Can parents with Parent PLUS Loans participate in the SAVE Plan? Yes, With the right strategy.
While Parent PLUS Loans are not directly eligible for the Saving on a Valuable Education (SAVE) Plan, there is a specific strategy you can employ to gain eligibility. The details are more nuanced, and we’ll dive into them ahead, guiding you through your options and what steps to take.
Ahead, we’ll cover Parent PLUS Loan eligibility for the SAVE Plan.
Are Parent PLUS loans Eligible for the SAVE Plan?
No, Parent PLUS Loans are not eligible for the Saving on a Valuable Education Plan. This income-driven repayment plan, introduced by the Biden administration, targets borrowers with federal student loans made directly by the government for their own education. While the new SAVE Plan offers many benefits, such as income-based repayments and loan forgiveness, it specifically excludes Parent PLUS Loans.
The best repayment option you, as a parent borrower, can qualify for using the normal Direct Consolidation Loan process is the income-contingent repayment plan.
The ICR plan does offer many student loan borrowers relief, but not if you’re a high-earner (i.e., someone earning $80 thousand or more yearly). Your student loan payments may still be too expensive.
But all isn’t lost. There is a workaround, and this is where things get interesting.
The Workaround for SAVE Eligibility
So, you’ve learned that Parent PLUS Loans don’t qualify for the SAVE Plan. You’re probably wondering, “What now?”
This temporary strategy lets Parent PLUS Loans become eligible for more favorable income-driven repayment plans, effectively changing their status.
Here’s the catch—you need to act quickly.
The loophole will close its doors on July 1, 2025. Miss this window, and you’ll be back to square one, limited to less favorable student loan repayment options.
How to Get into the SAVE Plan If You Already Consolidated
If you’ve already consolidated a Parent PLUS Loan, don’t despair. You may not be locked out of the SAVE Plan.
For those with a Parent PLUS consolidation loan under the Federal Family Education Loan (FFEL) Program, a single additional consolidation could make you eligible for SAVE, sidestepping the complexities of the double consolidation loophole.
But if you’ve used a Direct Consolidation Loan to pay off Parent PLUS Loans, the path to SAVE requires borrowing another federal student loan. Once you have that new loan, you should be allowed to use the double consolidation process to switch to the SAVE Plan.
You can consolidate for free on the Federal Student Aid website, StudentAid.gov.
One of the most significant changes introduced by the SAVE Plan is its impact on monthly payments. By adjusting the discretionary income limit from 150% to a generous 225% of the federal poverty line, the SAVE Plan offers substantial relief to borrowers, even eliminating payments for those below certain income thresholds.
The new plan also offers a 100% subsidy for unpaid interest, meaning the U.S. Department of Education will wipe out the accrued interest every month.
Here’s a comparison to help you understand how SAVE plan benefits stack up against other popular IDR plans:
Monthly Payment Calculation
Income Exemption Level
Loan Forgiveness Timeline
10% to 15%
150% of the poverty line
20 or 25 years
150% of the poverty line150% of the poverty line
150% of the poverty line
20 or 25 years
20 or 25 years
225% of the poverty line
10, 20, or 25 years
You can also use the Loan Simulator to estimate your payments under different repayment plans.
How to Access the SAVE Plan with Parent PLUS Loans
If you’re a parent borrower with PLUS Loans, you might be eyeing the benefits of the SAVE Plan. While Parent PLUS Loans don’t qualify for this plan outright, there are specific steps you can take to get there.
Step 1: Evaluate Your Current Loan Type: The path to SAVE depends on whether your Parent PLUS Loan is a Federal Family Education Loan (FFEL) or a Direct Loan. Knowing this will guide your next moves.
Step 2: Consider Loan Consolidation: If your Parent PLUS Loan is an FFEL, you may get into the SAVE Plan through a Direct Consolidation Loan. The process is more involved but still achievable for those with existing Direct Loans.
Step 3: Obtain a New Federal Student Loan (if needed): If you’ve already consolidated a Parent PLUS Loan using a Direct Consolidation Loan, you must borrow another federal student loan. This is necessary to use certain strategies that make you eligible for SAVE.
Step 4: Complete the Consolidation Process: Once you have all the required loans, head over to StudentAid.gov and complete the loan consolidation process. Read all the terms carefully.
Step 5: Enroll in an Income-Driven Repayment Plan: After successfully consolidating, apply for an income-driven repayment plan and enroll in the SAVE Plan. You can do this on the FSA site.
Step 6: Monitor Your Loan Status: Keep an eye on your loan statements and online accounts to confirm that your loans have been switched over to the SAVE Plan. If you experience any hiccups, contact your loan servicer immediately.
How Does the SAVE Plan Factor in With Parent PLUS Loans?
While Parent PLUS Loans are not directly eligible for the SAVE Plan, understanding the mechanics of this new plan can provide insights into what you’re missing out on—and what you could gain through alternative strategies, such as the double consolidation loophole.
For example, the higher income exemption could drastically reduce or even eliminate monthly payments for families falling under specific income thresholds.
Here’s a table that shows payment amounts under different repayment plans for a parent who is married, has a combined income of $180,000, and owes $300,000 in Parent PLUS loans
5. Extended Fixed
6. Extended Graduated
Can Parent PLUS Loans Qualify for the New SAVE Plan and PSLF?
While Parent PLUS Loans don’t automatically qualify for the SAVE Plan or Public Service Loan Forgiveness(PSLF), strategic maneuvers can unlock these options. To be PSLF-eligible, you must first apply for a Direct Consolidation Loan and then enroll in an IDR plan like income-contingent repayment or the SAVE plan if you use the loophole we mentioned earlier. Both are qualifying repayment plans for PSLF and IDR Forgiveness.
These forgiveness programs differ from Biden’s student debt cancellation plan, which the Supreme Court shut down a few months ago. Unlike that program, PSLF and income-based repayment forgiveness have remained unchallenged, signifying their likely longevity.
Other SAVE Plan Benefits
Upcoming IDR & SAVE Plan Changes
What You Need to Know
1. Streamlined IRS Tax Access
Grant us annual, secure access to your latest IRS tax returns to simplify the IDR application and recertification process.
2. Automatic Recertification
Auto-recertify your IDR plan annually with secure tax disclosure, keeping you on track without manual effort. Note: Launches in July 2024.
3. End of Interest Capitalization
Exiting most IDR plans after July 1, 2023, won't result in unpaid interest being added to your principal, except in the IBR Plan.
4. User-Friendly Application
The new application allows a quick, under-10-minute enrollment in IDR, with progress saving and tracking features.
5. SAVE Plan: Reduced Monthly Payments
The SAVE Plan substantially lowers your monthly payments by setting the income exemption at 225% of the poverty line, a significant increase from the previous 150%.
6. No Payments Under Certain Incomes
Earn $32,800 or less as a single borrower or $67,500 or less as a family of four and owe zero in loan payments under the SAVE Plan. Those above these income thresholds can save at least $1,000 annually.
7. Elimination of Unpaid Interest
After making a scheduled payment, any remaining interest on both subsidized and unsubsidized loans is eliminated. For example, if $50 in interest accrues and your payment is $30, the remaining $20 of interest is waived.
8. Exclusion of Spousal Income
Married borrowers filing taxes separately can now exclude spousal income, eliminating the need for spousal cosigning on IDR applications.
Key Considerations for Parent PLUS Loans
Higher Costs: Both the interest rate and origination fee for Parent PLUS Loans are higher than those for federal student loans.
Repayment Timing: Default settings start repayment 60 days post-disbursement. Communicating with your loan servicer is essential to defer payments until after your child graduates.
Unsubsidized Nature: Know that Parent PLUS Loans are unsubsidized, accruing interest during deferment and forbearance periods. This interest capitalizes —adds the interest to your principal balance — when the temporary pause on payment ends.
Path to PSLF: Once enrolled in an income-driven plan, you become eligible to pursue Public Service Loan Forgiveness.
Discretionary Income: The income level used to calculate your monthly payment in income-driven repayment plans. Your monthly payment amount under IDR Plans is based on your adjusted gross income, family size, and loan balance.
Loan Forgiveness: The cancellation of all or some part of your remaining balance. Forgiveness is tax-free under all student loan forgiveness programs through 2025.
Recertification: The annual process of submitting updated income and family size information to continue in an income-driven repayment plan.
Struggling with Parent PLUS Loan payments that feel more burdensome than a mortgage? You’re not alone. We’ve helped parents across America use the double consolidation loophole and other strategies to enter the SAVE Plan and find affordable payment options.
Don’t navigate this complex landscape alone—book a call with us today and take the first step toward financial relief.