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Can Parent PLUS Loans Get Income-Based Repayment and Loan Forgiveness?

Mark Kantrowitz

April 08, 2013

You’ve mentioned previously that while Parent PLUS loans are nominally eligible for public service loan forgiveness, they are not eligible for IBR or ICR, which leaves nothing left to forgive. Is there no relief for Parent PLUS loans altogether? Or, is there any way for Parent PLUS loans to qualify for loan forgiveness? — Anonymous

Federal Parent PLUS loans are not eligible for income-based repayment. They are, however, eligible for income-contingent repayment if they are included in a Federal Direct Consolidation Loan and the borrower entered repayment on or after July 1, 2006. This consolidation loan may then qualify for public service loan forgiveness (PSLF).

Federal student loans, such as Federal Stafford loan and Federal Grad PLUS loan, are eligible for income-based repayment (IBR) and pay-as-you-earn repayment (PAYER). They are also eligible for income-contingent repayment (ICR), an earlier version of income-based repayment. These repayment plans base the monthly loan payment on a percentage of discretionary income, as opposed to the amount you owe. They often yield a lower monthly payment than under other repayment plans, especially for borrowers whose total federal student loan debt exceeds their annual income.

Federal parent education loans, such as the Federal Parent PLUS loan, are not eligible for income-contingent repayment, income-based repayment or pay-as-you-earn repayment.

(Private student loans are also not eligible for income-contingent repayment, income-based repayment or pay-as-you-earn repayment. Private student loans, also known as alternative student loans, are non-federal loans that are not guaranteed or funded by the federal government.)

All Federal student and parent loans are eligible for standard 10-year repayment, graduated repayment and extended repayment. Graduated repayment starts off with monthly payments at or slightly above an interest-only payment and increases the monthly payment every two years. The final payment is no more than three times the initial payment. Extended repayment is a level repayment plan like standard repayment, but may use a repayment term of 12, 15, 20, 25 or 30 years, depending on the amount owed.

Federal student and parent loans are both eligible for public service loan forgiveness. Public service loan forgiveness forgives the remaining debt after ten years of full-time employment in a public service job for borrowers who repay their loans under the income-contingent repayment, income-based repayment, pay-as-you-earn repayment or standard repayment plans. However, because Federal Parent PLUS loans are not eligible for the income-contingent, income-based or pay-as-you-earn repayment plans, the only qualifying option is to repay the loans under standard repayment. (Even if Federal Parent PLUS loans were eligible for income-contingent or income-based repayment, the regulations at 34 CFR 685.219(c)(1)(iv)(A) and (B) specifically exclude allowing Federal Parent PLUS loans that were repaid under these repayment plans to qualify for public service loan forgiveness.) But the debt will be paid in full after ten years of payments under standard repayment, theoretically leaving nothing left to forgive.

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