Are Private Student Loans Eligible For Forgiveness

Last Updated on January 19, 2023

Are Parent Student Loans Eligible For Forgiveness?

Many of us take out student loans to help pay for our education. While some of us have no problem paying back our loans, others struggle to keep up with the payments. If you are a parent who has taken out student loans for your child’s education and are struggling to make payments, you may be wondering if your debt can be forgiven.

Student Loan Forgiveness Options

There are several options available to parents who want to get rid of their student debt. The following programs offer some form of loan forgiveness:

The Parent PLUS Loan Forgiveness program will forgive up to $50,000 in outstanding balances on eligible loans after 20 years of repayment. To qualify, borrowers must work full-time in an eligible occupation at an eligible employer while making 120 qualifying payments.

The Public Service Loan Forgiveness program forgives any remaining balance on eligible federal student loans after 10 years of repayment under certain circumstances. To qualify, borrowers must be working full-time and make 120 qualifying payments on a qualifying repayment plan while working for a government or non-profit organization.

Student loan forgiveness programs aren’t just for students.  Depending on lender qualification requirements and borrower history, parent loan forgiveness is also possible. Many parents struggling to repay student loan debt can qualify for loan forgiveness. 

A federal parent PLUS loan may be eligible for forgiveness through an income-contingent repayment plan or the Public Service Loan Forgiveness (PSLF) program. There are also options for parents that take out loans from private lenders.

A parent PLUS loan, or Direct PLUS loan, is a form of federal student aid. Once a student reaches federal student loan limits, parent borrowers will often take out a PLUS loan. A parent PLUS loan is an unsubsidized federal direct loan. Because they are not subsidized loans, interest accrues while the student is in college.

However, some parents borrow more than they can afford to repay. In 2013, the federal government removed annual and lifetime borrowing limits from parent PLUS loans, allowing parents to borrow the full amount of a college education. Since the government removed the limits, more parents defaulted on their PLUS loans.

So, does Parent PLUS loan forgiveness exist? Yes, but only in some circumstances. 

Parent Plus Loans: How Much Debt Are Parents in and Can It Be Forgiven? |  GOBankingRates

Are Parent PLUS Loans Eligible for Forgiveness? Options for Parent Loan Forgiveness

If you’re a parent borrower with a Direct PLUS loan or a private loan and you’re wondering: can parent PLUS loans be forgiven, consider these options:

  • Income-Contingent Repayment
  • Public Service Loan Forgiveness
  • Temporary Expanded Public Service Loan Forgiveness
  • Federal Agencies
  • Military Forgiveness Programs
  • State Student Loan Forgiveness
  • Employer-paid Student Loan Assistance
  • Refinancing

Parent PLUS Loan Forgiveness Student through Income-Contingent Repayment

Parent PLUS loans are not directly eligible for income-driven repayment plans.

However, a Federal Direct Consolidation loan that includes Parent PLUS loans may be eligible for Income-Contingent Repayment (ICR). The borrower must have entered repayment on or after July 1, 2006, per the regulations at 34 CFR 685.208(a)(2)(iv)(D).

A parent PLUS loan in the Direct Loan program or the Federal Family Education Loan Program (FFELP) is eligible if it is included in a Federal Direct Consolidation Loan.

Income-contingent repayment bases the monthly payment on 20% of the borrower’s discretionary income, which is defined as the amount by which the borrower’s adjusted gross income (AGI) exceeds 100% of the poverty line.

The remaining loan balance is forgiven after a 25-year repayment term (300 payments). Generally, the IRS treats cancelled debt as taxable income for student loan borrowers. But, the American Rescue Plan Act of 2021 made all student loan forgiveness tax-free through 2025.

An income-contingent repayment plan is the only income-driven repayment program available to a parent PLUS borrower. To qualify for this parent student loan forgiveness, a borrower must consolidate their PLUS loan into a Direct Consolidation Loan, and repay the consolidation loan under the income-contingent repayment plan.

Student loan forgiveness programs aren’t just for students. Depending on lender qualification requirements and borrower history, parent loan forgiveness is also possible. Many parents struggling to repay student loan debt can qualify for loan forgiveness.

A federal parent PLUS loan may be eligible for forgiveness through an income-contingent repayment plan or the Public Service Loan Forgiveness (PSLF) program. There are also options for parents that take out loans from private lenders.

A parent PLUS loan, or Direct PLUS loan, is a form of federal student aid. Once a student reaches federal student loan limits, parent borrowers will often take out a PLUS loan. A parent PLUS loan is an unsubsidized federal direct loan. Because they are not subsidized loans, interest accrues while the student is in college.

However, some parents borrow more than they can afford to repay. In 2013, the federal government removed annual and lifetime borrowing limits from parent PLUS loans, allowing parents to borrow the full amount of a college education. Since the government removed the limits, more parents defaulted on their PLUS loans.

So, does Parent PLUS loan forgiveness exist? Yes, but only in some circumstances.

Are Parent PLUS Loans Eligible for Forgiveness? Options for Parent Loan Forgiveness
If you’re a parent borrower with a Direct PLUS loan or a private loan and you’re wondering: can parent PLUS loans be forgiven, consider these options:

Income-Contingent Repayment
Public Service Loan Forgiveness
Temporary Expanded Public Service Loan Forgiveness
Federal Agencies
Military Forgiveness Programs
State Student Loan Forgiveness
Employer-paid Student Loan Assistance
Refinancing
Parent PLUS Loan Forgiveness Student through Income-Contingent Repayment
Parent PLUS loans are not directly eligible for income-driven repayment plans.

However, a Federal Direct Consolidation loan that includes Parent PLUS loans may be eligible for Income-Contingent Repayment (ICR). The borrower must have entered repayment on or after July 1, 2006, per the regulations at 34 CFR 685.208(a)(2)(iv)(D).

A parent PLUS loan in the Direct Loan program or the Federal Family Education Loan Program (FFELP) is eligible if it is included in a Federal Direct Consolidation Loan.

Income-contingent repayment bases the monthly payment on 20% of the borrower’s discretionary income, which is defined as the amount by which the borrower’s adjusted gross income (AGI) exceeds 100% of the poverty line.

The remaining loan balance is forgiven after a 25-year repayment term (300 payments). Generally, the IRS treats cancelled debt as taxable income for student loan borrowers. But, the American Rescue Plan Act of 2021 made all student loan forgiveness tax-free through 2025.

An income-contingent repayment plan is the only income-driven repayment program available to a parent PLUS borrower. To qualify for this parent student loan forgiveness, a borrower must consolidate their PLUS loan into a Direct Consolidation Loan, and repay the consolidation loan under the income-contingent repayment plan.

Public Service Loan Forgiveness for Parent PLUS Loans

Parent borrowers may be eligible for Public Service Loan Forgiveness (PSLF) after making 120 qualifying payments (ten years).

Parent PLUS loans are eligible if they are in the Direct Loan program or included in a Federal Direct Consolidation Loan. The borrower must work full-time in a qualifying public service job.

Eligible repayment plans include standard repayment and income-driven repayment plans. If a borrower repays their loans under the standard repayment plan for ten years, there will be nothing left to forgive. So, the borrower will need to repay their loans in an income-driven repayment plan to earn some forgiveness under public service loan forgiveness.

If a borrower consolidates their Parent PLUS loans into a Federal Direct Consolidation Loan, the consolidation loan will be eligible for income-contingent repayment, as noted above.

Another option is the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program, enacted by the Consolidated Appropriations Act, 2018 (P.L. 115-141). A Federal Direct Consolidation Loan that repaid a Federal PLUS Loan is eligible for TEPSLF if some or all of the 120 qualifying payments were made under a graduated repayment or extended repayment plan, provided that the last year of payments were at least as much as the borrower would have paid under an income-driven repayment plan. 

Other Options for Loan Forgiveness of Parent Loans

Federal agencies

Federal agencies may repay federal education loans, including Parent PLUS loans, as an employee recruitment or retention tool, but only if the employee is the parent PLUS loan borrower. Thus, a Parent PLUS loan may be forgiven if the parent works for the federal agency, but not if the student works for the federal agency.

Military forgiveness programs

Parent PLUS loans may be eligible for repayment under the various military loan forgiveness programs, depending on the service. The loan forgiveness may be limited to Parent PLUS loans borrowed on behalf of a student who is the Service member. Private parent loans are not eligible.

State student loan forgiveness

Several states offer student loan repayment assistance for borrowers who move to the state or specific cities or counties within the state. Parent loans, including both Parent PLUS and private parent loans, may be eligible.

Employer-paid student loan assistance

Parent loans are eligible for many employer-paid student loan repayment assistance programs, commonly known as LRAPs. This includes both Parent PLUS loans and private parent loans.

Loan Discharge Programs

Parent PLUS loans are also eligible for certain discharges, including:

  • Death of the parent or death of student on whose behalf the Parent PLUS loan was borrowed
  • The parent (but not the student) becomes totally and permanently disabled
  • Bankruptcy discharge (rare)
  • Closed school discharge
  • False certification discharge
  • Identity theft discharge
  • Unpaid refund discharge
  • Defense to repayment

Private parent loans may also be eligible for a death or disability discharge, depending on the lender.

Refinancing a Parent Loan

If you don’t qualify for loan forgiveness, you may be able to lower your payments by refinancing the Parent PLUS Loan. However, a federal loan can only be refinanced into a private loan. That means if you have a federal loan you will lose federal loan protections such as:

  • Forbearance and deferment
  • Choice of repayment option
  • Potential student loan forgiveness

You may also have the option to refinance your parent loan in your child’s name. This might make sense if your child is now graduated and working, and you are nearing retirement. Keep in mind, however, that not every loan servicer will offer this type of student loan refinancing for parents.

How Parent PLUS Loan Forgiveness Work

Parent PLUS loans are a popular option for those sending their kids off to college. These federal loans, which are offered to parents of undergraduate students, can make college more affordable in the short term.

Parent PLUS loans come with higher interest rates and fees than federal loans that undergraduates can take out on their own, and they have fewer repayment options. But they’re eligible for many of the same forgiveness programs as other federal loan types.

For example, parent PLUS loans qualify for forgiveness if you choose a certain federal repayment plan, if you work in certain jobs or if you’re permanently disabled. Here are the ways that you may be able to receive forgiveness as a parent PLUS loan borrower.

What Is Parent PLUS Loan Forgiveness?
Like other types of student loan forgiveness, parent PLUS loan forgiveness cuts short your repayment obligations. If you meet certain requirements, you can stop repaying your debt and have the remaining balance wiped away.

Parents who take out PLUS loans must qualify for loan forgiveness based on their own circumstances, not those of the child for whom they borrowed loans. For instance, the Public Service Loan Forgiveness (PSLF) program provides loan forgiveness after a certain time to borrowers who work in government and nonprofit jobs. To get parent PLUS loans forgiven under this program, the parent—not the student—must work in a qualifying job.

Forgiveness for parent PLUS loans also often requires actively confirming your eligibility and submitting an application. In certain instances, though, the government may contact you to explain that you’re eligible for a forgiveness program.

3 Options for Parent PLUS Loan Forgiveness


There are multiple ways to access parent PLUS loan forgiveness, including as a result of the repayment plan you choose or your career path.

1. Income-contingent Repayment


Student borrowers can choose from four different income-driven repayment (IDR) plans, which limit monthly federal student loan bills to a percentage of income and lead to forgiveness after 20 or 25 years. Parent borrowers, however, have access to just one IDR option: income-contingent repayment (ICR).

Under this plan, parent PLUS loans are forgiven after 25 years of repayment. To qualify, borrowers must convert their PLUS loans into a federal direct loan by consolidating their student debt. You can complete the application to consolidate parent PLUS loans online at StudentAid.gov. After consolidating, you can sign up for ICR online for free.

If you sign up for ICR now, according to current IRS rules, it’s possible you’ll have to pay income tax on the amount that’s eventually forgiven. But these forgiveness regulations may change before your repayment term ends.

2. Public Service Loan Forgiveness


The Public Service Loan Forgiveness (PSLF) program provides tax-free forgiveness to borrowers who work full-time for an eligible nonprofit or the government. Borrowers must make 120 qualifying payments before they can apply for forgiveness. While working towards PSLF, you’ll make payments using an income-driven repayment plan, which keeps monthly bills low and allows for the maximum possible forgiveness.

As a parent PLUS borrower whose job makes you eligible for PSLF, there are a few extra steps to take to participate. You’ll need to consolidate PLUS loans into a direct consolidation loan, for example, and then choose ICR as your repayment plan. If you already work for a qualifying employer when your child leaves school and enters repayment, you could receive forgiveness in as early as 10 years, one of the shortest forgiveness time frames available.

3. Discharge Options for Parent PLUS Loans


The terms “forgiveness” and “discharge” have the same essential meaning, but they’re used to refer to different conditions for loan cancellation.

When your loans are erased because you work in a certain type of job, the government refers to that as forgiveness, while the situations below are considered circumstances for discharge. In both cases, you’re no longer required to make loan payments and your repayment is considered complete. Here are the cases when parent PLUS loans are eligible for discharge.

Discharge due to death. If the parent PLUS borrower or the child for whom they took out a loan dies, the loan is forgiven. To receive the discharge, documentation verifying the death must be provided to the student loan servicer.
Total and permanent disability discharge (TPD). If the parent borrower becomes totally and permanently disabled, their loans may be discharged. The government reaches out to eligible Social Security recipients with student loans to let them know TPD is available to them, but others can apply proactively through the federal website DisabilityDischarge.com.
Closed school discharge. Parents may also be eligible for discharge if their child’s school closed before the child could complete their degree program. Contact your student loan servicer to identify whether you’re a candidate.
Alternatives to Student Loan Forgiveness
If the options above aren’t useful for your situation, there are other ways to limit the amount you pay toward parent PLUS loans or take a break from payments altogether if you need to.

Deferment and Forbearance

Parent borrowers can postpone student loan payments through federal deferment and forbearance programs, though interest will continue to accrue. One exception is the government’s Covid-19 forbearance, set to expire on January 31, 2022. Parent PLUS borrowers do not currently have to make payments, and interest is not being collected.

When the Covid-19 forbearance ends, parent PLUS borrowers can apply to put their payments on hold through general forbearance, which covers a wide range of circumstances, or deferment. For PLUS borrowers, the two programs function the same way, but they apply to different situations. In case of unemployment, for example, you can put loans into deferment for up to three years. Certain types of forbearance, such as a mandatory forbearance, can be used for longer periods.

The important element to know about deferment and forbearance is that they may not be difficult to get, but accrued interest can add up fast—and make repayment much more difficult in the long run. Opt for them only if you need help for a short time and don’t expect your loans to be unaffordable for an extended period.

Student Loan Repayment Assistance Programs


If you don’t find any federal options that can help you with your parent PLUS loans, look elsewhere. Many state agencies offer repayment programs for student loans. You usually have to work in certain careers, like a teacher, nurse, doctor or lawyer. Additional requirements often apply, such as working in a rural or high-need area for a specific number of years. While this isn’t the same as forgiveness, you can earn free money to pay off your student loans faster.

Student loan repayment is becoming more popular among the private sector as well. Companies are increasingly offering loan repayment as a benefit for employees. If you’re in the market for a new job, research employers that offer loan repayment as a perk.

Student Loan Refinancing


If you’re in a strong financial position—meaning you have a good or excellent credit score and solid income—student loan refinancing can help you save money on interest. When you refinance, a private student loan company pays off your PLUS loans and replaces them with a new private student loan, ideally at a lower interest rate. That can lead to lower monthly payments or less paid toward your loans in total.

Parent borrowers are often good candidates for refinancing because they are more likely than student borrowers to have a stable financial foundation. That means they could qualify for lower interest rates than the federally set PLUS loan rate they originally received.

Refinancing comes with some drawbacks, though. Since the loan will no longer be federal, you won’t have the option to switch to an ICR plan if you need to lower payments, and forbearance is often limited to 12 or 24 months total throughout the loan term. Most refinance lenders also don’t offer forgiveness. If getting your loans forgiven is a top priority, it may be best to keep your loans as they are and opt for a federal program that can lead to cancellation.

Conclusion

Parent PLUS loan forgiveness is possible under a few different circumstances. On top of those, student loan discharges and refinancing are other options available to parents that struggle to repay a Direct PLUS loan.

About the author

The Editorial Team at Infolearners.com is dedicated to providing the best information on learning. From attaining a certificate in marketing to earning an MBA, we have all you need. If you feel lost, reach out to an admission officer.
Study on Scholarship Today -- Check your eligibility for up to 100% scholarship.

Leave a Comment