Federal Parent PLUS loans are eligible for loan forgiveness, but the process is a little complicated. Private parent loans may also be eligible for loan forgiveness, in certain circumstances.
The loan forgiveness options available to Federal Parent PLUS loans include forgiveness after 25 years in an income-contingent repayment plan and Public Service Loan Forgiveness.
Parent PLUS loans are not eligible for Teacher Loan Forgiveness, which is restricted to Federal Stafford loans.
Parent PLUS Loan Forgiveness through Income-Contingent Repayment
Parent PLUS loans are not directly eligible for income-driven repayment plans.
However, a Federal Direct Consolidation loan that includes Parent PLUS loans may be eligible for Income-Contingent Repayment (ICR). The borrower must have entered repayment on or after July 1, 2006, per the regulations at 34 CFR 685.208(a)(2)(iv)(D).
Parent PLUS loans in the Direct Loan program and Federal Family Education Loan Program (FFELP) are eligible if included in a Federal Direct Consolidation Loan.
Income-contingent repayment bases the monthly payment on 20% of the borrower’s discretionary income, which is defined as the amount by which the borrower’s adjusted gross income (AGI) exceeds 100% of the poverty line.
The remaining debt is forgiven after 25 years of payments (300 payments). This forgiveness is taxable under current law.
Thus, to qualify a Parent PLUS loan for loan forgiveness in the income-contingent repayment plan, the loan needs to be included in a Federal Direct Consolidation Loan.
Public Service Loan Forgiveness for Parent PLUS Loans
Public Service Loan Forgiveness reduces the forgiveness period from 25 years (300 payments) to 10 years (120 payments). The loan forgiveness is tax-free.
Parent PLUS loans are eligible if they are in the Direct Loan program or included in a Federal Direct Consolidation Loan. The borrower must work full-time in a qualifying public service job.
Eligible repayment plans include standard repayment and income-driven repayment plans. If a borrower repays their loans under the standard repayment plan for 10 years, there will be nothing left to forgive. So, the borrower will need to repay their loans in an income-driven repayment plan to earn some forgiveness under public service loan forgiveness.
If a borrower consolidates their Parent PLUS loans into a Federal Direct Consolidation Loan, the consolidation loan will be eligible for income-contingent repayment, as noted above.
Another option is the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program, which was enacted by the Consolidated Appropriations Act, 2018 (P.L. 115-141). A Federal Direct Consolidation Loan that repaid a Federal PLUS Loan is eligible for TEPSLF if some or all of the 120 qualifying payments were made under a graduated repayment or extended repayment plan, provided that the last year of payments were at least as much as the borrower would have paid under an income-driven repayment plan.
Other Options for Loan Forgiveness of Parent Loans
Federal agencies may repay federal education loans, including Parent PLUS loans, as an employee recruitment or retention tool, but only if the employee is the borrower of such loans. Thus, a Parent PLUS loan may be forgiven if the parent works for the federal agency, but not if the student works for the federal agency.
Parent PLUS loans may be eligible for repayment under the various military loan forgiveness programs, depending on the service. The loan forgiveness may be limited to Parent PLUS loans borrowed on behalf of a student where the student is the Servicemember. Private parent loans are not eligible.
Several states offer student loan repayment assistance for borrowers who move to the state or specific cities or counties within the state. Parent loans, including both Parent PLUS and private parent loans, may be eligible.
Parent loans are eligible for many employer-paid student loan repayment assistance programs, commonly known as LRAPs. This includes both Parent PLUS and private parent loans.
Parent PLUS loans are also eligible for certain discharges, including:
- Death of the parent or death of student on whose behalf the Parent PLUS loan was borrowed
- The parent (but not the student) becomes totally and permanently disabled
- Bankruptcy discharge (rare)
- Closed school discharge
- False certification discharge
- Identity theft discharge
- Unpaid refund discharge
- Defense to repayment
Private parent loans may also be eligible for a death or disability discharge, depending on the lender.