Who Pays Back Parent PLUS Loans?

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Stanley Tate

#1 Student Loan Lawyer

Updated on November 3, 2022

Parent PLUS Loans are the responsibility of the parent who signed the master promissory note, but the student can take over the payments by refinancing the loans into their name.

The parent who borrowed the Parent PLUS Loan is legally responsible for paying it back. The student loans will stay in their name until it’s paid in full, the borrower qualifies for loan forgiveness, or the other parent or child refinances them into their name.

Payments on Parent PLUS Loans start two months after the U.S. Department of Education disburses. The borrower can start repaying right away, or they can defer repayment while their child is an undergraduate student. The deferment will pause the payments, but interest will continue to be added to the loan balance during that time. At the end of the deferment period, the loan servicer will add the accrued interest to the principal balance you borrowed, which will cause you to pay more interest over the life of the loan.

Related: What Happens to Parent PLUS Loans When the Parent Dies?

How to pay back Parent PLUS Loans

Parent PLUS loans have higher interest rates and charge more fees than other federal student loans. On top of that, they have worse repayment options and protections.* Still, there’s room to choose a strategy that works for you.

Parent PLUS Loan borrowers are eligible for four repayment plans:

  • 10-Year Standard Repayment

  • Graduated Repayment

  • Extended Repayment

  • Income-Contingent Repayment

You’ll pay off parent loans the fastest and save the most money with the Standard Plan. But your payments will be higher than if you moved to the Graduated or Extended plans, both of which allow you to stretch the repayment period from 10 to 20+ years.

The Income Contingent Repayment Plan is a good option if you have a loan balance. It caps your monthly payments at 20% of your discretionary income and puts you in a position to get your loan balance forgiven after 20 years of payments or after a decade of working full-time in public service.

Note: Before switching to the ICR plan, you’ll need to consolidate your Parent PLUS Loans into a Direct Consolidation Loan. You can do that on the Federal Student Aid website, StudentAid.gov.

Related: How to Consolidate Parent PLUS Loans

Use the Loan Simulator to estimate your monthly payment amount under the different loan repayment plans. Here are other options if you can’t afford Parent PLUS Loan payments.

* The school determines the loan amount for Parent PLUS Loans based on the cost of attendance. That cost is frequently higher than what most students pay. Combine that with the rising cost of college, and parents end up borrowing a lot more in Direct Plus Loans than they intended when they first got their child’s financial aid package.

Loan forgiveness options

Parent borrowers can get their student loans written off if they make payments for at least 20 years or work for the government or a nonprofit organization. They also can get $10-20 thousand cleared from their balance under President Biden’s student loan forgiveness plan.

  • Income-Driven Repayment Plan Forgiveness. The federal government promises to forgive your remaining student loan debt — including any Parent PLUS Loans you borrowed — after you’ve made payments for at least 20 years under one of its income-based plans. You can qualify for this relief opportunity for a limited time even if you’ve never switched to an IDR plan. The Education Department announced it would use a one-time waiver and account adjustment to credit borrowers toward IDR Forgiveness for any payment they made under any plan and for time spent in long forbearances and certain deferments. Read more about the IDR Waiver.

  • Public Service Loan Forgiveness. You can get your Parent PLUS Loans forgiven tax-free after working for a qualifying government or nonprofit employer for 10 years. To enroll in the PSLF Program, you’ll need to consolidate your parent loans into a Direct Loan, switch to the ICR plan, and make 120 student loan payments.

  • Biden’s forgiveness plan. After months of debate, President Biden took executive action and announced he would cancel up to $20 thousand in student debt for Pell Grant recipients and up to $10 thousand for individuals who made under $125 thousand in 2020 or 2021. Parents could get $20 thousand if they received a Pell Grant for their college education. Their child could get the same amount if they got the grant as part of their financial aid package. You can apply for the cancellation on StudentAid.gov. Read more about Biden’s $10k forgiveness.

Learn More: Can Parent PLUS Loans Be Forgiven?

Refinance options

Student loan refinancing makes sense if you don’t work in public service or would pay off your loans before they’d be forgiven. Depending on your credit score, you may be able to get a lower interest rate and more favorable repayment terms. Keep in mind that only private lenders offer refinancing, which means your parent loans would no longer qualify for federal benefits like flexible repayment plans, extended forbearance options, and any student loan forgiveness programs.

You can also explore transferring the loan into your child’s name or their other parent’s name. Doing that would shift the responsibility for the Parent PLUS Loans from you to them.

Use an online marketplace such as Credible to shop with multiple lenders simultaneously without a hard credit check. The lender will only perform a hard pull on your credit report if your application is approved.

Learn More: How to Get Parent PLUS Loans in Student’s Name

Bottom Line

The parent who borrowed the Parent PLUS Loan is responsible for paying it back. The government offers different repayment options and forgiveness programs to help ease the burden of repayment. If those don’t work for your situation, consider refinancing into a private student loan. Depending on your credit history and personal finances, you may be able to get a lower variable or fixed interest rate and better loan terms.

UP NEXT: Who’s Responsible for Parent PLUS Loans in a Divorce?

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