Who is legally responsible for parent PLUS loans?

Asked by: Gerda Maggio V  |  Last update: January 20, 2025
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You, the parent borrower, are legally responsible for repaying the loan.

Who is responsible for parent PLUS loan if parent dies?

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.

Who claims a parent PLUS loan on taxes?

If you're a parent who's taken out a Parent PLUS loan to support your child's higher education expenses, you have a chance to reduce your tax bill for the tax year through this specific deduction, potentially saving up to $2,500 per year.

Is a spouse responsible for a parent PLUS loan?

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.

Are parents responsible for their children's student loans?

Key Takeaways. Parents are not obligated to repay their child's federal student loans, even though their information is required for the Free Application for Federal Student Aid (FAFSA). Parents may be held responsible for student loan debt if they co-signed a private loan or took out a parent PLUS loan.

Do I Still Need To Pay Back The Parent Plus Loan?

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Who is ultimately responsible for paying back a parent PLUS loan, you or your parents?

A Direct PLUS Loan made to you as a parent cannot be transferred to your child. You are responsible for repaying the loan. Can I ever postpone making loan payments? Yes, under certain circumstances you may receive a deferment or forbearance, which allows you to temporarily stop or lower your payments.

Do kids inherit student loan debt from parents?

No one inherits your student loans if you die, but private lenders can seek repayment from your estate, a cosigner (for loans taken out before Nov. 20, 2018), or your spouse if you took out the debt during your marriage and you live in a community property state.

Who is liable for parent PLUS loans?

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.

What is the loophole for parent plus borrowers?

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.

Are parent PLUS loans forgiven after 10 years?

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 parent PLUS loans be written off?

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.

Who gets the money from 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.

Can I get my name off a parent PLUS loan?

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.

What happens if parents don't pay parent PLUS loans?

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.

Are children responsible for parent's debt after death?

Many Baby Boomers plan to pass down inheritances to their loved ones, but some aren't so lucky. It may come as a relief to find out that, in general, you are not personally liable for your parents' debt. If they pass away with debt, it is repaid out of their estate.

What debts are not forgiven upon death?

Medical debt and hospital bills don't simply go away after death. In most states, they take priority in the probate process, meaning they usually are paid first, by selling off assets if need be.

What is the $100,000 loophole for family loans?

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.

How to get out of parent PLUS loans?

How Can Parent PLUS Loans Be Discharged?
  1. School closure leading to the inability of your child to complete their program.
  2. Your child's school's failure to refund loan money following your child withdrawing from school, withstanding the law.
  3. Your death or the death of the child you borrowed for.

What are the rules for parent PLUS loan?

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).

Are both parents responsible for parent PLUS loan?

A common misunderstanding area of the Parent Plus loan is legal ownership. These loans are the legal responsibility of the parent who signs the promissory note. This means it is the parent's legal and financial responsibility to repay this loan.

Are parent PLUS loans forgiven if the parent dies?

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.

Can I dispute a parent PLUS loan?

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.

What happens to my mom's credit card debt when she died?

Credit card balances are typically paid for by the deceased's estate, which is everything that they owned at the time of death.

What is the interest rate for the parent PLUS loan?

Summary: The Parent PLUS Loan is a federal loan that parents of dependent undergraduate students can use to help pay for their child's education. The Direct Parent PLUS Loan offers a fixed 9.08% interest rate for the 2024 - 2025 school year and flexible loan limits.

What happens to a student loan after death?

If you die and have a federal student loan, no one will be responsible for your debt —not your parents, your spouse or anyone else. The servicer will discharge your loan, or a Parent PLUS loan taken in your name, once they are provided with documentation of the death.