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

Mark Kantrowitz

April 08, 2013

ICR and PSLF for Parent PLUS Loans

But there is a workaround that may allow some borrowers to qualify for ICR and public service loan forgiveness.

Borrowers who entered repayment on or after July 1, 2006 may repay a Federal Direct Consolidation Loan under the income-contingent repayment plan even if the consolidation loan repaid Federal Parent PLUS loans, per the regulations at 34 CFR 685.208(a)(2)(iii) (or 34 CFR 685.208(a)(2)(iv)(D), as amended November 1, 2012). This enables recent Federal Parent PLUS loans to qualify for public service loan forgiveness if and only if they are included in a Federal Direct Consolidation Loan. Unconsolidated Federal Parent PLUS loans are not eligible. The Federal Direct Consolidation Loans are also eligible for 25-year forgiveness for borrowers who don’t qualify for public service loan forgiveness, after 25 years of payments under income-contingent repayment, standard repayment or the economic hardship deferment.

Federal Direct Consolidation Loans that refinance a Federal Parent PLUS loan, however, are not eligible for the income-based or pay-as-you-earn repayment plans.

The availability of ICR for Federal Parent PLUS loans may enable retired parents on fixed income to save money by stretching out the repayment term on the Federal Parent PLUS loans, similar to the method suggested for federal student loans in Ask Kantro: People Retiring with Student Loans May Save Money with Income-Based Repayment.

(The regulations are ambiguous whether “entered repayment” means just on the Federal education loans in question or on any of the borrower’s Federal education loan. If the former interpretation applies, a borrower with Federal Parent PLUS loans entering repayment prior to July 1, 2006 might qualify for income-contingent repayment by consolidating the loans into a Federal Direct Consolidation loan that enters repayment on or after July 1, 2006. However, the latter interpretation appears to be the correct interpretation, meaning that only the more recent Federal Parent PLUS loans may qualify for income-contingent repayment through consolidation and only if the borrower did not enter repayment on any federal education loans prior to July 1, 2006.)

Federal Direct Parent PLUS loan borrowers and borrowers of Federal Direct Consolidation Loans that repaid a Federal Parent PLUS loan may also petition the US Department of Education to allow repayment under an alternate repayment plan. The borrower must demonstrate that the terms and conditions of the other repayment plans are “not adequate to accommodate the borrower’s exceptional circumstances.” Alternate repayment plans are described in the regulations at 34 CFR 685.208(l) and in practice are similar to the income-contingent and income-based repayment plans. The alternate repayment plan is not eligible for public service loan forgiveness or the 20-year or 25-year forgiveness available under income-contingent, income-based or pay-as-you-earn repayment.

Generally, Federal Parent PLUS loans are not eligible for other federal loan forgiveness programs, such as teacher loan forgiveness. They may, however, be eligible for the student loan repayment programs sponsored by federal agencies under the authority of 5 USC 5379. They may also be eligible for non-federal loan repayment and loan forgiveness programs.

Federal Parent PLUS loans are eligible for other options for financial relief, such as deferments, forbearances and the total and permanent disability discharge.

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