The "Parent PLUS loan loophole" refers to a complex, temporary strategy called double consolidation, allowing parents with multiple Parent PLUS loans to bypass typical restrictions and access more affordable income-driven repayment (IDR) plans, like the SAVE plan and potential loan forgiveness, by consolidating their loans in a specific sequence through two different servicers to obscure their original Parent PLUS status. Normally, Parent PLUS loans only qualify for the less favorable Income-Contingent Repayment (ICR) plan. This loophole is set to close in July 2025, requiring borrowers to act quickly.
The Parent PLUS Double Consolidation Loophole offers a unique opportunity to merge your Parent PLUS loans into a single consolidation loan and lower your repayment by 50%. The biggest problem is that this loophole is scheduled to expire on July 1, 2025, but it takes 4 to 6 months to complete.
Yes, Parent PLUS loans can be forgiven or discharged, but it often requires specific actions like consolidating the loan into a Direct Consolidation Loan to access Income-Contingent Repayment (ICR) or Public Service Loan Forgiveness (PSLF), or by meeting criteria for total and permanent disability discharge or death. Forgiveness pathways are limited compared to other federal loans, primarily relying on the 25-year ICR plan or PSLF if the parent works in public service, as Parent PLUS loans don't directly qualify for most other income-driven plans.Â
In 2025, the Department of Education will be closing the loopholes that allow you to access better income-driven repayment plans—including the new Saving on a Valuable Education (SAVE) plan.
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.
A Parent PLUS Loan is anything but a plus for your financial goals. In fact, this kind of borrowing is a special kind of toxic because it involves a student and their mom or dad. The only thing worse than debt is the kind that hangs over a family relationship!
However, Parent PLUS Loans will be capped at $20,000 per student per year and a $65,000 lifetime limit beginning July 1, 2026. Parents who borrowed before that date can continue borrowing under the current limits for up to three additional years or until their student completes their program. Good news.
By taking action now, you can make your Parent PLUS loans eligible for an Income-Driven Repayment (IDR) plan, which sets payments as a portion of your income each year and offers many people lower payments compared to the Standard Repayment plan.
The government doesn't forgive Parent PLUS Loans when you retire or draw Social Security benefits, but it has programs that will wipe out your remaining balance after you've made a number of student loan payments under an income-driven repayment plan.
You will lose repayment plan options and restart the clock on PSLF and other forgiveness programs. You can learn more about the consolidation process here . Act quickly to avoid default. Default can result in consequences like garnishment of your wages, federal tax return, or Social Security.
You can achieve Parent PLUS loan forgiveness by consolidating into a Direct Consolidation Loan, enrolling in an eligible repayment plan (usually ICR), and meeting specific program requirements, such as employment in public service for PSLF, documented total disability, borrower defense eligibility, or other qualifying ...
Yes, your child can make the monthly payments on your Parent PLUS loan. If you want to avoid having your child apply for student loan refinance, you can simply have them make the Parent PLUS loan payment each month instead. However, it's important to be aware that if you do this, the loan will still be in your name.
The "7-year rule" for student loans generally refers to when negative marks, like defaults, are removed from your credit report (around 7 years after the first missed payment or default date for federal loans, 7.5 years for private loans), but the debt itself doesn't disappear and must be paid off; it's also a benchmark in bankruptcy proceedings where federal loans can become dischargeable after 7 years from when payments were due, though proving "undue hardship" is required and difficult.
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.
Follow the standard repayment plan
Making payments on the standard, 10-year federal repayment plan will pay off parent PLUS loans the fastest and save you the most money. To become debt-free even quicker, make extra student loan payments toward your principal balance.
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.
Defaulting on a Parent PLUS Loan can have serious financial consequences for student loan borrowers. Here's what happens if you haven't made a payment in more than 270 days: Immediate Consequences: Credit Score Impact: Your default will be reported to credit bureaus, which can significantly lower your credit score.