Student Loan Forgiveness May or May Not Include Parent PLUS Loans

by | Nov 30, 2022 | College Expenses |

The question of when student loan payments will resume, along with “if” those payments will resume for all borrowers, is still on the minds of lawmakers, lenders, and borrowers. Although Joe Biden has repeatedly extended the loan pause, that may end on Aug. 31, 2022 and loan cancellation is still a possibility. But will student loan forgiveness include Parent PLUS loans?

An often-forgotten population that’s deeply affected by student loan debt is the parents of students. Parent PLUS loans are offered through the Department of Education to assist parents of college and higher-education students. If Biden offers loan forgiveness, it’s unclear whether parents who took out PLUS loans would also be eligible for that forgiveness.

Biden is reportedly considering canceling $10,000 in student loan debt per borrower

The president hasn’t made a formal announcement, but may soon. He is reportedly considering a plan that would forgive $10,000 per borrower who earns under $125,000 annually. This would be a means-testing student loan forgiveness program, so those above the income threshold wouldn’t have any loans forgiven.

These plans are still uncertain, and sources have made little mention of other types of borrowers and whether they might qualify for student loan forgiveness.

Parent PLUS loan borrowers may be eligible for forgiveness

Certain types of borrowers will not benefit from federal student loan forgiveness. Those who took out private student loans, for example, won’t qualify for a blanket loan forgiveness. The Biden administration only has the power to eliminate portions of loans taken out under the federal government.

Since Parent PLUS loans are a product of the Department of Education, it’s conceivable that Biden’s plan would extend to those borrowers as well as student borrowers. Parents often take out Parent PLUS loans to bridge the gap between their children’s financial aid and the cost of their chosen educational institution.

According to Education Department documents obtained by Politico, Parent PLUS loans could be eligible for the latest forgiveness package. There is still some uncertainty about whether graduate school loans would qualify for forgiveness.

The Education Department seemed to expect both Parent PLUS loans and FFEL loans (federal loans held by private entities) to qualify for forgiveness. In addition, all federal student loans would be eligible.

Parent PLUS borrowers are eligible for the Income-Contingent Repayment Plan

If Parent PLUS loans end up not being included in Biden’s soon-to-be-announced proposal, there are ways for parent borrowers to find some relief from student loans. An Income-Contingent Repayment Plan is available to Parent PLUS borrowers.

To sign up for the income-contingent repayment plan, the borrower must first consolidate loans into a direct consolidation loan. This is not a forgiveness plan, but one that modifies your required payment to ease the financial burden.

Parent PLUS loans may also be eligible for Public Service Loan Forgiveness (PSLF). Since Parent PLUS loans are direct loans, they qualify for PSLF. The borrower must work a specific amount of time in a qualified government or non-profit organization and meet strict guidelines to receive PSLF.

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