Can a Parent PLUS Loan be forgiven?
The short answer is yes.
You’re not alone. Among the myriad of confusing steps along the journey of paying for college, the forgiveness of loans borrowed by parents to pay for their children’s education is one of the most perplexing. It may also be one of the most critical questions for many families. With undergraduate federal student loans capped at $31,000, far short of the total cost of most four-year colleges, parents are required to bear much of the borrowing responsibility for college, and many are left wondering if there are avenues available to them for debt relief.
Public Service Loan Forgiveness (PSLF), the federal government’s large-scale student loan cancellation program, which forgives remaining loan balances after ten years of on-time payments, does consider Direct PLUS Loans to be loans eligible for forgiveness under this program. Congratulations, parents! You can check off one box on your forgiveness eligibility checklist! However, as discussed in the previous post, 3 Keys to Federal Student Loan Forgiveness, having a qualified loan is just one of the three main requirements for getting your college loans forgiven.
You must also be working full-time for a public service organization. If you’re employed by a government agency or a non-profit organization, such as a school or hospital, hats off to you! You can check box number two!
The final basic requirement to qualify for PSLF is that you must be repaying your loan on one of a handful of qualifying repayment plans. Eligible repayment plans include Standard Repayment, Pay As You Earn Repayment (PAYE), Revised Pay As You Earn Repayment (REPAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). The Standard Repayment Plan repays your full loan balance within ten years, leaving no debt to be forgiven, so is not your best bet for accessing forgiveness. Utilizing an income-driven repayment plan—PAYE, REPAYE, IBR, or ICR—is the key to maximizing forgiveness opportunities, but guess what? All four income-driven repayment plans prohibit the repayment of a Parent PLUS Loan under these plans. Uh-oh. There goes the final box on your forgiveness checklist, seemingly leaving no possibility for getting your PLUS Loans forgiven under PSLF.
But don’t despair, parents! You may have noticed there are a couple of paragraphs remaining in this blog post, because this is not, in fact, the end of the story. There is actually a work-around that allows parent loans to be forgiven under PSLF, but it can be a little tricky, so be sure to follow these steps to open up the possibility of PLUS Loan forgiveness:
- Consolidate your PLUS Loans into a Direct Consolidation Loan. While Parent PLUS Loans are ineligible for any of the income-driven repayment plans, Direct Consolidation Loans which include Parent PLUS Loans can, in fact, be repaid under one income-driven plan: Income-Contingent Repayment (ICR).
- Choose ICR as your repayment plan. Monthly payments will be capped at 20% of your discretionary income, which must be documented annually.
- Submit the Employment Certification Form annually or with job changes. Though not required, this form alerts the federal loan servicer that you intend to apply for forgiveness, and allows for tracking of your qualified payments. The servicer will alert you of any issues with your employment, loans, or repayment plan that would prevent you from qualifying for forgiveness.
- Make 120 on-time payments while working for a public service organization. Only payments made on since consolidating your loans count toward your 120 payment requirement. Prior payments on your PLUS Loans, even while working in public service, are not considered.
- Apply for Public Service Loan Forgiveness. The PSLF Help Tool available on studentaid.gov will get you started on the application, which you can then print and submit to your employer for certification.
As you can see, while it is possible to get a portion of your parent loans forgiven under the federal Public Service Loan Forgiveness program, it is not necessarily an easy task. It won’t happen automatically, and requires significant proactivity on your part. If you hold substantial PLUS Loan debt and are employed, or planning to work, in public service, it may behoove you to consider consolidating your loans and beginning to repay them under ICR in order to set yourself up for eventual forgiveness. Before making any significant financial moves, however, it is a good idea to utilize the federal student loan simulator in order to determine if, based upon your income, ten years of Income Contingent payments will leave any remaining balance to be forgiven. If not, your best bet may be to simply pay off your loans as soon as possible in order to minimize their total cost to you over time.
Also note that while you may have heard about a recent Trump administration proposal to eliminate Public Service Loan Forgiveness, the proposal would simply sunset the program for new student loan borrowers on or after July 1, 2021; prior borrowers would be grandfathered in. In addition, the proposal is just that—a proposal. In order to become law, it would need to pass both houses of Congress, so, at present, the PSLF program is very much a viable option for both student and parent borrowers.