Double Consolidation Loophole Guide for Parent PLUS Loans (2025)

Current snapshot: Servicers are processing applications, but courts and policymakers could restrict the new loan’s access to cheaper IDR plans without warning. The June 30, 2025, deadline is on hold due to a court injunction. If that changes, we’ll update this notice.

The double consolidation loophole lets Parent PLUS borrowers access better income-driven repayment plans through a two-step consolidation process. Parent PLUS loans normally restrict borrowers to Income-Contingent Repayment (ICR), which typically has higher monthly payments compared to other income-driven plans.

Here’s how the loophole works:

1. Split Parent PLUS loans into two separate Direct Consolidation Loans.

2. Consolidate those two loans into one final Direct Consolidation Loan.

The final loan qualifies for Income-Based Repayment (IBR) and Pay As You Earn (PAYE), potentially reducing monthly payments by 30-70% compared to ICR. Previously, borrowers could also access the Saving on a Valuable Education (SAVE) plan, but it’s currently unavailable due to a court injunction.

This loophole leverages a regulatory gap the Department of Education has acknowledged—but never officially authorized.

Currently, the double consolidation loophole remains accessible due to a federal court injunction that blocks enforcement of the June 30, 2025 deadline.

Initially, the Department of Education’s July 10, 2023, Final Rule required all double-consolidation loans to be finalized by June 30, 2025. Under this rule, any Direct Consolidation Loan made after that date to repay a Parent PLUS loan would be limited exclusively to the ICR plan.

But the Eighth Circuit Court of Appeals issued a comprehensive stay in February 2025, halting enforcement of the entire 2023 IDR rule, including this specific deadline. Until this injunction is lifted, the June 30 deadline can’t be enforced.

This situation creates ongoing uncertainty for Parent PLUS borrowers due to:

• The unenforceable June 30 regulatory deadline.

• Potential new Congressional legislation restricting IDR access.

• Administrative policy shifts under the Trump administration.

Borrowers can still complete the double consolidation process, but eligibility for income-driven repayment plans remains uncertain pending the resolution of these political and legal developments.

Total Time Required: 12–16 weeks
Cost: Free
Required Resources: FSA ID, loan account details, recent tax returns, computer with internet access

Step 1: Verify Eligibility and Gather Documents

Time Required: 1–2 hours
Resources Needed: StudentAid.gov account, Parent PLUS loan information

Log in to your StudentAid.gov account and confirm you have Parent PLUS loans that haven’t previously been consolidated. If your loans were already consolidated once, you can still perform a double consolidation, but you’ll apply the strategy to your existing Direct Consolidation Loan.
Next, gather these documents:

• Loan account numbers

• Current servicer details

• Recent tax returns

• Active FSA ID (required for electronic signatures)

Step 2: Submit Two Initial Consolidation Applications

Time Required: 2–3 hours
Processing Time: 6–8 weeks
Resources Needed: Loan details, FSA ID, decision between online or paper application

Submit two separate Direct Consolidation Loan applications to split your Parent PLUS loans. Divide the loans approximately evenly; the precise split won’t affect the outcome.

Why use paper applications?

• StudentAid.gov restricts borrowers to one electronic consolidation application every six months, so both initial consolidations must be done on paper.

• Submitting both paper applications simultaneously helps speed up processing.

• All consolidations are handled by Aidvantage, regardless of your selected servicer.

Step 3: Wait for Initial Consolidations to Finish

Time Required: 6–8 weeks (waiting period)
Resources Needed: Patience, regular account monitoring

Monitor processing updates through your StudentAid.gov account. Aidvantage typically sends Loan Summary Statements within a few weeks of submission.

Carefully review these statements for:

• Errors

• Missing loans

Contact Aidvantage immediately if corrections are necessary. Wait until both initial consolidations are fully processed and appear as two separate Direct Consolidation Loans before moving forward.

Step 4: Apply for ICR on Both Loans (Risk Mitigation)

Time Required: 1 hour
Processing Time: 2–4 weeks
Resources Needed: Tax returns, proof of income

Before completing the final consolidation, proactively apply for the Income-Contingent Repayment plan for each of your two new consolidation loans via the IDR Plan Request Form.

Why this matters:

• Establishes IDR eligibility before potential Congressional changes.

• Provides a protective fallback: If current IDR options are terminated, borrowers already enrolled in ICR would likely be grandfathered into future repayment plans.

Step 5: Submit Final Consolidation and Choose an IDR Plan

Time Required: 0.5-1 hours
Processing Time: 6–8 weeks (consolidation), plus 2–4 weeks (IDR enrollment)
Resources Needed: Consolidation loan numbers (from Step 2), FSA ID, income documentation, tax returns

After your initial consolidations (and optional ICR enrollments) finish processing, submit your final Direct Consolidation Loan application online at StudentAid.gov/loan-consolidation. Select both consolidation loans from Step 2 and choose your preferred IDR plan during the application—typically IBR, PAYE, or SAVE, if available.

Here’s what happens next:

• Your final consolidation processes first (about 6–8 weeks).

• Once the consolidation is complete, your IDR application will begin processing automatically (typically an additional 2–4 weeks).

• Consider contacting Aidvantage once the consolidation is complete to confirm your IDR application is actively being processed.

Deciding whether to pursue double consolidation comes down to practical outcomes, not uncertainty paralysis.

Weigh these scenarios carefully:

• If you don’t pursue double consolidation, you’re stuck with potentially unaffordable Parent PLUS payments and no other income-driven options.

• If you pursue double consolidation but face unexpected restrictions, the worst outcome is that you end up in the ICR plan—the exact option you’d have without taking action.

The real risk is legislative action that could block access to all income-driven repayment plans. But enrolling in ICR during consolidation significantly reduces this risk, because current proposals would grandfather existing ICR borrowers into newer plans.

For most borrowers, especially those currently struggling with high monthly payments, the benefits of attempting double consolidation far outweigh the limited downside.

Originally, the Department of Education’s July 10, 2023, Final Rule included a grandfathering provision designed to permanently protect borrowers who completed double consolidation by June 30, 2025 (see “Borrower Eligibility for IDR Plans (§ 685.209(c)),” 88 FR 43835–43836).

Under that rule:

• Any borrower who finalized their double consolidation before July 1, 2025, would retain permanent eligibility for income-driven repayment plans beyond ICR—such as IBR, PAYE, and SAVE, subject to plan availability.

• These protections would apply based on the disbursement date of the final consolidation loan, not simply the application submission date.

Currently, the federal court injunction suspends enforcement of this deadline, making the grandfathering provision temporarily irrelevant. But the grandfathering rules could regain significance if the injunction is lifted, reinstating the June 30, 2025 deadline. Borrowers who complete consolidation during this period of uncertainty may still benefit from grandfathering protections if the original rule returns to effect.

High Confidence

Loan servicers are processing double consolidation applications normally, and Aidvantage continues managing consolidations centrally. The ongoing court injunction doesn’t impact your ability to consolidate your loans. Regardless of the legal and political situation, consolidations themselves remain unaffected.

Moderate/Low Confidence

The uncertainty lies in what happens after consolidation—specifically, whether you’ll have access to expanded income-driven repayment plans.

Under the original July 10, 2023, rule, consolidations disbursed after June 30, 2025, would be restricted exclusively to the Income-Contingent Repayment Plan. But this deadline is currently suspended due to a court injunction. The Department of Education acknowledges this suspension, but hasn’t clarified how repayment options will be handled once consolidations are finalized.

Adding to the confusion, administrative policy shifts from the Biden to Trump administrations may independently affect IDR eligibility, irrespective of the injunction.

In short, you can confidently consolidate your loans today, but your eventual repayment plan options remain uncertain until legal and political questions are resolved.

The timeline for resolving the current legal uncertainty is unclear, involving several complex moving parts without a definite end date.

• Ongoing Court Litigation: The lawsuit blocking the Department of Education’s July 2023 IDR rule has returned to the district court for review, and appeals could extend litigation for months or even years. The Eighth Circuit’s February 2025 ruling also raised broader questions about loan forgiveness under existing IDR plans (PAYE and ICR) further complicating the matter.

• Congressional and Administrative Actions: Independent of court proceedings, proposed legislation in Congress and administrative changes under the Trump administration could create additional restrictions or modifications to income-driven repayment plans.

• Recent Supreme Court Decision (June 2025): Adding to the confusion, the Supreme Court recently limited the ability of district courts to issue “universal injunctions”—rulings blocking federal policies nationwide rather than just for specific plaintiffs. It’s unclear whether this decision directly affects the Eighth Circuit’s broader injunction against the SAVE plan, further complicating the timeline for resolving the uncertainty.

If double consolidation becomes unavailable or restricted, Parent PLUS borrowers still have several viable strategies:

• Income-Contingent Repayment: Consolidating into ICR remains possible. While ICR payments might be higher than other IDR plans, they’re often lower than standard repayment, especially valuable if you expect your income to drop in retirement, when Social Security kicks in.

• Forbearance: Federal loans typically come with about three years of forbearance, allowing you to temporarily pause payments if ICR remains unaffordable.

• In-School Deferment: Returning to school can pause payments entirely through deferment, offering breathing room while potentially increasing future earning power.

• Extended or Graduated Repayment Plans: Switching to extended or graduated repayment plans can lower monthly payments in the short term. You can later switch to ICR if your income decreases significantly.

• Private Refinancing: If you have excellent credit, private refinancing may provide lower interest rates. But refinancing means forfeiting federal protections, including income-driven repayment and loan forgiveness, which could be critical if your financial circumstances change.

• Bankruptcy: Federal student loans have become somewhat easier to discharge through bankruptcy, thanks to recent changes by the Department of Justice and Department of Education via the attestation process. Although full discharge is still challenging and not guaranteed, a Chapter 13 bankruptcy may help you manage Parent PLUS loan payments and even earn credit toward Public Service Loan Forgiveness or IDR forgiveness during the repayment plan.

For most Parent PLUS borrowers facing unaffordable payments, the practical risk-benefit analysis clearly supports pursuing double consolidation.

• If you don’t act, you risk staying trapped in unaffordable payments—or potentially losing access to all income-driven repayment options entirely, depending on legislative changes.

• If you do act, the worst-case scenario is simply ending up enrolled in Income-Contingent Repayment (ICR), the baseline option you have anyway.

To protect yourself, follow this key risk-mitigation step: Enroll proactively in ICR during your consolidation process. This locks in your eligibility, providing essential protection against potential future legislative restrictions.

Given that the double consolidation timeline typically takes 12–16 weeks to complete, begin promptly rather than waiting for uncertain legal or political outcomes. Acting now preserves your chances of accessing better repayment plans later, while ensuring you have secure fallback protections already in place.

Parent PLUS Loans can be overwhelming, especially if you miss the double consolidation deadline. Without it, you might be left with payments that stretch your budget.

The process is time-consuming, and errors could mean losing access to more affordable income-driven repayment plans.

If you don’t know where to start or are worried about making mistakes, my team and I have successfully helped many families manage this process and unlock the best repayment options.

Book a call with us today to get started.

Additional Resources

• Create Your FSA ID – Set up your login to access federal loan services.

• Review Your Federal Loans on StudentAid.gov – Check your loan types and balances.

• Download the Paper Consolidation Application – Use this form for the first round of double consolidation.

• Start Your Consolidation Application Online – Submit your second round of consolidation after completing the first round.

• Loan Codes and Paper Application Instructions – Understand the codes and how to fill out the forms correctly.

• Apply for Income-Driven Repayment (Paper Form) – Lower your payments based on your income.

• Estimate Your Payments with the Parent PLUS Loan Calculator – See how different plans could affect your monthly payment.

Related reading:

• Can’t Pay Parent PLUS Loans? 6 Solutions to Take Control

• Can Parent PLUS Loans Be Consolidated With Student Loans?

• Benefits and Drawbacks of Consolidating Parent PLUS Loans