Help!!! My Parent PLUS loans are presently in a forbearance that
will end in a few months. My expected installment payments are more
than my monthly income. I am retired and my husband is on disability
retirement. We have another son presently attending college. What
options are available to me (if any)? Do I ask for an extended
repayment, or continue with an economic hardship deferment? My husband
was a teacher for 33 years and I was a school nurse for 27 years; are
there any programs to reward our years of service in an inner city
environment? I am sure that I am not the only retired parent
attempting to repay the Parent PLUS loans.
— Rhonda B.
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Your options are unfortunately limited. Income-contingent repayment
and income-based repayment are not available for Parent PLUS loans, so
the only available repayment plans are standard repayment, graduated
repayment and extended repayment. Depending on the loan balance,
graduated repayment may initially have a lower monthly payment than
extended repayment, but this payment will increase every two years and
will eventually exceed the monthly payment under extended
repayment. In most cases extended repayment yields the lowest monthly
payment for borrowers who are ineligible for income-based repayment.
In rare circumstances the US Department of Education will negotiate a
more affordable repayment plan for loans in the Direct Loan program.
However, they will want monthly payments that are at least 1% of the
outstanding loan balance and higher than any involuntary garnishment amount.
You might qualify for the economic hardship deferment, but this is not
a permanent solution. The economic hardship deferment is limited to a
maximum of three years. Interest continues to accrue on the Parent
PLUS loan during the economic hardship deferment and will be
capitalized at the end of the deferment, increasing the size of the
loan. Like a forbearance, the economic hardship deferment will dig your
debt into a deeper hole.
Loan forgiveness programs such as public service loan forgiveness are
generally not retroactive. They are based on future service, not past
service. Also, the Parent PLUS loan is not eligible for public service
loan forgiveness. (Technically the Parent PLUS loan is eligible for
public service loan forgiveness. However, Parent PLUS loans are not
eligible for income-based repayment or income-contingent
repayment. That leaves just standard ten-year repayment or the
equivalent available for use with public service loan
forgiveness. Since the forgiveness occurs after ten years of full-time
employment in a public service job while repaying the loans in the
Direct Loan program, one must use income-based repayment or
income-contingent repayment to reduce the monthly payment enough to
obtain a financial benefit from the forgiveness. With standard
ten-year repayment there will be nothing left to forgive at the end of
the ten-year period.)
Another option is to come out of retirement to seek employment
sufficient to repay the debt.
Try to avoid defaulting on the loans. The federal government has
strong powers to compel repayment, including garnishing up to 15% of
Social Security benefit payments and offsetting federal and state
income tax refunds. (Depending on the amount borrowed, the garnishment
amount may be more or less than the monthly payment under extended
repayment.) Federal education loans cannot be discharged in bankruptcy
unless the borrower can demonstrate undue hardship in an adversarial
proceeding; less than 1% of borrowers are successful in getting such a
discharge. Collection charges of up to 25% will be deducted from each
payment, including involuntary payments. The default will ruin your
credit, possibly preventing you from getting credit cards, auto loans
and home mortgages. You would also lose eligibility for further Parent
If you are denied a Parent PLUS loan, your son will become eligible
for the same increased unsubsidized Stafford loan limits that are
available to independent students, but the increase is only $4,000 or
$5,000 a year, depending on year in school. That's much less than the
cost-of-attendance cap on the Parent PLUS loan. However, if the
increase in the unsubsidized Stafford loan limits yields enough money,
you don't necessarily need to apply for and be denied a Parent PLUS
loan for your son to qualify for the higher unsubsidized Stafford loan
limits. College financial aid administrators have the authority under
the regulations at 34 CFR 682.201(a)(3) and 34 CFR
685.203(c)(1)(ii) and (iii) to grant the higher unsubsidized
Stafford loan limits in "exceptional circumstances" such as "the
student's parent receives only public assistance or disability
You might find Fastweb's Quick Reference Guide on Repayment Student Loans
to be helpful.