After a lifetime of pouring your heart and wallet into them, it’s your kid’s college graduation day. As you wipe away a tear, you think, “I’m all done here, right?”
Not so fast.
If you took out Parent Plus loans, you could be looking at paying for your kids’ college education long after the pomp and circumstance.
As of the second quarter of 2019, 3.5 million borrowers had $93.9 billion in outstanding Direct Plus Loans for parents (and that doesn’t include consolidated loans), according to the Brookings Institute.
Don’t give up hope. There are options for wiping out your Direct Plus Loans through Parent Plus loan forgiveness — but it won’t be easy. (But who ever said parenting was easy?)
Parent Plus Loans Forgiveness Options
Compared to federal loans taken out by students, Direct Plus Loans for parents are much more restrictive when it comes to forgiveness options.
In fact, beyond a few less-than-desirable options (which we’ll explain later) there aren’t any options for Direct Plus Loan forgiveness. Technically.
You cannot consolidate your Direct Plus Loans for parents with any federal student loans that the student received.
However, there are ways to alter your loan to make it eligible for forgiveness.
All options include multiple steps and some extra work, but just like any good parent, we’ll walk you through each one so you can be prepared.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) program potentially offers loan forgiveness after 10 years of qualifying payments if you work in public service (you, not your child).
But if you’re already meeting the work requirements, this could be an attractive option.
Direct Plus Loans for parents aren’t eligible for PSLF, but they can become eligible if you combine them into a federal Direct Consolidation Loan and then apply for the Income-Contingent Repayment (ICR) plan. Here’s how:
Submit your direct consolidation loan application and promissory note either electronically at StudentLoans.gov or by mailing a paper application.
Select the ICR plan (that’s the only eligible option if you have Direct Plus Loans for parents) on the Income-Driven Repayment Plan Request form or visit StudentLoans.gov to complete the request online.
While you are repaying under the ICR plan, you’ll need to provide documentation of your income and certify your family size each year to recalculate your payment amount.
Follow the PSLF requirements for loan forgiveness, which includes 120 qualifying payments and submitting an Employment Certification Form for each employer.
PSLF is not an easy program to navigate, as evidenced by the 1% acceptance rate, but it could be your fastest track to loan forgiveness.
Income-Contingent Repayment Plan
Instead of signing up for PSLF, you could stop at the ICR plan.
The good news is that loan forgiveness via ICR does not depend on you working in public service.
The bad news is that receiving loan forgiveness through ICR takes 25 years. And unlike PSLF, you will be assessed federal income tax on the forgiven amount, so you may need to plan for a big tax bill once you qualify for forgiveness.
But if the alternative to forgiveness is default, you’ll avoid having your wages, Social Security benefits and tax refunds garnished if you stick with ICR, which still requires you to consolidate your Plus loans.
To determine your discretionary income, calculate the difference between your adjusted gross income and the poverty guideline amount for your state and family size, then divide that number by 12.
Under the plan, your monthly loan payment will be either 20% of your discretionary income or a percentage of what you would repay under a standard repayment plan — whichever is less.
If you haven’t repaid that loan in 25 years, any remaining amount will be forgiven.
Death and Disability Discharges
There are a couple of options for getting your Direct Plus Loans forgiven without consolidation — and without having to wait a quarter century — but they are both dependant upon your misfortune.
If you become permanently and totally disabled, you are eligible to have your Direct Plus Loans for parents discharged. This discharge does not apply if your child becomes disabled — only you.
If you’re in the military and become disabled during your service, Veteran Affairs will alert the Federal Student Aid office, who will then notify that your federal loans will be automatically forgiven in 60 days.
If you are not a veteran, you’ll need to fill out the student loan disability discharge application, submitting proper documentation throughout the three-year review period.
You can learn more about student loan disability discharge in this post.
Direct Plus Loans for parents will also be forgiven if either you or your child dies. However, if you and your spouse are both responsible for the loan, and only one of you dies, the surviving parent will need to keep paying.
To qualify for the death discharge, survivors will have to provide proof of death (an original or certified copy of a death certificate) to the loan servicer.
Here’s more information about what happens to student loans when you die.
Alternative Option for Getting Rid of Parent Plus Loans
We’ve talked about forgiveness up until now, but there is another alternative for ridding yourself of Direct Plus Loans: your kid.
If your child graduated from college, got a job and is doing well enough on their own, they can refinance your Direct Plus Loans in their name.
But they have to be the ones to start the process, so if they’re not aware of your financial situation, this may be a good time to talk with them about your inability to pay for the loans.
It may not be easy, but consider it one more life lesson your kids will thank you for later.
Tiffany Wendeln Connors is a staff writer/editor at Codetic. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.