Parent PLUS Loan Forgiveness Programs are federal programs, like Closed School Discharge, that forgive loans for parents who co-signed for their children.
What Is Parent PLUS Loan Forgiveness?
The Parent PLUS Loan Forgiveness Program is a federal program that forgives the debt of parents who have co-signed on student loans. The program is available to any parent who has co-signed on a student loan, regardless of income or financial need.
To qualify for the program, parents must make 120 payments on their loans (which can be any combination of principal and interest payments). Once they have made the required payments, the remaining balance on their loan will be forgiven.
To be eligible for an Income-Contingent Repayment, ICR, the Department of Education must first consolidate your parent PLUS loan into a direct consolidation loan. Here is a guide to Parent Plus loan Repayment.
TABLE OF CONTENTS
What Are Parent PLUS Loans?
Why Should Parents Consider Parent Plus Loan Forgiveness?
What Repayment Programs are available for Parent PLUS Loans?
What Forgiveness Programs are available for Parent PLUS Loans?
The most common way to begin is by consolidating the loans. There are nine loan servicers in the federal government:
Cornerstone
FedLoan Servicing
Granite State
Great Lakes Educational Loan Services, Inc
HESC/EdFinancial
Mohela
Navient
Nelnet
OSLA Servicing
Some of these servicers will be exiting the industry by the end of the year. In most cases, the federal consolidation process takes between 30 and 90 days.
What Are Parent PLUS Loans?
The Parent PLUS Loan is a federal student loan available to parents and guardians of dependent students. This program allows parents to borrow money on behalf of their children at lower interest rates. The student then repays the loan while in school. After graduation, the student can apply for loan forgiveness. Parent PLUS loans can help pay for your child’s education, but they come with some risks.
PLUS loans are typically more expensive than other federal student loans, with higher interest rates and fees. And, if you can’t make your payments, your credit score could suffer.
According to research by the policy group New America, the average total student and parent debt for Parent Plus borrowers was approximately $38,000 from 2003 to 2016.
The government's interest rates, which are higher than those of private banks and have averaged more than 7% over the last decade, contribute to the rise in those figures. Furthermore, the government charges parents an additional cost of more than 4% of the overall loan amount, and the terms are harsh. According to the Congressional Budget Office, the government profits from Parent Plus loans.
Unlike student loans, getting a payment plan based on a family's income is difficult with Parent Plus. That means that if a parent loses their work or receives a large salary cut, they may be left with unaffordable monthly bills.
According to the most recent official predictions, one in every eight parents will fail on their debts. Even when administrators can detect from a family's financial records that they have little chance of repaying the loans, colleges and institutions continue to give them, and Congress authorizes them to borrow.
Why Should Parents Consider Parent Plus Loan Forgiveness?
Student loans are a major financial burden for many families. But there are Parent plus loan repayment options available that could help ease this burden. There are repayment options such as income-contingent repayment or Public Service Loan Forgiveness.
What Repayment Programs are available for Parent PLUS Loans?
ICR- The Income-Contingent Repayment plan offered by the U.S. Department of Education. It was established as part of the Higher Education Act of 1965. Under this program, eligible students who receive federal Pell Grants can borrow up to the full cost of attendance minus any other aid received. In return, the student must make payments based on his or her family’s adjusted gross income. If the student makes these payments for 20 years, he or she will be able to cancel out the remaining balance of the loan.
PSLF - (PSLF) is a federal program for certain public-sector workers, such as those in government and charitable organizations. After 120 qualified payments, this program forgives all federal student loan debt (typically 10 years).
Many graduates who are eligible for Public Service Loan Forgiveness choose income-driven repayment arrangements. Keep in mind that most of these plans aren't available to parents who take out parent PLUS loans. Instead, you'll almost certainly need to consolidate your federal debt and enroll into the Income-Contingent Repayment – if you stick to the regular 10-year repayment schedule, your loan total will be zero after 120 payments, leaving you with nothing to forgive.
Make sure you qualify for PSLF before attempting it. Unfortunately, many PSLF candidates who worked in public service for ten years and expected loan forgiveness had their applications turned down because they didn't meet all of the standards or didn't complete the proper paperwork each year.
You should also be sure that extending your loan terms with an ICR is worth the additional interest you'll pay. If you can make extra payments instead, you may be able to pay off your debt years sooner, which may be a better alternative for some borrowers.
Keep a watch out for any administrative changes to PSLF, in addition to making sure your loans are on the correct repayment schedule. The program has recently come under assault from detractors, with some Republican politicians suggesting that it be phased out entirely. While the initiative is now operational, it is not guaranteed to continue to offer discharge of student loans indefinitely.
What Forgiveness Programs are available for Parent PLUS Loans?
There are some circumstances in which your Parent PLUS Loan can be totally forgiven. If you (the borrowing parent) dies, or the child for which you took out the loan passes away (Death Discharge) or becomes totally and permanently disabled (TPD Discharge), your loan will be discharged. You can also have your loan discharged in rare cases if you declare bankruptcy.
A few other circumstances are also available:
Because the school closed, the child for whom you borrowed could not finish his or her program (Closed School Discharge).
The school made a mistake in certifying your eligibility for the loan (False Certification Discharge).
Your loan eligibility was falsely confirmed as a result of identity theft (False Certification Discharge).
The child for whom you borrowed money dropped out of school, but the school failed to reimburse you for the money you borrowed, as required by applicable rules and regulations (Unpaid Refund Discharge).