Parent PLUS Loan Forgiveness Is Possible: Here’s How to Get It

parent-plus-loan-forgiveness

As a parent, it can make sense to take out a Parent PLUS loan — you want to do what’s best for your child and help pay for their education, right?

While it can be a great idea at the time, repayment becomes an overwhelming struggle for some borrowers. Luckily, there are a few sources of Parent PLUS loan forgiveness you can investigate to get rid of that debt once and for all.

Parent PLUS loan forgiveness through consolidation

While Parent PLUS loan borrowers are ineligible for many of the income-driven plans available, there’s a workaround that can help you pursue loan forgiveness.

Parent PLUS loan borrowers are eligible for the Income-Contingent Repayment (ICR) plan if they first consolidate their loans through a Direct Consolidation Loan.

Under ICR, your payments will either be 20 percent of your discretionary income or what you would pay on a fixed, 12-year repayment plan, after adjustments to your income are made.

Kind of confusing, right?

To get a better picture of what your payments might be under ICR, check out this Repayment Estimator to see what your prospective payments might be.

After 25 years of consistent repayment, any remaining balance will be forgiven. It’s important to note, however, that your forgiven loans will be considered taxable income under current tax law (though there are rumors this might change at some point).

Here are the steps to take in order to get Parent PLUS loan forgiveness:

Step 1: Apply for a Direct Consolidation Loan through StudentLoans.gov.

Step 2: Talk to your loan servicer and choose the Income-Contingent Repayment plan.

Step 3: Make payments on time for 25 years to get your loans forgiven. Pay any potential tax bills related to your loan forgiveness.

Student loan forgiveness for parents through PSLF

If you work in public service or are looking for a career change, you may have a shot at Parent PLUS loan forgiveness through the Public Service Loan Forgiveness program.

Under this program, parents who work full-time for certain government entities or nonprofits and make consistent payments for 10 years can get their loans forgiven.

But here’s where it can get tricky: In order to be eligible for PSLF, you must repay your loans under an income-driven plan or the Standard Repayment Plan. Of course, we just learned that Parent PLUS loans aren’t eligible for those plans.

As student loan expert Heather Jarvis wrote on her blog:

“Direct Parent PLUS loans are technically eligible for Public Service Loan Forgiveness, but not really. Because Parent PLUS loans cannot be repaid under either Income-Based Repayment or Income-Contingent Repayment, you can’t actually make payments on a Parent PLUS loan that count towards Public Service Loan Forgiveness, unless you pay under the Standard 10-year Repayment plan, which won’t leave anything left to forgive.”

So again, the loophole is consolidating with a Direct Consolidation Loan and then applying for Income-Contingent Repayment. Assuming you have a large enough loan, low enough income, and work for a qualifying employer, this route could lead you to loan forgiveness.

If this is something you are interested in pursuing, take the following steps:

Step 1: Consolidate your loans through a Direct Consolidation Loan by applying through StudentLoans.gov.

Step 2: Talk to your loan servicer and choose the Income-Contingent Repayment plan.

Step 3: Fill out the Employment Certification for Public Service Loan Forgiveness form and return it to FedLoan Servicing.

Step 4: Continue to work at a qualified agency for 10 years. After 10 years of repayment, submit the Public Service Loan Forgiveness application.

The good news is that under this plan, your forgiven loans are NOT considered taxable income.

Refinancing Parent PLUS loans in your child’s name

As a Parent PLUS loan borrower, your options for loan forgiveness are limited to two options, both of which rely on consolidating your loans and choosing the Income-Contingent Repayment Plan. Each option has it’s own pros and cons.

While there aren’t other Parent PLUS loan cancelation options, there is a way to alleviate the financial burden on yourself and transfer your loans to your child.

Parents take on Parent PLUS loans on behalf of their child, but it is the parent’s responsibility to pay back the loans. However, through refinancing, a few companies make it possible for parents to transfer Parent PLUS loans into their child’s name.

The catch? Your child must be the one who applies for refinancing and gets approved.

This may be a good option if you find yourself struggling with payments, but your child is now graduated and doing well financially. It’s important to know, though, that refinancing causes you and your child to give up any federal protections such as loan forgiveness.

Final Word

Parent PLUS loan forgiveness is possible, though it’s not necessarily an easy path. You must consolidate your loans, sign up for an Income-Contingent Repayment plan and either make payments for 25 years or opt for a life of public service and pay for 10 years.

Though it’s not easy, it is possible. If you’re looking into Parent PLUS student loan forgiveness, check out these options and weigh the costs and benefits carefully and compare with your current repayment options.

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