Student debt: Can Parent PLUS Loans be forgiven?
(NEXSTAR) – While the conversation surrounding federal student loan forgiveness continues, some parents have been left wondering if the loans they took out on behalf of their college students will qualify for the same relief.
The Direct PLUS Loan, commonly known as the Parent PLUS Loan, is available for eligible parents of dependent undergraduate students. According to the latest data from the Department of Education, parents of roughly 3.6 million students owe over $107 billion in Parent PLUS Loans as of March 2022. That’s about 6% of the entire $1.6 trillion in federal student loan debt Americans owe.
Biden, when asked in April about using executive authority to cancel student loan debt, told reporters he is not considering $50,000 in debt reduction. Multiple sources have confirmed to The Hill that Biden was considering expunging at least $10,000 per borrower.
Though sources have indicated debt relief could be restricted based on income level or loan type, additional details of widespread federal loan forgiveness haven’t been announced. The most recent update from the White House has been President Biden telling reporters on Wednesday that he will make a decision on student loan forgiveness by the end of August.
That also means it isn’t clear who will and won’t qualify for student debt relief. An analysis from Peter Granville, senior policy associate with The Century Foundation, says if the Biden administration were to restrict relief to “per student” rather than “per borrower,” the parents responsible for the Parent PLUS Loans may be excluded from debt cancelation.
Outside of waiting for potential widespread student loan forgiveness, parents can currently have their debt canceled in a limited number of ways.
According to the Federal Student Aid office, parent PLUS loans can be discharged if the parent dies or becomes totally and permanently disabled, or if their loan is discharged in bankruptcy. Loans could also be discharged if the student for whom the loan was borrowed dies, doesn’t complete their program before their school closes, or withdraws from school and the school does not refund the parents’ loan money.
Parent PLUS loan borrowers are also only eligible for one income-driven repayment option, the Income-Contingent Repayment Plan, or ICR. To use this plan, parents must first consolidate their PLUS loans into a Direct Consolidation Loan, then repay that loan under ICR.
Payments on the ICR plan are either 20% of the borrower’s discretionary income or what they would “pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.” The lesser of the two is used, according to FSA. Parents can pursue Public Service Loan Forgiveness for their PLUS loans, but can only do so while using the ICR plan.
Ultimately, it’s too soon to tell whether Parent PLUS Loan borrowers are being considered in potential student loan forgiveness by the Biden administration.
So far, roughly 1.3 million borrowers have seen $26 billion in student debt forgiveness since President Biden took office.
In addition to the thousands of borrowers that have received debt cancellation under the revamped PSLF program, another 690,000 borrowers have had a total of $7.9 billion in student loans erased through discharges due to borrower defense and school closures. Over 400,000 borrowers have received more than $8.5 billion in debt forgiveness through total and permanent disability discharge.
The Biden administration agreed to cancel $6 billion in federal student debt for roughly 200,000 borrowers as part of a proposed class-action settlement. The borrowers claim their college defrauded them and their applications for relief from the Department of Education were delayed for years.