Parent PLUS Loan Forgiveness

Millions of parents in the U.S. hate Parent PLUS Loans. Did you know that collectively, 3.6 million parents owe $96.1 billion? Hopefully, the Parent PLUS Loan Forgiveness can help pay off any outstanding debt you owe. But even still, an increasing number of parents are struggling to pay off the loans they took for their children to go to college.

Parent PLUS Loan Forgiveness can help you clear off your loan debt, but there are ways on how to avoid Parent PLUS Loans. However, if you’re already borrowed money for your child, there’s still a way for you to be debt-free.

In this guide to Parent PLUS Loan forgiveness, we’ll have a look at the options and other alternatives you have. Let’s begin.

What is A Parent PLUS Loan?

Parent PLUS Loan is a student loan that offers parents the opportunity to pay for their children’s college education. You can borrow the overall cost of college tuition. For the 2019-2020 academic year, the Parent PLUS Loan has an interest rate of 7.08%, and a one-off payment fee of 4.236% of the borrowed amount. According to Brookings Institution, the Parent PLUS Loan had limits of the total amount you could borrow when the program began in 1980. But the Congress eliminated the restrictions due to the rise of college costs.

Even though the program seems appealing due to the unlimited loan funding, there’s a real chance that you can get into serious debt. So before you go in for a parent plus loan, find out how to avoid parent plus loan. If you do find out, you can save you a lot of trouble in the future. If you’ve already gone for the loan, then let’s keep reading.

Note: Grandparents are not eligible to request for PLUS loans on behalf of their grandchild, unless the grandparent is a legal guardian of the student.

How The Parent PLUS Loans Work

The PLUS loan has a fixed rate, and you pay for an initiation fee for each federal loan. There’s no subsidization on the Parent PLUS Loan, so the interest accumulates on the unsettled loan balance. 

The interest accrues right after the fund’s dispense, and it continues to increase even if you have the loan in deferment. One imperative thing you have to remember is that you, the parent, are responsible for the loan debt. It means your child can’t cosign with you or even transfer the loan directly to your child.  

However, you might be able to transfer the loan when your child refinances the loan debt with a private loan servicer. But your child will have to get a low-income debt ratio and a credit strong enough to qualify.

Parent PLUS Loan Forgiveness Through the ICR Plan

You can acquire eligibility for most federal loan forgiveness programs through using the right repayment plan, or working at the right job. Parent PLUS Loans are no different. However, under the numerous income-based loan repayment plans, you can only qualify for the ICR plan. But there’s a trick to it.

Technically, you’ll not be able to have your loans paid off through income-based repayment plans, including the ICR. But you can consolidate your Parent PLUS Loan through the Direct Consolidation Program, and the Direct Consolidation Loans qualifies for the ICR plan.

Did you get that? For you to qualify, you have to consolidate your PLUS loan into a Direct Loan. Then, enroll your Direct Loan into the ICR plan, and you’ll be eligible for total PLUS Loan forgiveness after you’ve made monthly payments for 25 years.

You have to know that if you don’t make enough salary every month, the ICR plan will limit your monthly payments. That can increase your overall outstanding debt because there’re IRS income taxes you have to pay on your forgiven debt.

Parent PLUS Loan Forgiveness Through The Public Service Loan Forgiveness

To get rid of your PLUS loan quicker, after making a standard ten-year payment, you need to be somehow eligible for the Public Service Loan Forgiveness. The federal government created the PSLF to encourage people to work in the public sector. People with public service jobs can qualify for the program. It includes:

  • People who work for the government, either state, federal or local
  • Those who work for a nonprofit (501(C)(3))
  • People who serve in the military

Nursing and teaching positions can also qualify for the PSLF. Others include medical roles, firefighters, law enforcement, legal positions, and other similar jobs.

For you to take advantage of this, you need to follow the same procedure as explained above. That is, change your Parent PLUS Loan into a Direct Loan, enroll in an ICR plan, and finally apply for the PSLF. The great news about using the PSLF to clear your PLUS loan is that you can pay off your debt in ten years. Also, you don’t have to pay income taxes on your forgiven amount.

However, it requires full-time work in public service, so you may have to change your career so that you can take advantage of the PSLF.

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Parent PLUS Loan Discharges

In case you’re not eligible for the PLUS Loan forgiveness explained earlier, there are still other ways to clear your loan debt. You can do so if you qualify for the following discharge programs:

  1. Closed School Discharge Program
  2. Borrower Defense to Repayment Program
  3. Death Discharge Program
  4. Student Loan Bankruptcy Discharge
  5. Permanent and Total Disability Discharge

The discharge programs do the same thing as the forgiveness programs but with a minute difference. The program can eliminate your student loan debt. But the more significant issue with the discharge program is that it’s challenging to be eligible. Let’s take a look at the qualifications for each of them.

Closed School Discharge Program

When a student is not able to graduate from college because the school closed down before they could complete all their courses, they can qualify for the Closed School Discharge program. The circumstance is a bit rare to come by, but in recent years, many for-profit colleges such as Le Cordon Bleu closed down, leaving thousands of students with unfinished degrees.

If you want to get a discharge from the program, this is how you do it. Let’s say you’re a parent with a Parent PLUS Loan, your student child must have been an active student in the school for 120 days before the school shut down. If your child was enrolling in the school before it closed down, you can apply for a Closed School Discharge and eliminate your Parent PLUS Loan.

Borrower Defense To Repayment Program

To qualify for the Parent PLUS Loan forgiveness, you have to prove that the school committed fraudulent acts against you and your child. It’s not easy to get a Borrower Defense to Repayment discharge. You have to submit a detailed legal application to the Education Department. They will then review the application and decide whether to clear your debt or not.

Death Discharge Program

Losing a loved one is unbearable. It’s never easy, so it’s understandable if you don’t prefer the Death Discharge program. However, if the parent who borrowed the money dies, or the child whom the parent borrowed the money for dies, they are eligible for the Death Discharge program. It requires providing a death certificate to the student loan service company.

Every loan servicing company has their way of handling student death discharge. So to find out how to proceed, contact your loan servicer for details of the application process.

Honestly, we hope that you don’t get to use the Death Discharge program, but things happen. People do experience this difficulty, so it’s worth utilizing the program, if necessary.

Student Loan Bankruptcy Discharge

Let’s state the facts. It’s tough to get a bankruptcy discharge. But if you happened to qualify for the discharge, you have to take the advantage. This is how the process works. You have to include your student loan debt in the bankruptcy proceeding and pass the Undue Hardship Test. 

The test proves that your loan debt is too much burden on you. As such, it’s affecting the ability to provide the necessities for you and your family. As you can see, it’s a severe test. And since the Parent PLUS Loan forgiveness is your responsibility as a parent, you have to prove that it’s a heavy burden on you

Permanent And Total Disability (TPD) Discharge

You can eliminate all your debt loans, including Parent PLUS Loans, if you qualify for the Disability Discharge program. As a parent, you are eligible for this program if you can prove to the authorities that you are permanently and totally disabled. That means, you can’t work to pay your monthly loan payments. One good thing about the TDP discharge is that you don’t pay any income tax on your  PLUS Loan forgiveness.

Other Payment Options For Parent PLUS Loans

Technically, all the procedures explained above are the only ways to get Parent PLUS Loan forgiveness. However, there are different procedures to ease your loan debt. The other ways to lower your financial burden are:

  1. Refinancing your loan
  2. Deferment
  3. Forbearance
  4. Changing your loan repayment plan

These loan programs won’t eliminate any of your remaining loan balance. But they can help you save money by lessening monthly payments, putting a hold on monthly payments, and helping to make your loans easy to pay, at least for a while.

Refinancing Your Parent PLUS Loan

Refinancing your loan is the process of transferring your loan debt to your student child, making them legally responsible for paying off the student loan debt.  Of course, you’ll have to have an honest conversation with your child and come up with a good plan. 

Your child will have to be the one to apply for the student loan refinance. Also, your child will have to get approval from the loan servicer to carry the loan burden from you.

When you refinance your loan, it will become a private student loan. It’s a great idea because it offers lower payments and interest rates. But the low rates can increase with time due to its variability. Also, you have to remember that your child will not qualify for any federal loan benefit programs. So, your child will not be eligible for PSLF, deferments, forbearance, or any of the PLUS Loan forgiveness and discharges explained above.

Deferment

Every federal student loan qualifies for deferments. It allows you to put a hold on repaying your loans, and stop making payments for a set time. For you to acquire this benefit, you have to prove that you’re having challenges making your monthly payments. But you have to know that when you put your payments on hold, you accrue more interest on your repayment later.

It means, they will add your accrued interest charges to your total loan debt at the end of your deferment.

Forbearance

Forbearance is the same as deferment, with only a slight difference. With forbearance, you get to put your loan debt on hold and quit making monthly payments for a specific period. But, like deferment, the interest accumulates, so you end up paying for them later.

Changing Your Loan Repayment Plan

The quickest way to reduce your Parent PLUS Loan monthly payment is to change your loan repayment. It’s not as better as the total Parent PLUS Loan forgiveness, but it makes the debt easy to pay for a short while. Changing the repayment plan reorganizes how you pay off your debt.

In addition to defaulting on Parent PLUS Loans, there are two easy-to-access repayment plans:

  1. Graduated Repayment

This repayment helps you make small payments at the initial stage of your loan repayment, and increases into more huge sums many years in the future. When you begin, the payments will be at or slightly above the interest-only repayment. With time, you then make payments monthly every two years. Your final payment will not exceed three times the original payment.

  1. Extended Repayment

Depending on the amount you owe, the extended repayment can spread your repayment to 12, 15, 20, 25, or 30 years. It will limit your monthly payments, but with time, more interest will accumulate. Which means, more payments later.

Defaulting On Parent PLUS Loans

When you’re unable to pay your Parent PLUS Loan, and already tried low payment with ICR plan, defaulting on Parent PLUS Loans may be lurking in the shadows. You could seek deferment and forbearance, but they don’t last forever.

When you’re not able to pay your monthly payments, the following could happen:

  1. If you miss 90 days of monthly loan payments, your loan servicer will send delinquent reports to the credit bureaus.
  2. When you miss 180 days, you’ll have a lengthy credit report showing your lack of payment history.
  3. When you miss your loan payment for 270 days, you will have your loan defaulted.

Defaulting on Parent PLUS Loans poses a significant problem; usually, that’s when the trouble starts. The federal government can offset all your social security benefits, prevent you from getting any student aid, and take your tax refund without anyone stopping them.

You should know how to avoid Parent PLUS Loan all together to prevent these catastrophes. If you need help on how to avert Parent PLUS Loan, contact an expert to help you.

Guidance On Parent PLUS Loan Forgiveness

A lot of loan servicers will not tell you the whole truth about the Parent PLUS Loan. If you want the best way to get out of Parent PLUS Loan payments, hire an expert. The expert will evaluate your options and provide you with a repayment plan that is ideal for your situation.

Yes. A lot of people are against paying an expert to help them in their student loan debt. They have the right to be. Many scammers out there claim they can help you out of your Parent PLUS Loan, but they’re only out to get your money. You shouldn’t trust an expert or a company just because they say so. You have a part to play by researching to find out if they’re legit.

Look out for the experts who want to help you get your Parent PLUS Loan settled once and for all. Also, you have to pay the expert to help you solve your case, and decide which possible strategy is the best. Then you can be on the right track of becoming free from the student loan debt. Even though you have to pay, you can save thousands of dollars when you get out of debt. So weigh the cost and maybe consider hiring an expert.

Let’s have an overview of the Parent PLUS Loan forgiveness.

Apply for Student Loan Forgiveness Help

If you struggle with university student loan forgiveness, then you should get help with that. Because the employees in these agencies are dealing with the student loans every day and they have enough experience for solving different kinds of student loan problems.

Parent PLUS Loan Forgiveness Overview

Parent PLUS Loan is a common alternative way to pay for your children’s tuition fees, but to many people, it’s not the best decision. If you’ve already gone for the Parent PLUS Loan, It may be late, but all hope is not lost. Parent PLUS Loan may be one of the worst student loans because they don’t provide any type of IBR directly or PAYE.  They also don’t offer any student loan forgiveness programs.

If you have a standard ten-year payment for your Parent PLUS Loan, you can qualify for the Public Service Loan Forgiveness (PSLF). However, because the PSLF demands a ten-year repayment, in the end, you’ll have nothing left to forgive.

Luckily, there are other ways to lower the Parent PLUS Loan payments, so there’s still hope. You change your repayment plan to an extended or graduated repayment plan. They can help you reduce your payments, but you’ll have more interest incurred on it. However, if you’re able to afford your monthly payments, the interest should not be much of a problem for you.

Another way to settle your Parent PLUS Loan is to refinance your loan. It’s one of the areas to consider since there are not a lot of options with the Parent PLUS Loans. It’s good to note that deferment and forbearance still apply to the Parent PLUS Loan. You can defer, forbear, or even acquire a student loan cancellation through the disability discharge program, if you’re eligible.

You can also change your Parent PLUS Loan into a Direct Consolidation Loan. It will allow you to qualify for the ICR and the PSLF.

Final Thoughts

In the end, you need to consult your children. If you took out the loan for your child and haven’t discussed the implication it’ll have on your finances, you need to do so, primarily if it’s affecting you. You and your child can effectively resolve the problem through Parent PLUS Loan forgiveness if you work together. 

Yes, we know no parents want to burden their children with financial debt. And we also know that as a parent, you are legally required to repay the loan. It’s not possible to cosign the student loan debt. It’s understandable.

But the Parent PLUS Loan can be a burden on your finances. Maybe you’re not a burden to your children. But if you can’t retire because you’re defaulting on a Parent PLUS Loan, you’ll need more help in the future than now. 

So have an honest conversation with your child to solve the issue through the PLUS Loan forgiveness, that is, if you’ve already gone for the Parent PLUS Loan. But if you haven’t, you can find a way on how to avoid Parent PLUS Loan.

Free Consultation With Forget Student Loan

If you want a financial expert to help with our Parent PLUS Loan forgiveness, Forget Student Loan can help you with a free consultation. Call us on this number: 800-881-0687.

Remember, if you went in for the Parent PLUS Loan, you could be paying the student loan debt for a decade, or more. In that case, we recommend having an honest conversation with your children to come up with a plan to pay off the debt through the Parent PLUS Loan forgiveness. If you haven’t gone for the Parent PLUS Loan, we recommend that you avoid them at all costs. However, if it’s too late, focus on clearing your debt with the options given on this page.  Better yet, why don’t you give Forget Student Loan a call right now: 800-881-0687.