I just learned of a provision within the Federal Education Program that allows anyone who is determined to have a Permanent and Total disability to apply to have their college loans forgiven. This includes Parent Plus Loans that may have been taken out by parents to help fund a child's education.
To get TPD discharge, you must show that you have a disability that severely limits your ability to work, now and in the future. This can be a physical or a mental disability.
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.
Getting Parent PLUS Loans Forgiven Through PSLF
Essentially, parents can have their student loans forgiven through Public Service Loan Forgiveness (PSLF) that is typically geared to students who work in public service, but only if they jump through several hoops first.
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.
The federal government can potentially garnish your wages and Social Security benefits. But Parent PLUS loans do offer more flexible repayment options than most private loans, which can help borrowers better manage their debt obligation.
If a borrower dies, their federal student loans are discharged after the required proof of death is submitted. The borrower's family is not responsible for repaying the loans. A parent PLUS loan is discharged if the parent dies or if the student on whose behalf a parent obtained the loan dies.
A refund is issued to the parent-borrower 7-10 days after the loan has been disbursed to the student's account. The parent-borrow may elect to receive their refund via Digital Disbursement via Zelle or by Paper check. The default refund method will be via paper check.
If you're totally and permanently disabled, you may qualify for a discharge of your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation.
Statements or letters on a physician's/medical professional's letterhead stationary. Statements, records or letters from a Federal Government agency that issues or provides disability benefits. Statements, records or letters from a State Vocational Rehabilitation Agency counselor.
Starting in September 2021 and continuing quarterly after that, eligible borrowers identified as totally and permanently disabled through data matching with the Social Security Administration (SSA) will automatically have their federal student loans discharged.
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.
If you're a parent or graduate student seeking a Direct PLUS Loan, one of the requirements to qualify is that you must not have an adverse credit history. If your application is denied because of an adverse credit history, don't give up. You still have options.
Unfortunately, no. You, the parent, are legally responsible for repayment of the loan.
Parent PLUS Loans are eligible for total and permanent disability discharge if the parent borrower, not the student for whom you borrowed, is totally and permanently disabled. For more information on TPD eligibility: https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge.
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).
Key Takeaways. Parent PLUS loans can potentially be forgiven after 10 years under specific conditions, such as through the Public Service Loan Forgiveness (PSLF) program after consolidation into a direct consolidation loan. Parent borrowers must enroll in the Income-Contingent Repayment (ICR) plan to qualify for PSLF.
Qualifying disabilities include physical conditions (like MS, cancer, heart failure), mental health conditions (like severe PTSD or bipolar disorder), and other chronic conditions that significantly limit your ability to work for at least 60 months.
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.
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.
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 close friend or family member can pay off your debt, but credit rules, tax implications and other considerations must be made. Your donor can pay down or eliminate your debt by making direct payments to you, your creditors or other methods.
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.