Student debt: can Parent PLUS loans be forgiven?

(NEXSTAR) – As the conversation around federal student loan relief continues, some parents are wondering if the loans they have taken out on behalf of their students will receive the same relief.

The Direct PLUS Loan, commonly referred to as the Parent PLUS Loan, is available to eligible parents of dependent undergraduate students. According to the latest data from the Department of Education, parents of about 3.6 million students owe more than $107 billion in Parent PLUS loans as of March 2022. That’s about 6% of all federal debt. of $1.6 trillion that Americans owe.

Biden, asked in April about using executive power to write off student loan debt, told reporters he was not planning to reduce his $50,000 debt. Multiple sources confirmed to The Hill that Biden plans to cut at least $10,000 per borrower.

While sources said debt relief could be limited based on income level or type of loan, additional details on the widespread federal loan cancellations were not announced. The latest update from the White House was that President Biden told reporters on Wednesday that he would make a decision on canceling student loans by the end of August.

It also means that it is unclear who will and will not be eligible for student debt relief. An analysis by Peter Granville, senior policy associate at the Century Foundation, indicates that if the Biden administration were to limit relief to “per student” rather than “per borrower,” parents responsible for Parent PLUS loans could be excluded from debt cancellation.

Aside from the expectation of a potential widespread cancellation of student loans, parents can currently have their debt canceled in a limited number of ways.

According to the Federal Office of Student Aid, parent PLUS loans can be canceled if the parent dies or becomes totally and permanently disabled, or if their loan is canceled in the event of bankruptcy. Loans could also be canceled if the student for whom the loan was borrowed dies, does not complete their program before their school closes, or withdraws from school and the school does not repay the loan money. parents.

Parent PLUS loan borrowers are also only eligible for one income-based repayment option, the Income Contingent Repayment Plan, or ICR. To use this plan, parents must first consolidate their PLUS loans into a direct consolidation loan and then repay that loan under the ICR.

Payments on the ICR plan are either 20% of the borrower’s discretionary income, or what they “would pay on a repayment plan with a 12-year fixed payment, adjusted for your income.” The lesser of the two is used, according to the FSA. Parents can apply for Public Service loan forgiveness for their PLUS loans, but can only do so using the ICR plan.

Ultimately, it’s too early to tell whether Parent PLUS Loan borrowers are considered in the Biden administration’s potential student loan cancellation.

So far, about 1.3 million borrowers have seen $26 billion in student debt forgiveness since President Biden took office.

In addition to the thousands of borrowers who received debt forgiveness under the revamped PSLF program, another 690,000 borrowers have seen a total of $7.9 billion in student loans wiped out by discharges due to borrower defense and school closures. More than 400,000 borrowers have received more than $8.5 billion in debt forgiveness through total and permanent disability release.

The Biden administration has agreed to forgive $6 billion in federal student debt for about 200,000 borrowers in a proposed class action settlement. Borrowers say their college defrauded them and their requests for relief from the Department of Education have been delayed for years.


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