The Cold, Hard Truth About Parent PLUS Loan Forgiveness in 2023

Trapped in relentless debt? Discover the realities of Parent PLUS loan forgiveness in 2023 and take control of your family's financial future.

As a parent, you'd move mountains to secure your child's academic dreams. Taking out Parent PLUS loans was a small price to pay. Or so it seemed. Now you're trapped, ensnared in relentless debt as your child ventures into adulthood. Is total freedom through loan forgiveness just a fantasy, or could it be reality?

This exhaustive guide lifts the veil on Parent PLUS loan forgiveness, revealing the limited avenues and harsh truths. Discover what options exist in 2023, so you can make empowered decisions for your family’s financial future.

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Demystifying Parent PLUS Loans

Before evaluating forgiveness, it’s important to understand what Parent PLUS loans entail.

What are Parent PLUS Loans?

Parent PLUS loans allow biological or adoptive parents to borrow money from the federal government to cover educational expenses for their dependent undergraduate children. This includes tuition, room and board, books, and other related costs.

Unlike most federal student loans, Parent PLUS loans require a credit check and can be taken out regardless of financial need. As the borrower, you hold full responsibility for repayment—the debt obligation cannot be transferred to your child.

Parent PLUS loans carry a higher interest rate of nearly 7% and lack flexible repayment options. You can borrow up to the full cost of attendance, minus any other financial aid received.

Read in Detail here:

Pros and Cons of Parent PLUS Loans

Parent PLUS loans provide funds when savings and scholarships fall short, but they also create a burdensome debt that impacts family dynamics.

Pros:

Bridge the gap between savings/aid and total education costs
Available regardless of income level
Fixed interest rate

Cons:

Responsibility lies solely with the parent
Higher interest rate than federal student loans
Requires credit check
Limited flexible repayment options

For many parents, the crushing weight of Parent PLUS loans sparks an obsessive search for forgiveness. But what are the realities?

The Elusive Myth of Parent PLUS Loan Forgiveness

In desperation, you may pin hopes on student loan forgiveness to eliminate your Parent PLUS debt. But how feasible is this solution?

Does Parent PLUS Loan Forgiveness Exist?

The possibility of getting your Parent PLUS loans forgiven or discharged does exist. However, qualifying is exceptionally challenging, with low approval rates.

Several federal forgiveness programs technically allow Parent PLUS loans. But the rigid requirements and years-long commitments mean very few succeed in shedding their debt this way.

Was Parent PLUS Loan Forgiveness Possible Under Biden?

In August 2022, President Biden announced plans to cancel up to $10,000 in federal student loan debt for borrowers earning under $125,000. This initially provided hope for Parent PLUS loan holders.

However, the Supreme Court blocked Biden’s forgiveness program in June 2023. Hinging hopes solely on government intervention is risky. But other options remain.

Navigating the Labyrinth of Federal Forgiveness

Though available, federal forgiveness programs for Parent PLUS loans are deliberately complex. Expect a demanding journey with little payoff.

Income-Driven Repayment (IDR) Plans

IDR plans like Income-Contingent Repayment (ICR) limit payments to a percentage of your disposable income and discharge any remaining balance after 20-25 years.

But there’s a catch. Parent PLUS loans don’t automatically qualify for IDR. You must first consolidate them into a Direct Consolidation Loan. Even then, approval isn’t guaranteed. You must recertify income annually. Higher earnings could mean payments exceed standard repayment amounts.

Few see forgiveness under IDR. Any discharged sum is considered taxable income.

Public Service Loan Forgiveness (PSLF)

For PSLF, you must make 120 qualifying payments under an IDR plan while working full-time for an eligible employer like government or nonprofit organizations. The remaining balances are forgiven after 10 years.

But PSLF’s approval odds are dismal, with just a 2% success rate. Some believe they've met all requirements only to later get rejection letters.

Attempting federal forgiveness for Parent PLUS relief often leads borrowers down a demoralizing path. Other options exist.

Should You Pursue Federal Forgiveness Programs?

Forgiveness for Parent PLUS loans is possible but not probable. The rigid criteria and barely-there approval rates prevent most borrowers from realizing their dream of debt-free living.

Relying solely on these programs could prolong the pain. But by taking purposeful action, you can seize control of your finances.

Alternatives - Refinancing and Aggressive Repayment

While federal forgiveness lurks as a distant possibility, more immediate relief comes from tackling your debt head-on. Consider these proactive alternatives:

Refinancing Parent PLUS Loans

Refinancing involves taking out a new loan to pay off the existing debt at better terms, often a lower rate. This is done through private lenders.

Be aware you’ll lose federal protections like IDR plans and deferments. Do your research to ensure favorable rates and terms that align with your goals.

Accelerated Repayment Strategies

Repaying Parent PLUS loans swiftly limits interest costs. But it requires planning and discipline.

Create a monthly budget to maximize income for extra payments
Implement the debt snowball method to pay off debts from smallest to largest methodically
Make lifestyle changes to boost earnings available for repayment
Avoid taking on new debts before existing loans are defeated

While not as enticing as forgiveness, these actions put victory over debt within your grasp.

Finding Forgiveness for Special Circumstances

Though limited, forgiveness options for special cases do exist. Two worth noting are disability discharge and death discharge.

Disability Discharge

If a parent who took out a PLUS loan becomes totally and permanently disabled, the loan may qualify for a discharge. Specific criteria include:

The disability must prevent you from working to earn income.
It must be expected to last indefinitely or result in death.
You must provide documentation from a physician.

This permanently cancels your repayment obligation. Just be aware discharged debt may count as taxable income.

Death Discharge

If the parent borrower of a PLUS loan dies, or the student beneficiary dies, the loan may qualify for discharge. Documentation proving the death will be required.

While morbid to consider, this avenue does offer relief to grieving families. They must still navigate the application process during a difficult time.

Overcoming Parent PLUS Loans - You Are the Solution

Freedom from oppressive Parent PLUS loan debt rests in your hands. Relying on forgiveness programs leads most borrowers down a disappointing path. But alternatives exist.

Arm yourself with financial wisdom. Approach repayment systematically, budgeting to accelerate progress. Refinance for better loan terms. Forgiveness may come someday, but for now, you hold the power.

Act with intention. Cut expenses. Increase earnings. Challenge yourself and your family to make sacrifices today, so your tomorrow is debt-free. With focus and perseverance, you can overcome.

FAQs :

What is the double consolidation loophole for parent PLUS loans?

The double consolidation loophole for Parent PLUS loans is a strategy that allows Parent PLUS loan borrowers to access better repayment options that are normally not available on Parent PLUS loans. Here's how it works:
The parent borrower first consolidates their existing Parent PLUS loans into two Direct Consolidation loans.
Then, they consolidate these two Direct Consolidation loans into a single new Direct Consolidation loan.
This process can provide access to income-driven repayment plans (such as PAYE, IBR, RePAYE, and SAVE) that offer lower monthly payments based on the borrower's income and family size. It can make loan repayment more manageable for parents who may have initially faced limited repayment options with Parent PLUS loans.

Is it worth consolidating parent PLUS loans?

Whether consolidating Parent PLUS loans is worth it depends on your financial situation and goals. Consolidation can provide access to income-driven repayment plans and potentially lower monthly payments, making it more manageable for some borrowers. However, it may also extend the repayment term, resulting in more interest paid over time. It's essential to consider your specific circumstances and consult a financial advisor to determine if consolidation aligns with your financial objectives.

How do I not pay back a parent PLUS loan?

To avoid paying back a Parent PLUS loan, you would typically need to explore options such as loan forgiveness or discharge, which are available in certain situations like death, disability, or if the school closes. However, attempting to avoid repayment through default or non-payment is not advisable, as it can lead to serious consequences, including damaged credit and collection actions.

How can I get Parent PLUS Loan forgiveness?

One way to potentially have your Parent PLUS Loans forgiven is through an Income-Contingent Repayment Plan. This plan calculates your monthly payments based on your income and family size, and any remaining balance may be forgiven after a certain number of years of qualifying payments .

Do Parent PLUS Loans qualify for forgiveness based on the child’s circumstances?

No, Parent PLUS Loans must qualify for forgiveness based on the parent's circumstances, not those of the child for whom the loan was taken .

What are the eligibility criteria for Parent PLUS Loan forgiveness?

Eligibility for forgiveness depends on factors like the repayment plan chosen and the number of qualifying payments made. It's essential to consult with your loan servicer for specific eligibility details.

Are there other forgiveness programs for Parent PLUS Loans?

Apart from Income-Contingent Repayment, there may be other forgiveness programs based on your profession, such as Public Service Loan Forgiveness (PSLF) if you work in a qualifying public service job. Check with your loan servicer and explore potential options .

Is Parent PLUS Loan forgiveness affected by the child’s student loans?

Parent PLUS Loan forgiveness is based solely on the parent's loan and repayment circumstances, and it is not directly tied to the child's student loans or their repayment

The Cold, Hard Truth About Parent PLUS Loan Forgiveness in 2023