Can Grad PLUS Loans Be Forgiven? Grad PLUS Loans are technically eligible for income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF), but those programs are not a guarantee. For starters, IDR plans typically take about 20–25 years to complete.
Direct PLUS Loans for Graduate or Professional Students These loans are eligible for PSLF without having to consolidate and can be repaid under any income-driven repayment plan the borrower qualifies for.
Fortunately, student loans aren't taxable, so you don't report student loans as income on your tax return, and you don't have to pay taxes on certain types of financial aid.
The school will first apply grad PLUS loan funds to your school account to pay for tuition, fees, room and board, and other school charges. If any loan funds remain, your school will give them to you to help pay other education expenses. Get more information about receiving aid.
Student loans
The portion of your federal or private student loan paid directly to the school for tuition won't qualify as income. However, depending on the credit card issuer, the remaining amount after paying your tuition may count.
Eligibility. Defaulted loans are not eligible for repayment under the SAVE, PAYE, or ICR Plans. Starting in summer 2025, defaulted Direct Loans will be eligible for the IBR Plan.
Any borrower with ED-held loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if the loans are not currently on an IDR plan. Borrowers with FFELP loans held by commercial lenders or Perkins loans not held by ED can benefit if they consolidate into Direct Loans.
Income-driven repayment disadvantages
Since you'll be repaying your loan for longer, more interest will accrue on your loans. That means you might pay more under these plans in the long run — even if you qualify for forgiveness. It's likely you'll pay off your loan before forgiveness kicks in.
Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school. PLUS loans can help pay for education expenses not covered by other financial aid.
Only loans that are part of the federal direct loan program, including grad PLUS loans, are eligible for PSLF. Private student loans aren't eligible. You must consolidate these other types of federal student loans to make them PSLF-eligible: Federal Family Education Loan Program (FFELP) loans.
More than $2,085 in total debt in collections or charged off in the past two years (before the date of the credit report); or. Default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of federal student loan debt in the past five years (before the date of the credit report)
Grad PLUS Loans are also eligible for income-driven repayment plans, which cap your monthly payments at a percentage of your income and can lead to loan forgiveness after a certain period.
Income-Based Repayment Plan Eligibility
If that amount is less than the monthly amount required under the standard 10-year repayment plan, that student would be eligible for IBR. You monthly payment will be 0$ if your AGI is less than 150% of the federal government's established poverty line of $12,880 in 2021.
The graduated repayment plan doesn't operate like an income-driven repayment (IDR) plan. If your income doesn't increase over time, you'll still be on the hook for the increased payments near the end of your plan. The graduated repayment plan is a good idea if: You're expecting a steadily increased income.
Under an income-driven repayment (IDR) plan, you may be eligible to have any remaining balance on your student loans automatically canceled or forgiven after 20 to 25 years, and for some borrowers, loans will be canceled in as little as 10 years!
After at least 20 years of student loan payments under an income-driven repayment plan — IDR forgiveness and 20-year student loan forgiveness. After 25 years if you borrowed loans for graduate school — 25-year federal loan forgiveness.
SAVE: Any borrower with qualifying student loans is eligible for this IDR plan. PAYE and IBR: The estimated payment you make for either of these plans has to be less than what you would pay on the standard repayment plan within a 10-year period. For PAYE, only loans disbursed after Oct. 1, 2011, are eligible.
If You Can't Afford Your Payments
Don't wait to contact your loan servicer to discuss options. An IDR plan could lower your payment. If your income drops (for example, if you become unemployed), your payment could be as low as $0 per month. You can request a temporary pause of payments (deferment or forbearance).
Under the IBR Plan, interest not covered by your monthly payment that you're responsible for paying will continue to accumulate and will be capitalized (added to your loan principal balance) if you no longer qualify to make payments based on income, or if you leave the IBR plan.
Loans are not taxable, so you don't report the loan on your tax return. You may claim an education tax credit if you use loan proceeds to pay school-related expenses (like tuition and fees) but not living expenses (like room and board).
Student loans add to your debt-to-income ratio
DTI includes all of your monthly debt payments – such as auto loans, personal loans and credit card debt – divided by your monthly gross income. Student loans increase your DTI, which isn't ideal when applying for mortgages.
Generally, you must include in gross income everything you receive in payment for personal services. In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options.