The Parent Plus loans she had taken out for her daughter are barred from the government's most inexpensive repayment plans. “It's abusive,” Lloyd, who lives in Detroit, said of Parent Plus loans, a program with $111 billion in outstanding debt held by 3.7 million people. “The interest rates are predatory.
Parent PLUS loans can be a good alternative to private student loans because they offer more flexible repayment options. But Parent PLUS loans can be costlier than other options, and consequences are harsh for default, including the potential for wage and Social Security garnishment.
In addition, parent PLUS loans aren't eligible for some other types of federal student loan forgiveness programs. To get around this, some borrowers go through two or more federal consolidations to hide the origin of the loans, then request an IDR plan. This process is often called the double consolidation loophole.
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.
Parent PLUS Loans typically have higher interest rates than a student's federal student loans. This means that over the life of the loan, you could end up paying significantly more in interest with a Parent PLUS Loan compared to a federal student loan taken out by a student.
If you're still making payments on your Parent PLUS Loan after 25 years of on-time payments (for a total of 300 payments), the remaining balance of your loan will be forgiven.
In November 2022 the plan was stopped by an appeals court in Texas. The ruling included an injunction that stopped the forgiveness plan from moving forward. In 2023, Supreme Court ultimately blocked this forgiveness plan, leaving borrowers looking elsewhere for relief.
Parent PLUS loans account for $111 billion
Currently, 3.7 million parents have $111.3 billion in Parent PLUS loans outstanding. The average parent PLUS loan is roughly $30,000. Parent PLUS loans also come with an interest rate of more than 8%, compared with 5.5% for undergraduate student loans.
If you have a parent PLUS loan, you can only get student loan forgiveness through Public Service Loan Forgiveness or the Income-Contingent Repayment plan, and borrowers must meet certain requirements for each option, such as making 120 payments or working for a qualifying employer.
Based on the information from Federal Student Aid, as of 2022, the average Parent PLUS Loan debt is $29,528. Although that might not sound like a huge amount, it depends on the parent's income.
There is no forgiveness available to Parent PLUS Loan borrowers looking to retire. Remember that Parent PLUS Loan forgiveness is only possible through the Income-Contingent Repayment Plan or PSLF after first consolidating your Parent PLUS Loan into a federal Direct Consolidation Loan.
Parent PLUS loan borrowers can consolidate into a Direct Consolidation Loan, even without another loan, and have access to Income-Contingent Repayment (ICR).
You cannot reduce or decline your Federal Direct Parent PLUS Loan on myUCF. Please complete the online Loan Adjustment Form from the Financial Aid Forms website.
Repaying a Parent PLUS loan is the legal responsibility of the borrower – the parent. While you may ask your child to contribute to repayment, it is ultimately your responsibility.
But when it comes to student loan debt and divorce, the person who took out the loan is typically responsible for paying the loan, even in divorce. Only one of the spouses can sign the promissory note on Parent PLUS Loans, so technically that's who is responsible for the student loan in the case of divorce.
If you took out a federal parent PLUS loan for your child's education, you don't have to start paying it back right away. Parent PLUS loan deferment is available up until six months after your child graduates or drops below half-time enrollment. Interest will accrue on the loans during a deferment.
Federal Parent PLUS Loans are forgiven when the parent borrower dies or when the child they borrowed the loan for dies. The U.S. Department of Education won't go after the surviving spouse or any other family member to repay the debt.
Income-Contingent Repayment is the only income-driven repayment plan parent PLUS loan borrowers can use. To be eligible, you must first consolidate your parent PLUS loans. Switching to Income-Contingent Repayment could lower your payments significantly if you qualify.
Standard repayment plan: Pay off your loan by making fixed monthly payments for 10 years. Graduated repayment plan: Start with smaller payments, then have your payments gradually increase during the 10-year repayment period. Extended repayment plan: Fixed or graduated payments for 25 years.
Here's the average debt balances by age group: Gen Z (ages 18 to 23): $9,593. Millennials (ages 24 to 39): $78,396. Gen X (ages 40 to 55): $135,841.
A consumer's age may also influence how much debt they carry on their credit card accounts. According to the most recent Transunion data from Q1 2023, those aged 40-49 had the highest average credit card balance of $7,600. The age group with the lowest average credit card balance was those under 29 at $2,900.
Parent PLUS Loan interest rates and fees are high
Parent PLUS loans have a fixed interest rate for the entire term of the loan. The origination fee on top of the loan is a percentage of the loan amount.
Transfer the Parent Loan to a Spouse or Child
Your spouse or child can transfer the Parent PLUS Loan into their name if they have a good credit score (e.g., 680+) and a steady income showing they can pay back the college debt plus their living expenses.
No, a Direct PLUS Loan made to a parent cannot be transferred to the child.
Consolidation is much faster, which may be important if you want to regain eligibility for federal student aid. However, the default will remain in your credit history. Do not consolidate Parent PLUS loans with other federal student loans.