What Parent PLUS Borrowers Need to Know About Student Loan Forgiveness


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President Joe Biden’s announcement last month that he will forgive up to $20,000 in student debt for borrowers will also impact the millions of parents who have taken out loans for their children’s education.

Debt forgiveness applies to so-called Parent PLUS Loans, federal loans that parents can take out to help their dependent children pay for college tuition.

With soaring tuition fees over the past few decades, more and more students are reaching the limits of how much they can borrow in student loans, pushing parents to borrow more.

Learn more about personal finance:
How student loan forgiveness will be applied to your debts
Key events on the road to student loan forgiveness
How to Calculate Your Student Loan Forgiveness Bill

Currently, more than 600,000 parents take out student loans for their children each year, up from around 450,000 in 2000, according to data provided by higher education expert Mark Kantrowitz. The average Parent PLUS loan outstanding is about $30,000, he said.

Many of these parents will now get some relief.

“Students and parents should ask for forgiveness,” Kantrowitz said.

Here’s what you need to know.

1. Am I eligible?

President Joe Biden announced in August that most federal student loan borrowers will be eligible for some remission: up to $10,000 if they don’t receive a Pell Grant, which is a type of assistance available to low-income undergraduate students, and up to $20,000 if they did.

Regardless of any relief their children may be entitled to, parents with Direct PLUS loans will also be eligible for loan forgiveness, as long as they do not exceed the income limits set by the President: $125,000 for individuals or $250,000 for households. If you earned less than these amounts in 2020 or 2021, you should be good.

In some cases, both parents have applied for Parent PLUS loans for their children and both will be individually eligible for loan forgiveness.

If a parent in their own undergraduate years received a Pell Grant, they will be able to get the $20,000 loan forgiveness whether or not their child has the grant in their financial aid package. Likewise, if the parent did not get a Pell Grant, but their child did, the parent may only qualify for $10,000 in cancellation.

You can check your account on Studentaid.gov, under the “My Aid” section to see if you have been awarded the scholarship. Most recipients come from families with incomes below $60,000, Kantrowitz said.

2. What if I have Parent PLUS loans and my own student loans?

The rebate amounts announced by Biden, either $10,000 or $20,000, are per borrower. This means that this will be the limit of your relief, no matter what type of federal student loan you hold. This will also be the limit, regardless of the number of children you have borrowed for.

Although your Parent PLUS loans may be forgiven over your own student loans, the US Department of Education prioritizes loans with higher interest rates.

Currently, Parent PLUS loans carry an interest rate close to 8%, compared to less than 5% for undergraduate student loans.

3. Should I ask for forgiveness with my child?


“Parents should apply separately from their children,” Kantrowitz said, as you are both eligible for your own relief.

The Ministry of Education said an application would be ready by “early October”. Ideally, you’ll be ready to apply for relief as soon as the app launches.

4. What happens if I still have a Parent PLUS balance after the discount?

If you’re still in debt after canceling your student loan, you’ll want to prepare for bills resuming in January.

That’s when the pandemic-era relief policy suspending federal student loan payments and interest is set to end.

You can consider refinancing your remaining balance to take advantage of a lower interest rate, Kantrowitz said.

However, while it may save you money, there are a number of reasons consumer advocates urge caution when considering turning your federal student loans into private debt.

Your rate doesn’t matter if you lose your job, have sudden medical bills, can’t pay your payments, and find default is your only option.

Betsy Mayotte

President of the Institute of Student Loan Counselors

The Ministry of Education allows some borrowers to make reduced monthly payments if their income is low and others can defer their bills without interest if they prove economic hardship. The government also offers loan cancellation programs for teachers and civil servants.

Private lenders generally allow only limited interruptions to your payments, during which interest accrues.

As a result, Betsy Mayotte, president of the Institute of Student Loan Counselors, said she could count on one hand the number of borrowers for whom she thought refinancing their federal loans into private loans was a good idea. .

“Refinancing a private student loan may earn a lower interest rate than federal student loans,” Mayotte said, “but your rate doesn’t matter if you lose your job, have medical bills suddenly cannot afford your payments and find that is your only option.”


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