Student Loan Forgiveness for Parents: 6 Ways To Get Out of Debt for Your Child’s Education
If the Biden administration’s federal student loan forgiveness plan gets struck down by the U.S. Supreme Court, as many expect, it won’t just impact millions of student borrowers. It will also impact parents who have taken out loans on behalf of their children.
See: New Student Loan Forgiveness Rule Simplifies Process — Who Qualifies?
Learn: Student Loan Forgiveness Rule Quietly Changes — How It Affects Borrowers’ Debt
For these parents, having to resume loan payments after a pause of more than three years could create all kinds of financial challenges — especially those who took out Parent PLUS loans, also known as Direct PLUS loans.
Many parents took out PLUS loans when student borrowers reached their federal student loan limits, according to the Saving for College website. These are unsubsidized loans that carry higher interest rates and origination fees than other federal student loans, and they also accrue interest while students are still in school.
Parents who borrowed more on PLUS loans than they can now afford to repay might be forced to seek debt relief options elsewhere. Forgiveness is available on PLUS loans, but only in certain circumstances. Here’s a look at six of them.
Public Service Loan Forgiveness
Parents might be eligible for Public Service Loan Forgiveness (PSLF) after making 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Parent PLUS loans are eligible for PSLF if they are in the Direct Loan program or included in a Federal Direct Consolidation Loan, according to Saving for College.
Temporary Expanded Public Service Loan Forgiveness
This is similar to the PSLF program. According to the Federal Student Aid website, to qualify for relief under Temporary Expanded Public Service Loan Forgiveness (TEPSLF) you must meet the following requirements:
Made all of your payments under a qualifying repayment plan for TEPSLF
Had at least 10 years of full-time employment certified by a qualifying employer and approved by MOHELA, the U.S. Department of Education’s federal loan servicer for the PSLF program
Met the TEPSLF requirement for the amount you paid 12 months prior to applying for TEPSLF. Also, the last payment you made before applying for TEPSLF must be at least as much as you would have paid under an income-driven repayment (IDR) plan.
Made 120 qualifying payments under the new requirements for TEPSLF while working full-time for your qualifying employer or employers
Income-Contingent Repayment
Although Parent PLUS loans are not directly eligible for income-driven repayment plans, a Federal Direct Consolidation loan that includes Parent PLUS loans might be eligible for Income-Contingent Repayment. The borrower must have entered repayment on or after July 1, 2006, according to Saving for College. With income-contingent repayment, the payment amount is based on 20% of the borrower’s discretionary income. The remaining loan balance is forgiven after a 25-year repayment term.
Military Forgiveness
Your Parent PLUS loan might be eligible for military loan forgiveness programs as long as the money was borrowed on behalf of a student who is a member of the U.S. military.
Federal Employment Forgiveness
Certain U.S. government agencies repay federal education loans — including Parent PLUS loans — as a recruitment and retention tool. The Parent PLUS loan would only be forgiven if the Parent PLUS loan borrower works for the agency, so it would mainly apply to parents rather than students.
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Bankruptcy
This option should only be used as a last resort for parents and other student loan borrowers. The U.S. Department of Justice in November 2022 announced a new process for handling bankruptcy cases that aims to “help ensure consistent treatment of the discharge of federal student loans, reduce the burden on borrowers of pursuing such proceedings and make it easier to identify cases where discharge is appropriate.”
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This article originally appeared on GOBankingRates.com: Student Loan Forgiveness for Parents: 6 Ways To Get Out of Debt for Your Child’s Education
