What to know about repaying parent PLUS loans

When it comes to knowing whether your student loan qualifies for repayment moratoriums, or forgiveness and forbearance programs, the answer can usually be summed up in two words: “It depends.”

That’s the short answer anyway. The long answer? Qualification often depends on whether you have a federal loan or private or state loan, whether it’s for an undergraduate or graduate student, or one held by the parent, and the particulars of loan repayment and consolidation programs

Take this recent question about a parent student loan, called PLUS loans, from Hazel T.:

“I have a parent loan and have been paying on it for several years … and have paid down the loan quite a bit. Can you shed some light on why parent loans are not included in the loan forgiveness program, and if the government erases all federal student loans, will that include parent loans?

To clarify, borrowers with PLUS loans — along with other federal student loans — are under the same repayment and interest rate moratorium that President Joe Biden extended through Aug. 31.

Parent PLUS loans are taken out by parents and even grandparents to help pay for a child or grandchild’s college education. More than 3.7 million families owe at least $104 billion, according to a report from the Century Foundation. The report noted that parent PLUS borrowers, who can borrow up to the cost of attendance of a particular school, took out an average of $15,116 in 2017, compared to the average of $6,616 for direct subsidized and unsubsidized student loans.

These loans generally have higher interest rates than other federal loans, and this can lead to a “perfect storm of financial troubles” for borrowers helping to pay for the education of a child or grandchild, the foundation said.

Parent PLUS borrowers still have more than half of their initial balance left to pay after 10 years, and 38% after 20 years, according to the foundation.

As to the second part of Hazel T.’s question on whether Biden would cancel PLUS loan balances, much is still up in the air. According to some reports, the president’s plan to cancel up to $10,000 in federal student loan debt per borrower would include PLUS loan borrowers.

But whether that plan survives is a political question.

There are many caveats involving the discharge of PLUS loans, said Mark Kantrowitz, a student loan expert and author of “How to Appeal for More College Financial Aid.” Overall, he said, options to reduce monthly payments or to seek forgiveness are less generous for PLUS loan borrowers.

For example, Kantrowitz said, PLUS loan borrowers are not eligible for the teacher loan forgiveness program. That program is limited to borrowers with federal Stafford loans. But parent borrowers may be eligible for the Public Service Loan Forgiveness after making 120 qualifying payments, he said.

All federal loans, including PLUS loans, are eligible for a death or disability discharge, based on the death or total permanent disability of the borrower, Kantrowitz said. Parent PLUS loans are also eligible for a discharge upon the death of the student on whose behalf the money was borrowed.

Given all these complexities, I recommend contacting your student loan servicing company to get more detailed answers to your specific questions. There are too many “it depends” that can impact your situation.