New graduates aren’t the only ones burdened by student loans. Many parents also take on debt to pay for their children’s education.
In fact, more than 3.4 million people owe a collective $81.5 billion in parent PLUS loans, a federal student loan designed for parents financing their kids’ education.
Although these loans can be useful tools for covering college costs, paying them back can get overwhelming fast. If you’re struggling with parent PLUS loans, you might be wondering what your options are for parent PLUS loan forgiveness.
Although these loans don’t have as many options as other federal student loans, there are ways to get them forgiven — or at least to manage them more easily.
Read on to see how you can get a parent PLUS loan forgiven, along with others options to consider as well.
3 ways to get parent PLUS loan forgiveness
Parent PLUS loans can be forgiven, but it won’t happen overnight. In most cases, you’ll have to keep up payments for many years before you see loan forgiveness. If anyone is promising immediate loan forgiveness, steer clear: You could be encountering a student loan scam.
Here are three legitimate ways to get your parent PLUS loan balance wiped clean.
1. Put your loans on the income-contingent repayment plan
One potential avenue for parent loan forgiveness is through the income-contingent repayment plan, which is an income-driven plan that results in forgiveness after 25 years. While Federal Student Aid offers four income-driven plans, parent PLUS loans are only eligible for the income-contingent plan. What’s more, you can’t apply directly for the income-contingent plan. You must first apply for a direct consolidation loan.
After consolidating, your loan will be eligible for the income-contingent plan, which adjusts your monthly payment to 20% of your discretionary income or what you’d pay on a fixed 12-year plan, whichever amount is lower. Along with adjusting your monthly payments, the plan also extends your terms to 25 years.
If you still have a balance after 25 years of on-time payments, the government will forgive the rest. Your balance will go down to zero, but you might have one last bill to pay on your student loans in the form of a taxes, since your forgiven balance will likely be treated as taxable income.
Consolidating your parent PLUS loan and applying for the income-contingent plan can make your bills more affordable and eventually lead to loan forgiveness, but it will take two-and-a-half decades to get there.
2. Qualify for the Public Service Loan Forgiveness program
If you’re looking for loan forgiveness sooner, you could instead consider the Public Service Loan Forgiveness (PSLF) program. PSLF forgives loans after 10 years of qualifying service in an eligible workplace. This could be a federal, state, local or tribal government organization, a 501(c)3 nonprofit, AmeriCorps or the Peace Corps, for example.
If you’re going this route, make sure to submit the PSLF Employment Certification Form every year so that Federal Student Aid can track your progress. You also should submit the form when switching jobs.
By the way, you’ll need to put your parent PLUS loan on the extended repayment plan or ICR if you’re pursuing PSLF. This makes sense, since if you’re paying back your loan on the standard 10-year plan, you’d have no balance left to forgive after 10 years.
Note that the future of PSLF is somewhat uncertain, with Federal Student Aid reporting that as of June 30, 2018, only 96 borrowers have actually seen loan forgiveness under the program. For now, the program still seems to be functioning, but whether it will continue to exist in the future remains to be seen.
3. Apply for student loan discharge for an eligible reason
If you have a special circumstance that makes you unable to repay your loan, you could qualify for student loan discharge or cancellation. Part or all of your loan could be canceled if any of these apply to you:
- You become totally and permanently disabled
- You qualify for student loan discharge through bankruptcy (difficult but possible in rare cases)
- The school your child attended closed, or it falsely certified your loan
- Your child withdrew from school and the school didn’t pay the required loan refund
- Someone stole your identity and borrowed the loan on your behalf
Programs such as borrower defense discharge and total and permanent disability discharge protect students and their families from predatory for-profit schools or the financial challenges that can come with disability.
Consider refinancing parent PLUS loans with a new lender
While your options for parent PLUS loan forgiveness are limited, you could try other strategies for getting your loans under control, such as refinancing with a private lender.
If you meet a lender’s underwriting requirements for credit and income, you could qualify for a lower interest rate than the 7.6% charged for PLUS loans as of July 2018.
You could also restructure your debt by choosing new terms. For instance, you might choose a shorter term to get out of debt faster and save money on interest. Or if you want to lower monthly payments, you could choose a longer repayment term, often up to 15 or 20 years.
Finally, you could shed the debt completely by refinancing in your child’s name. In this case, your child, rather than you, would need to apply for loan refinancing. They would also need to meet requirements for credit and income, unless you choose to cosign. Of course, this arrangement only works if your child is able and willing to repay the parent PLUS loan.
But keep in mind that refinancing a federal loan turns it into a private one. As a result, your loan would no longer be eligible for federal programs and protections, such as the income-contingent plan, PSLF or federal loan discharge programs. If you’re counting on any of these, refinancing probably wouldn’t be the right move.
But if you understand the consequences of turning your debt private, refinancing could make repayment more manageable, or it could even get the loan out of your name entirely.
Seek employers who offer a student loan assistance benefit
In recent years, more employers have started offering a unique benefit: student loan repayment assistance. Much like a 401(k) match, these employers will match up to a certain percentage of your student loan payments, thereby helping you get rid of debt faster.
If you’re open to changing employers, you might search for one who can help you pay back your loan. Or if you refinance the PLUS loan in your child’s name, then you child might prioritize companies with this helpful perk.
Since loan forgiveness can take a long time, seeking alternative strategies, such as an employer student loan benefit, could be one more strategy for getting out of debt.
Keep chipping away at your parent PLUS loans
If you borrowed a large amount for your child’s education, you might be paying it back for years to come. But don’t lose hope — you will pay it off eventually.
Parent student loan forgiveness programs also take a long time, but they can sometimes be a great option. And if you don’t qualify for forgiveness, keep chipping away at your balance and focusing on the long game.
Although you might have to take small steps to get there, ultimately you’ll reach your destination: a life free of student loan debt.
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