PLUS loans are federal loans that parents can take out to cover their child's college costs. The parent, not the student, is responsible for repaying the PLUS loan. PLUS loans don't qualify for all of the income-driven repayment (IDR) plans that student loans do.
Parent PLUS loans are the responsibility of the parent. Everything is determined by the parent's information. Since you are paying it, the IRS considers that a gift to your dad. Depending on the amount, you may have to file Form 709 during tax season.
Federal student loans are owned by the U.S. Department of Education while private student loans are owned by the financial institution that granted them. Learn more how who owns student loans and how to find out who owns your student loan.
Here's a quick overview of Direct PLUS Loans:
The U.S. Department of Education is the lender. The borrower must not have an adverse credit history.
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.
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.
The same principle applies to student loans. In the case of student loans, the student is responsible for repaying the debt — whether they graduated or not. The only exception to this rule are parent PLUS loans, in which the parent — not the student — is responsible for that debt.
Identifying Your Servicer
The following are loan servicers for loans that the U.S Department of Education (ED) owns. To find out who your loan servicer is, visit your account dashboard and scroll down to the “My Loan Servicers” section, or. call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.
Your interest charges will be added to the amount you owe, causing your loan to grow over time. This can occur if you are in a deferment for an unsubsidized loan or if you have an income-based repayment (IBR) plan and your payments are not large enough to cover the monthly accruing interest.
If the student's parents are divorced, both the custodial parent and the noncustodial parent are eligible to borrow from the PLUS loan program, provided that the combined amounts borrowed do not exceed the cost-of-attendance minus aid received cap.
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.
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.
Nothing happens to Parent PLUS Loans in a divorce. The person who filled out the FAFSA paperwork and signed the promissory note remains responsible for repaying the debt. The lender will continue to hound the parent-borrower for payment. The divorce decree doesn't change that responsibility.
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.
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 office of Federal Student Aid is responsible for directly managing or overseeing an outstanding federal student loan portfolio comprised of billions of dollars in Title IV loans and representing millions of borrowers.
The Ombudsman Group is dedicated to helping resolve complaints related to the federal student aid programs, including Direct Loans, Federal Family Education Loan (FFEL) Program loans, Perkins Loans, and grant programs.
There are two primary ways to find out which company is currently servicing your federal student loans. These include: Visiting your account dashboard at studentaid.gov and scrolling down to the “My Loan Servicers” section. Calling the Federal Student Aid Information Center (FSAIC) at 1-800-433-32432.
You, the parent borrower, are legally responsible for repaying the loan.
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.
If your mom or dad passed away with credit card debt the good news is that you are not personally responsible for their debt. After all, you never signed an agreement to be liable for paying their credit card bill. The responsibility was on your parent.
Parents can file an appeal after being denied a Parent PLUS Loan. Reach out to your school's financial aid office as soon as possible to get the appeal process started.
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.
Refinancing. If you have good credit and enough household income to qualify, you may also be able to refinance your Parent PLUS loan to a lower interest rate through a private lender, which can potentially save you money.