Parent PLUS Loan Forgiveness: How it Works [2024]

• Parent PLUS Loan Forgiveness can help you reduce or even erase your federal student aid debt, making handling the costs of your child’s college education easier.

• Depending on your situation, Parent PLUS Loans can qualify for forgiveness through either the PSLF program or IDR plans like the ICR Plan.

• If you pass away, your Parent PLUS Loans will be forgiven, so your family won’t have to pay off the debt.

If you’re a parent struggling with the weight of federal student loan debt from Parent PLUS Loans, you’re not alone. These loans can feel like a heavy financial burden, especially as you plan for retirement or protect your family’s financial future.

The good news? Parent PLUS Loan Forgiveness is possible—and it could offer the relief you’ve been looking for.

In this guide, we’ll cover everything you need to know about Parent PLUS Loan Forgiveness, including:

• What Parent PLUS Loan Forgiveness is and how it can help reduce or eliminate student loan debt.

• Who qualifies for forgiveness, and what steps do you need to take?

• What happens if you pass away, and whether your family will be responsible?

• The best repayment options to manage your loans, especially as you prepare for retirement and aim to protect your financial future.

And if you’re worried about how these loans might affect your ability to retire or whether your family will inherit this debt, we have resources that cover those concerns too.

Check out our guides on the double consolidation loophole and what happens to Parent PLUS Loans when you retire to help you work through those challenges.

Related

• Are Parent PLUS Loans Forgiven After 10, 20, or 25 Years?

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

• Parent PLUS Loan Forbearance – Pros, Cons, and Alternatives

Parent PLUS Loan Forgiveness is a way for eligible borrowers—parents who took out Direct PLUS Loans to help their children pay for higher education—to have some or all of their loan balances forgiven.

This means that your remaining loan balance could be wiped away after meeting certain requirements, such as making qualifying payments or working in specific jobs.

But forgiveness isn’t automatic, and it’s not as simple as just applying for it. Parent PLUS Loan borrowers need to follow specific pathways to qualify for forgiveness.

The two main loan forgiveness programs are Public Service Loan Forgiveness and the Income-Contingent Repayment Plan, a type of IDR plan. Both can ease the financial burden for parents who have taken on this debt.

To qualify for Parent PLUS Loan Forgiveness, there are a few key pathways you can take, depending on your circumstances and employment status:

Public Service Loan Forgiveness

PSLF is designed for student loan borrowers who are employed full-time by a qualifying government agency or nonprofit organization. To be eligible for PSLF, you must:

• Eligibility: Work for a qualifying employer; such as a government organization or a nonprofit recognized by the U.S. Department of Education. Related: PSLF Qualifying Employers List

• Qualifying Payments: Make 120 qualifying student loan payments (around 10 years); while enrolled in a qualifying repayment plan, such as the ICR Plan.

• Payment Timeliness: Ensure all payments are made on time; and that you remain in good standing with your loan servicer.

If you meet these criteria, the remaining balance on your Parent PLUS Loan can be forgiven tax-free.

Many public servants, including teachers and social workers, have successfully used this program to manage their student loan repayment obligations.

Related

• PSLF Updates 2024

• Student Loan Forgiveness For Professors – PSLF Is The Top Choice

• Social Workers Qualifies for Student Loan Forgiveness

Income-Driven Repayment Plans

If you don’t qualify for PSLF, the ICR Plan provides another path to loan forgiveness. Here’s how it works:

• Eligibility: You must consolidate your Parent PLUS Loans into a Direct Consolidation Loan to qualify for the ICR Plan. This consolidation simplifies your loan structure, making payments easier to manage.

• How Payments Are Calculated: Your discretionary income determines your monthly payments. This can offer financial aid, especially for low-income borrowers. As you near retirement and move to a fixed income, such as Social Security, your payments may decrease, making the plan more manageable.

• Loan Forgiveness Terms: After 25 years of qualifying payments, any remaining loan balance is forgiven, providing a big relief for long-term debt management.

• Flexibility for Borrowers: The ICR Plan takes longer than PSLF but offers flexibility for borrowers who don’t qualify for public service forgiveness.

As part of a broader personal finance strategy, this plan can help you manage your debt while securing long-term cancellation of your remaining loan balance.

1. Being on the wrong repayment plan

Make sure you’re enrolled in a qualifying repayment plan, such as ICR, or use double consolidation to access better plans like SAVE or IBR. For details on eligible plans, refer to studentaid.gov to verify with your loan servicer.

Payments made under plans like Graduated or Extended Repayment don’t count toward forgiveness, so verify your plan with your loan servicer to avoid setbacks.

2. Missing or late payments

3. Refinancing for a lower interest rate

Refinancing your federal student loans with a private lender may lower your interest rate, but it comes with major downsides.

When you refinance, your loans become private student loans, meaning you lose access to federal protections like income-driven repayment plans and loan forgiveness programs.

Additionally, refinancing often depends on your credit history, and a poor credit score could result in higher interest rates than anticipated.

If you’re concerned about what happens to your Parent PLUS Loans if you pass away, the good news is that these loans are typically discharged upon the death of the borrower. This means that if you—the parent—pass away, your loan balance is forgiven, and your family won’t be responsible for repaying the debt.

In some cases, if the student for whom the loan was taken out passes away, the loan may also be discharged. For more detailed information on this topic, we have a full guide that explains what happens to Parent PLUS Loans when a borrower passes away, which you can check out.

Another common concern is whether your loan balance will keep growing over time due to unpaid interest, especially if you’re making income-driven payments that don’t fully cover the interest.

• Under plans like ICR and IBR, unpaid interest can accrue, causing your balance to increase over time.

• The SAVE plan offers a key benefit: an interest waiver that prevents unpaid interest from adding up if your monthly payment doesn’t cover the full amount of interest.

In terms of spouse or family responsibility, rest assured that unless your spouse cosigned the loan (which is rare for federal loans like Parent PLUS), they won’t be responsible for repaying your debt.

• Your home or other assets won’t be taken to satisfy the loan balance.

• This should help ease concerns about protecting your family’s financial future.

Finally, while your spouse or family won’t inherit your debt, it’s worth noting that forgiveness under some plans can lead to tax implications.

For example, PSLF forgiveness is tax-free, but forgiveness under ICR may be considered taxable income.

Consult a tax professional to understand how forgiveness might affect your taxes, especially if you’re on an income-driven plan.

President Joe Biden has yet to forgive Parent PLUS Loans, despite approving over $167 billion in student debt relief for 4.75 million Americans through various programs and executive actions.

While his administration has taken steps to provide targeted federal student aid relief, broad forgiveness for Parent PLUS Loans remains uncertain.

For the latest updates on Biden’s student loan forgiveness plans, including how Parent PLUS Loans may be affected, check out our monthly updated guide on Biden student loan forgiveness.

One-time Account Adjustment

The one-time adjustment offers Parent PLUS borrowers credit toward forgiveness based on time spent in repayment, forbearance, or deferment.

This adjustment is part of broader efforts by the Department of Education to help borrowers, similar to expanding access to Pell Grant funding for undergraduate students.

Although the qualifying deadline ended on June 30, 2024, the Department of Education is still working to apply for these credits, which could bring many borrowers closer to forgiveness.

Biden’s “Plan B” Forgiveness and Hardship Discharge Program

The administration has proposed broad forgiveness under Plan B, including waiving unpaid interest and forgiving debt for long-term borrowers. But, these proposals are currently facing stiff litigation in the Supreme Court.

The proposed hardship discharge program, which could provide relief for Parent PLUS borrowers in financial distress, is also facing legal challenges.

Given the ongoing litigation, it’s unclear whether these programs will ultimately be implemented.

Potential Future Legislation

One promising development is the Parent PLUS Parity Act, which aims to expand relief options for Parent PLUS borrowers. If passed, this legislation would:

• Make parent borrowers eligible for more income-driven repayment plans.

• Provide relief if their child qualifies for Public Service Loan Forgiveness or Total and Permanent Disability discharge.

• Offer new relief options for parents facing financial hardship.

The future of Plan B and other proposed programs is uncertain, but the one-time adjustment and potential legislation like the Parent PLUS Parity Act provide a clearer path for many Parent PLUS borrowers.

Parent PLUS Loan Forgiveness is possible, but the process can be confusing. Whether you’re looking at Public Service Loan Forgiveness, Income-Contingent Repayment, or waiting for new plans like Biden’s “Plan B” or the Parent PLUS Parity Act, taking timely action can help ensure you’re on the right track.

Every borrower’s situation is different, and choosing the right option can save you time, money, and stress. If you’re not sure which option is best for you, our student loan lawyers are here to help.

Book a call with our student loan experts today for clear advice and make the best choice for your financial future.