Yes, borrowers with Parent PLUS Loans can have their debts forgiven after 10 years (or 120 eligible monthly payments) with the PSLF program.
Parent PLUS loans are discharged upon the death of the borrower (the parent). Upon your father's passing, you would need to submit a copy of his death certificate to the loan servicer to initiate the discharge process. Contact the loan servicer for guidance and assistance when the time comes.
How to Use the Double Consolidation Loophole: The key to using the double consolidation loophole is to consolidate each of your Parent PLUS Loans twice. In this scenario, a borrower can have as few as two Parent PLUS Loans.
Occasionally, excess funds are the result of a Parent PLUS Loan. If there are excess funds from a Parent PLUS Loan, it is refunded directly to the borrower.
A parent PLUS loan, or Direct PLUS loan, is a form of federal student aid. Once a student reaches federal student loan limits, parent borrowers will often take out a PLUS loan. A parent PLUS loan is an unsubsidized federal direct loan.
Defaulting on a Parent PLUS Loan can lead to serious consequences, including wage garnishment, credit score damage, and the loss of federal benefits. But you can recover through loan rehabilitation or consolidation with the U.S. Department of Education.
The $100,000 Loophole.
With a larger below-market loan, the $100,000 loophole can save you from unwanted tax results. To qualify for this loophole, all outstanding loans between you and the borrower must aggregate to $100,000 or less.
If approved, the student can pay off the Parent PLUS loan with their new loan and begin making payments on the new loan. Transferring a Parent PLUS loan to a student involves refinancing through a private lender. The student must apply for a new loan to pay off the Parent PLUS loan.
Your parent PLUS loan may be discharged if you (not the child) become totally and permanently disabled, die, or (in some cases) file for bankruptcy. Your parent PLUS loan also may be discharged if the student for whom you borrowed dies.
It may come as a relief to find out that, in general, you are not personally liable for your parents' debt. If they pass away with debt, it is repaid out of their estate. However, this means that debt repayment could diminish or eliminate assets and property you could have inherited from your parents.
The Education Department doesn't forgive loan balances for parents when they retire. It will keep sending bills and adding interest until you pay off the debt, die or become totally and permanently disabled, or qualify for one of the department's student loan forgiveness programs.
This includes all types of outstanding Federal Family Education Loan (FFEL) Program loans (because only Direct loans are eligible for SAVE). Outstanding parent PLUS loans will not be considered, but the initial balances of parent PLUS loans that are included in consolidation loans will be considered.
What happens to my parent's PLUS loan if my parent dies or if I die? Your parent's PLUS loan will be discharged if your parent dies or if you (the student on whose behalf your parent obtained the loan) die.
introduced the Parent PLUS Parity Act, bicameral legislation to ease the burden of student loan debt for parent borrowers who helped their children pay for their higher education. Nationwide, approximately 3.9 million borrowers have outstanding Parent PLUS loan balances totaling $112 billion.
For 2021, you can forgive up to $15,000 per borrower ($30,000 if your spouse joins in the gift) without paying gift taxes or using any of your lifetime exemption. (These amounts are the same as in 2020.) But you will still have interest income in the year of forgiveness. Forgive (don't forget).
A loan between family members, or even friends, isn't help—it's a trap for both parties. Whenever you loan money to a friend or family member, you've become their creditor. You're now a lender, and they're a borrower.
Gift tax limit 2024
The gift tax limit, also known as the gift tax exclusion, is $18,000 for 2024. This amount is the maximum you can give a single person without having to report it to the IRS. For married couples, the limit is $18,000 each, for a total of $36,000.
Parent PLUS loans can be eligible for Income-Contingent Repayment (ICR) and Public Service Loan Forgiveness (PSLF). However, they must be consolidated into a federal Direct Consolidation loan first. Your eligibility for these programs can depend on your income and the type of employer you work for.
Parent PLUS Student Loan Forgiveness
After consolidating with a Direct Consolidation Loan, Parent PLUS Loans can be forgiven through two programs: Income-Contingent Repayment (ICR) or Public Service Loan Forgiveness (PSLF).
Parent PLUS loans aren't a great deal. The interest rate is 2.55% higher than the rate on the direct student loan. This year it's 8.05%, compared with 5.5% for a student loan. Origination fees are higher too: 4.228%, meaning that borrowing $10,000 will cost you $423 upfront.
Can the loan be transferred to the student? No, a Direct PLUS Loan made to a parent cannot be transferred to the child. You, the parent borrower, are legally responsible for repaying the loan.
Parent PLUS Loan rates are fixed at 4.60 percentage points above the 10-year Treasury yield. The rate or the 10-year Treasury note on May 8, 2024 came in at 4.483%, so the new Direct Loan interest rate for the 2024-25 academic year is 6.53%, and the Direct Parent PLUS loan rate is 9.08%.
Your Last Resort: Private Loans
These loans have different repayment options than federal loans and will most likely cost you more in interest. Also, they may not have the same kinds of protections in case of disability or death as do the federal loans. Private loans generally should be taken out only as a last resort.