The U.S. Department of Education offers a direct loan program that’s specifically for parents of college students called Parent PLUS loans. Like other federal student loans, there are a few special circumstances in which parents may be eligible for loan forgiveness.
Learn more about how Parent PLUS loans work, how to qualify for loan forgiveness and other higher education borrowing tips for parents.
What Is a Parent PLUS Loan?
Parent PLUS loans are part of a federal loan program in which parents borrow funds to help pay for their child’s college expenses. Unlike other student loans, the parent takes on the full repayment obligation with Parent PLUS loans, explains Katherine Presutti, director of student financial aid at the University of Hartford.
“Upon the student’s graduation, the parent is then responsible for repaying that loan,” Presutti says.
What sets this apart from other federal student loan programs is that a credit history check is performed on the parent to make sure they don’t have adverse credit items like foreclosure or bankruptcies. However, the credit score doesn’t matter in the same way that it might for other types of borrowing since everyone gets the same interest rate.
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There’s also no cap on borrowing amounts like there is with other federal student loans. The limit for Parent PLUS loans is defined as the total cost of attendance at the school your child attends minus any other financial assistance your child receives.
As such, the principal balance can really pile up over the course of four years, warns Brent Shock, vice president of Enrollment Management and Student Success at Miami University.
“Parent PLUS loans should be talked about more in terms of people overborrowing,” Shock says.
In fact, based on a 2022 report by The Century Foundation using U.S. Department of Education data, median Parent PLUS debt is about $29,600, with many parents struggling to maintain payments and carrying balances for 20 years or more.
Are Parent PLUS Loans Eligible for Forgiveness?
For some parents, there may be opportunities for PLUS loan forgiveness, which can help alleviate a debt burden – especially as they reach retirement age. For example, Parent PLUS loan borrowers are among those who would benefit from the Biden administration’s plan to offer student loan forgiveness.
“If it holds, Parent PLUS loans can be forgiven up to $10,000 for individuals who make $125,000 or less, or couples who make $250,000 or less,” says Shock. If the student was a Pell Grant recipient, then the parent could have an additional $10,000 of debt erased, he adds.
Whether or not this plan moves forward, there are other potential opportunities for Parent PLUS loan forgiveness.
Public Service Loan Forgiveness. The Public Service Loan Forgiveness program is intended for borrowers who are employed full-time by a government agency or not-for-profit organization.
The process involves consolidating all of your Parent PLUS loans into a direct consolidation loan, and switching to the income-contingent repayment plan. In addition, you’ll have to make 120 on-time payments – or 10 years of monthly payments – on the loan before it’s eligible for forgiveness.
“The PSLF program has been fraught in terms of how slow the process has moved, but it has picked up speed,” said Shock. His advice is to stay patient and work closely with the servicer of the loan to see the process through.
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Income-contingent repayment. Another avenue for loan forgiveness is switching to the income-contingent repayment plan. The main benefit of this option is that it will make your monthly payment more affordable, as it is capped at 20% of your discretionary monthly income. The downside of this route is that you’ll have to pay for 25 years before the remaining debt is forgiven.
“As parents are considering which repayment plan to choose, extending the life of the loan does mean paying back more in interest. In the long run, you end up paying more that way,” said Presutti. However, she noted, many low-income families can significantly lower their monthly payment, and therefore may still have remaining debt 25 years later, so the forgiveness at that point can still be beneficial.
Death or disability. Parent PLUS loans are discharged in the event that the borrower becomes totally and permanently disabled or passes away. If the student for whom you borrowed dies, the loan will be discharged as well.
School closure. Another opportunity to have your Parent PLUS loan discharged is if the school your student is attending closes before they complete their program of study. The same goes for if the school falsely certified your loan eligibility or didn’t refund your loan money after the child dropped out.
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Should You Choose a Parent PLUS Loan?
Every family’s financial situation is different, so it’s important to understand all of your options.
“One thing COVID taught us is that the federal government will step in and assist families in a way that private lenders may not,” said Presutti.
For example, if the Biden administration’s loan forgiveness offer does clear the Supreme Court, only Parent PLUS borrowers who fall under the income limits will be eligible, and private loan borrowers will get no relief.
If you are someone who works for a government or nonprofit organization who can qualify for PSLF, then a PLUS loan is definitely something you should investigate.
That said, if you have a really good credit rating or make too much income to be eligible for loan forgiveness, private loans may be the better route. Private lenders allow students to borrow with a parent co-borrower, and may offer a better interest rate than the Parent PLUS loan, said Shock.
“It can be a good thing, but you have to be really careful because you’re outside of federal protections and working directly with a bank,” Shock added.