loans. Since all Parent PLUS Loans are unsubsidized, the federal government does not cover any of the loan interest that accrues on the outstanding loan balance during the deferment period.

Here’s what you need to know about deferment for Parent PLUS Loans:

• Deferment Option: It’s optional and allows you to delay payments while your child is enrolled at least half time, and for another six months after graduation, dropping below half time enrollment, or withdrawal.

• Financial Flexibility: Specifically designed for parents facing financial strain or other challenges. Interest will continue to accrue, and if unpaid, will be capitalized or added to the total loan balance.

• Reason to Consider: If you’re facing financial strain or challenges while your child is in school, deferment temporarily halts payments until six months after your child’s graduation or drop to less than half time enrollment.

• Parent Going to College: The U.S. Department of Education will allow parent PLUS Loan borrowers to defer their student loans while the parent returns to school on at least a half time basis.

If you’ve ever confused the terms deferment and forbearance, you’re not alone. They both offer a way to pause student loan payments, but they have distinct meanings. Here’s how they differ for Parent PLUS Loans:

• Qualifying Events for Deferment: Deferment is specifically linked to certain situations, such as your child being enrolled at least half time in an eligible school. Forbearance, on the other hand, may be granted for various financial hardships or other personal reasons. Knowing the criteria for each can guide your decision.

• Duration of Deferment vs. Forbearance: Deferment for Parent PLUS Loans aligns with your child’s school enrollment and extends up to six months after graduation or dropping below half-time. Forbearance is typically shorter, up to 12 months, but can be renewable. The different durations may influence your choice based on your unique situation.

Does your Parent PLUS Loan qualify for deferment? To quickly determine your eligibility, check the following:

• Is your child enrolled at least half time at an eligible school?

• Is the loan a Parent PLUS Loan and in good standing?

• Is the request being made during your child’s enrollment or within the six-month grace period after they leave school?

Applying to defer Parent PLUS Loans doesn’t have to be daunting. Here’s a step-by-step guide to simplify the process:

1. Determine your eligibility: Parent PLUS Loan deferment is available while your child is enrolled at least half time at an eligible school. “Half time” means your child is meeting the school’s requirements for half time enrollment. Deferment also extends for another six months after your child graduates, drops below half time enrollment, or withdraws from school. This provides a buffer during their transition.

2. Obtain the deferment request form: You can download the Parent PLUS Borrower Deferment Request form from the Federal Student Aid website or contact your federal student loan servicer to request the form. Download: Parent PLUS Loan Deferment Request

3. Complete the deferment request form: Fill out the required information on the form, including your personal details and the deferment eligibility criteria that apply to your situation.

4. Submit the deferment request form: Send the completed form to your loan servicer. The contact information for your federal student loan servicer can be found on your loan statements or by logging into your account on the federal student loan servicer’s website.

5. Continue making payments: Keep making payments on your Parent PLUS Loan until you receive confirmation from your federal student loan servicer that your deferment has been granted.

6. Consider interest-only payments (Optional): While deferment is in place, you may choose to pay only the interest that accrues on your loan. This can prevent the interest from being added to your loan balance, potentially saving you money in the end. Contact your federal student loan servicer to set up interest-only payments.

Online vs. Offline Methods

• Offline: The primary method involves downloading, completing, and mailing the request form to your servicer.

• Online: Some servicers might offer online submission. Contact them to find out about this possibility.

Finding Your Loan Servicer

• Online: Log in to StudentAid.gov and look under “My Loan Servicers.”

• By Phone: Call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.

Parent PLUS Loan deferment is specifically tailored to parent loans in certain situations:

• Child’s Enrollment Status: Available for parents who have borrowed on behalf of their child enrolled at least half-time, and continues for six months after graduation, withdrawal, or dropping below half-time.

• Loan Status: Must be in good standing and not in default.

• Loan Type: Applies only to Parent PLUS Loans.

• May Apply: During active enrollment. Keep in mind that there is no Parent PLUS Loan grace period.

• May Not Apply: If not meeting minimum enrollment requirements or if the loan is in default.

• Frequency of Requests: Deferment can be requested as long as the eligibility criteria are met, with no strict limit, and is tied to the child’s school enrollment status.

Parent PLUS Loan deferment can be a vital tool for financial flexibility during your child’s education.

Understanding the process, eligibility, and implications ensures you make informed decisions. Whether you’re a parent loan borrower or a student, this guide provides essential insights.

Don’t hesitate to reach out to your student loan servicer or a financial aid advisor for personalized assistance.

 

Parent PLUS Loan deferment can be a vital tool for financial flexibility during your child’s education.

Understanding the process, eligibility, and implications ensures you make informed decisions. Whether you’re a parent borrower or a student, this guide provides essential insights.

Don’t hesitate to reach out to your loan servicer or a financial aid advisor for personalized assistance.