By: Charlestien Harris
When the Public Service Loan Forgiveness Program (PSLF) was made public, I wanted to know how the loans taken out by some parents would be affected by this opportunity. After all, getting rid of as much debt as possible is a key part of financial responsibility – it helps keep your finances in good shape and it helps keep your budget in balance!
First, I’m going to explain what a Parent PLUS Loan is so you can figure out if it’s for you or not. Parent PLUS loans are federal student loans issued directly to parents. The federal government reviews your credit and then provides some flexibility in repayment options through this loan option.
Parents, if you took out a student loan to send your child to college, this article is for you.
Here are the guidelines that have been issued when it comes to whether or not your Parent PLUS loan qualifies for the PSLF Waiver program.
- The first thing you need to know is Parent PLUS loans are not directly eligible for income-based repayment plans, which are required to have a remaining debt to be canceled after 120 qualifying payments. Parent PLUS loans do not qualify for the limited waiver unless consolidated with non-parent loans. Contact your repairer for your options.
However, a federal direct consolidation loan that includes Parent PLUS loans may be eligible for Income Contingent Repayment (ICR). The borrower must have started repaying on or after July 1, 2006.
- To qualify for the rebate, 120 qualifying payments must be made while loans are being repaid under the Direct Lending Program.in an eligible repayment plan (income-contingent repayment or standard repayment), while the borrower works full-time in an eligible government job.
- An income-based repayment plan is the only income-based repayment plan available to Parent PLUS borrowers. To qualify for this parent student loan forgiveness, a borrower must consolidate their PLUS loan into a direct consolidation loan and repay the consolidation loan under the income-contingent repayment plan. The borrower must be working full-time in an eligible public service job.
- If a borrower pays off their loans under the standard repayment plan for 10 years, they will have nothing left to forgive. The borrower will need to repay their loans under an income-driven repayment plan to obtain forgiveness under the PSLF.
Other PSLF options may include:
- The parent works for a federal agency. Federal agencies may repay federal student loans, including Parent PLUS loans, as an employee recruitment or retention tool, but only if the employee is the borrower. Therefore, a Parent PLUS loan can be waived if the parent works for the federal agency, but not if the student works for the federal agency.
- Some military branches may offer forgiveness programs. Parent PLUS loans can be repaid under the various military loan forgiveness programs, depending on the service. Loan forgiveness may be limited to Parent PLUS loans borrowed in the name of a student who is the service member. Private loans are not eligible.
- Some states offer student loan forgiveness programs. Several states offer student loan repayment assistance to borrowers who move within the state or to specific cities or counties within the state. Parent loans, including Parent PLUS Loans and Private Parent Loans, may be eligible.
- Mississippi has a program called the Winter-Reed Teacher Loan Repayment Program (WRTR), which is designed to help new teachers on the traditional track repay their undergraduate student loans. Visit https://www.msfinancialaid.org/wrtr for more information.
- Arkansas has two student loan forgiveness programs for teachers and veterinarians. Visit https://sams.adhe.edu for more information.
- Employer-paid student loan programs. Loans to parents are eligible for many employer-paid student loan repayment assistance programs, commonly known as LRAPs. This includes both Parent PLUS Loans and Private Parent Loans. Check if your employer offers this option.
- Loan release programs exist, but have strict stipulations. Parent PLUS loans are also eligible for certain waivers. Visit www.studentloanhero.com/featured/student-loan-discharge-programs for more information.
- Refinancing a parental loan is one option. If you don’t qualify for loan forgiveness, you may be able to lower your payments by refinancing the Parent PLUS loan. However, a federal loan can only be refinanced into a private loan. This means that if you have a federal loan, you will lose federal loan protections such as: forbearance and deferment, choice of repayment option, and potential student loan cancellation. Be sure to consider this option very carefully. You may also have the option of refinancing your parental loan on behalf of your child. This may make sense if your child is now a graduate and working, and you are approaching retirement. Keep in mind, however, that not all loan officers will offer this type of student loan refinance to parents.
For more information on civil service loan forgiveness, go to www.whitehouse.gov/publicserviceloanforgiveness.
Student loans have been a hot topic lately, and because of that, I wanted to provide some additional information for parents who have taken out Parent PLUS loans to help pay for their child’s college education. Hope this gives you a better understanding of whether or not your loan qualifies for the PSLF Waiver program. Don’t forget: the deadline to apply is October 31!
For more information on this and other financial topics, you can call me at 662-624-5776 or email me at [email protected]
Until next week – stay financially fit!
Charlestien Harris is a financial contributor to DeSoto County News. She is a financial expert with Southern Bancorp Community Partners whose articles appear in a number of publications in the region. You’ll see his columns weekly on the DeSoto County News website and on our social media channels.