If you took out loans to help fund your child’s education, such as Parent PLUS Loans from the federal government, you’re eventually going to have to start paying them back. Parent PLUS loans can’t be transferred to your child — even once they graduate and get a steady job — so you’re the one who’s on the hook for paying them off in full. That prospect can be daunting, since this may be your largest chunk of debt outside of a mortgage.
But you have lots of options for temporarily putting off payments on Parent PLUS Loans or making them affordable. The choices can get overwhelming, so here’s a guide to help you figure out which plan is right for you.
Starting Repayments — and Pausing Them if You Need To
Unlike some other federal loans, Parent PLUS Loans do not have a grace period — a six-month break after the student graduates, or drops below half-time enrollment, before payments are due. Instead, their repayment period typically begins once the loan is fully disbursed.
The idea behind the delay with other loans is that it gives your child a chance to get settled financially. The federal government assumes you, as a parent, don’t need the same accommodation.
If you’re not ready to start paying, you have a couple of options for pausing repayment on your Parent PLUS Loan:
1. Apply for deferment: One option is to apply for a deferment , which will allow you to temporarily stop monthly payments. You can ask for a deferment while your child is still in school at least half-time, or for six months after they graduate or drop to a lower level of enrollment.
Keep in mind that interest will still be piling up, even if you’re not making payments. If you don’t pay the interest during this period, it will be capitalized, or added to the loan principal, when the deferment is over, which can increase how much you owe over the life of the loan.
2. Request a forbearance: If the circumstances above don’t apply, you can still temporarily stop or reduce what you owe by requesting a forbearance . You may be eligible for forbearance if you’re unable to pay because of financial hardship, medical bills, or a change in your employment situation.
You may also qualify for a forbearance if you’re in a medical or dental internship or residency, if you’re in certain teaching jobs, or if you pay 20% or more of your gross income toward the loan. Interest will still capitalize during this period, but if you’re going through a temporary financial difficulty, it may be worth approaching your loan servicer for a forbearance rather than risking missed payments.
Parent PLUS Loan Repayment Options
You can’t put off payments forever. Depending on the plan you choose, you will have between 10 and 25 years to pay off the loan in full. But Parent PLUS loan repayment doesn’t have to be daunting — here are a few of the Parent PLUS Loan repayment options you have:
• Standard Repayment Plan: One of the most straightforward options is the Standard Repayment Plan . In this scenario, you will pay the same fixed amount each month and pay the loan in full within a decade. The benefit is that you always know how much you owe and you’ll accrue less interest than with most other plans, since you’ll be repaying the loan in a faster time frame.
The difficulty is that this results in monthly payments that are too high for some people. It’s a good option if you can afford the payments and you don’t expect your situation to change in the next ten years.
• Graduated Repayment Plan: Another option is the Graduated Repayment Plan . You will also pay off your loan within a decade, but the payments will start out smaller and then increase, usually every two years. You’ll pay more overall than under the previous plan because you’ll accrue more interest, but less than if you were to sign on for a longer repayment term. This plan is a good option if you expect to earn more in the relatively near future.
• Extended Repayment Plan: A third choice is the Extended Repayment Plan , which spreads payments out over 25 years. You can either pay the same amount every month, or have payments start out lower and ramp up over time. You’ll end up paying more over the life of the loan because you’ll be racking up interest over a longer time period. But it’s a good way to make monthly payments more affordable while knowing you are on track to pay off the loan in full.
Loan Forgiveness for Parent PLUS Loans
Parent PLUS borrowers don’t have as many opportunities as students do for getting a portion of the loan forgiven. There are no income-driven repayment plans for Parent PLUS loans, even though the government offers four such plans for students.
That being said, you do have a couple of options:
• Income-Contingent Repayment Plan: You do have one option for tying payments to your income, but you have to jump through one hoop first — you would need to consolidate your Direct PLUS loan (or loans) into a Direct Consolidation Loan through the federal government. This combines your existing loans into one and may change your monthly payment, interest rate, or the amount of time in which you have to repay the loan. Just note that Direct PLUS Loans received by parents to help pay for a dependent student’s education cannot be consolidated together with federal student loans that the student received.
Once you consolidate, you may be eligible for the Income-Contingent Repayment Plan . Under that plan, your monthly payment would be no more than 20% of your discretionary income. If you make the monthly payment for 25 years, the remaining balance will be wiped away, though you may owe taxes on it. This can be a good option for making your payments affordable if you expect your income to remain relatively low for the foreseeable future.
• Public Service Loan Forgiveness: Another way you might be able to get your loans forgiven is by signing up for Public Service Loan Forgiveness . You might qualify if you work in a public service job, including for a government organization, nonprofit, police department, library, or early childhood education center. Note that you are the one who has to work in this field, and not the student.
Make sure you submit an Employment Certification Form every year or when you switch jobs. To qualify, you also need to take out a Direct Consolidation Loan and then start repayment under the Income-Contingent Repayment Plan. If you work in public service, this can be a very effective way to get the loan off your back within a decade.
Considering Student Loan Refinancing
If you’re looking for another way to tackle your Parent PLUS loan, consider refinancing your parent plus loans with a private lender. This involves taking out a new loan and using it to repay your old one.
The benefit of student loan refinancing is that you may qualify for a lower interest rate or a lower monthly payment, especially if you have a solid credit and employment history. However, when you refinance federal loans with a private lender, you will lose eligibility for any federal repayment plans or loan forgiveness programs.
You can get a preliminary quote online in just a few minutes to see whether refinancing makes sense for you.
By taking out a Parent PLUS loan, you are generously supporting your child to achieve their dreams of a higher education and a solid career — but that doesn’t mean that loan payments need to become a burden for you. If you learn about your options for reducing or managing payments, you’ll be on track to paying off your loan with peace of mind.
One such option you might consider is refinancing your Parent PLUS Loan, which could help you secure a lower interest rate or monthly payment.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended to December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since in doing so you will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave up to $10,000 and $20,000 for Pell Grant recipients unrefinanced to receive your federal benefit. CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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