Direct PLUS Loans for Parents
If there is money left over, the school will pay it to you. In some cases, with your permission, the school may give the leftover money to your child.
In addition to the lack of practical discharge in bankruptcy, and the lack of income-based repayment programs, the other big problem with Parent Plus loans is that no one is looking at your ability to repay the loan when the loan is made.
Parent PLUS loans are educational loans, and the borrower can get an income tax deduction. When borrowers review their tax deductions, they can deduct up to $2,500 per year in interest paid on the Parent PLUS loan.
In most cases, your school will disburse your parent's loan money by crediting it to your school account to pay tuition, fees, room and board, and other authorized charges. If there is money left over, the school will pay it to your parent, usually by check.
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.
Yes. In addition to interest, you pay a loan fee that is a percentage of the principal amount of the loan. ED deducts the fee before you receive any loan money, so the loan amount you actually receive will be less than the amount you have to repay. See StudentAid.gov/interest for current loan fee rates.
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.
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.
Student loan interest is a deduction that reduces your taxable income. Therefore, you will not see your refund increase by the amount shown on your Form 1098-E. This means that with a lower taxable income you will pay less taxes.
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.
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.
If you're a parent and you're unable to get a PLUS loan, your child may be able to get additional unsubsidized loan funds. Normally, a dependent student can't get as much unsubsidized loan funding as an independent student can.
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.
Parent PLUS Loans can be forgiven when you retire
Parent PLUS Loan borrowers can have their debt forgiven after 10 years of working full-time for the government, nonprofit, or other qualifying employers.
While you may consolidate Parent PLUS Loans with a Federal Direct Consolidation Loan, refinancing is the only way to lower your interest rate or transfer a Parent PLUS Loan to the student. This option comes with a variety of pros and cons that you will want to explore before you make a decision.
Can more than one parent borrow a PLUS Loan? If a student's parents are divorced, both the custodial and non-custodial parent may borrow a PLUS Loan for their dependent, undergraduate student.
To be eligible for a Direct PLUS Loan for parents, you must be a biological or adoptive parent (or in some cases a stepparent), not have an adverse credit history, and meet the general eligibility requirements for federal student aid (which the child must meet as well).
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.
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.
Are student loans forgiven when you retire? No, the federal government doesn't forgive student loans at age 50, 65, or when borrowers retire and start drawing Social Security benefits. So, for example, you'll still owe Parent PLUS Loans, FFEL Loans, and Direct Loans after you retire.
The Bottom Line. Yes, borrowers with Parent PLUS Loans can have their debts forgiven after 10 years (or 120 eligible monthly payments) with the PSLF program.
Unlike all other federal student loans, there are no explicit borrowing limits for parent PLUS loans. Parents may borrow up to the full cost of attendance, which is determined by the institution, not the government, and includes books, travel and living expenses. There are no ability-to-repay standards for PLUS loans.
If you're struggling to make your Parent PLUS Loan payments, you can explore temporary relief options like deferment or forbearance. Both of these provide short-term solutions but can lead to a higher loan balance as interest continues to grow.