Question: I just turned 60 and will probably have to work 20 more years. I currently owe about $50,000 in Parent PLUS loans that have compounded to this amount through the years. My son has no means to pay his part, due to incarceration in the past, presently and in the future. Can I get relief or am I stuck with the entire loan amount? Do I make a deal to pay based on my income?
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Answer: Unfortunately, despite the situation, you’re likely liable for at least part of this debt. That’s because Parent PLUS loans are solely the responsibility of the parent borrower regardless of their child’s ability to pay. “Parent PLUS borrowers don’t have as many repayment options available as undergraduate borrowers if they’re having difficulty repaying debt,” says Anna Helhoski, student loan expert at NerdWallet. That said, Leslie H. Tayne, financial attorney and founder of Tayne Law Group, says you may not have to pay the full amount. “And even if you do, there are ways to make the required payments fit into your budget,” says Tayne. Here are some options that pros suggested, from loan forgiveness to refinancing your student loans.
Student loan forgiveness programs
If you haven’t done so already, your best bet may be to consolidate your Parent PLUS loans into federal direct loans and then apply for the income-contingent repayment (ICR) plan, both of which can be done online for free. “Under the ICR plan, your required payments will be based on your income and could be as low as $0 per month. Then, after making qualifying payments for 25 years, you may be eligible to have the remaining balance forgiven,” says Tayne.
Keep in mind, though, that you have to re-certify your income annually, and you might have to pay tax on the forgiven amount. As one of the four income-driven repayment plans, ICR caps payments at 20% of a parent’s income or what you’d pay with a fixed monthly payment over 12 years. “Parent borrowers can use the federal student aid loan simulator to find out how much they’d pay under this plan,” says Helhoski.
It’s also possible to earn forgiveness sooner through the Public Service Loan Forgiveness (PSLF) program. “To qualify, you must work for the government or a non-profit organization and make ten years’ worth of qualifying payments under the ICR plan,” says Tayne. Some people may even qualify for $0 payments if their income is very low.
“You can also explore the graduated repayment plan and the extended repayment plan,” says Tayne. “If you think your income will increase over time, the GRP could work for your budget as your payments would increase every 2 years and you’d pay off the debt in 10 years.” Under the ERP, payments would get spread out over 25 years which means you’d pay significantly less each month.
There are some extreme situations where loans may get wiped away, like if your son were to pass away or becomes totally and permanently disabled. Or, if your son’s school closed before he completed his studies or soon after he withdrew from the institution, you may be eligible to have the debt discharged. It’s also worth mentioning that some employers offer student loan assistance and forgiveness to employees, including companies like Ally, Estée Lauder, Google, Hulu and Peloton.
Student loan refinancing
Lastly, refinancing the debt into a private loan could make sense if your finances are in good shape and you’re interested in securing a lower interest rate. However, “you’ll lose out on federal student loan benefits, such as access to the ICR plan if you do this. If you believe you can secure a path to forgiveness, it’s best not to refinance,” says Tayne.