What are your Parent PLUS Loan repayment options? Parent PLUS Loans have four repayment plans: Standard repayment plan: Pay off your loan by making fixed monthly payments for 10 years. Graduated repayment plan: Start with smaller payments, then have your payments gradually increase during the 10-year repayment period.
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.
The parent-borrower will have the option to choose "Me" or "The Student." If they choose "The Student," any available refund will be issued to the student. If they choose "Me" (refunds go to the parent-borrower), we are required to issue the refund to the parent- borrower.
When the borrower of a Parent PLUS loan dies, the loan is discharged. (It does not matter whether there was an endorser or not, the loan is discharged and any endorsers have no further liability.)
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.
Generally speaking, the person who inherits must either assume the mortgage and start making payments or arrange to sell the property. When multiple heirs agree to assume the mortgage, they become co-borrowers and continue making mortgage payments.
The school will first apply the loan funds to the school account to pay for tuition, fees, room and board, and any other school charges. Any additional loan funds will be paid to the student as a credit balance (with your authorization) or sent to you. All loan funds must be used for education expenses.
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.
You, the parent borrower, are legally responsible for repaying the loan.
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.
Parent PLUS loans are costlier and offer less flexibility than federals loans made directly to students. Here are the details: The interest rate and origination fee are both higher than student loans. If you want to defer payments until after your student graduates, you must contact the servicer.
Finally, it's important to consider who is legally responsible for repaying the loan. With a Parent PLUS Loan, it's the parent's legal responsibility to repay the loan. You may agree with your child that they will repay the loan, but if they don't, it's your responsibility.
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.
This repayment plan leads to loan forgiveness after 25 years under normal conditions, but borrowers pursuing PSLF could have remaining debt forgiven after 10 years (if you still have a balance left). Also note that monthly payments on the ICR plan are not capped, so there's no limit on how high they can go.
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.
Parent PLUS loans are made directly to parents for their child's education. Under the current rules, parents cannot transfer these federal loans to a child, and they are solely responsible for paying back the loan.
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.
Student loan debt and divorce
Getting divorced is a messy process. Having debt involved can make it even more stressful. But if you have Parent PLUS Loans, the person who signed the promissory note is responsible for the loan.
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.
If your spouse passes away, but you didn't sign the promissory note or mortgage for the home, federal law clears the way for you to take over the existing mortgage on the inherited property more easily.
A family member (or sometimes even non-relatives) can assume an existing mortgage on a home they've inherited. If one person is awarded sole ownership of a property in divorce proceedings, that person can assume the full existing mortgage themselves.
If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.