If you took out a Direct PLUS Loan for Parents to help fund your child’s education, you’re going to eventually have to start paying the money back. Parent PLUS loans generally 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.
Fortunately, there are a number of ways to delay payments on parent PLUS Loans, or make them more affordable. Unfortunately, sorting through — and trying to understand — all the various deferment and repayment plans can be overwhelming. Not to worry. What follows is a simple guide to repayment options for Parent Plus loans.
Starting Repayments — and Pausing Them if You Need To
Unlike some other federal student 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 student 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. Your first payment on a parent PLUS loan is typically due once the loan is fully paid out, often after the spring semester. However, you can opt to defer Parent PLUS loan payments while your child is enrolled at least half-time and up to six months after they graduate or drop below half-time enrollment. To do this, you simply need to apply for a deferment with your loan servicer. Just 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 (i.e., 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 your child is already more than six-months post graduation, you may still be able to temporarily stop or reduce what you owe by requesting a forbearance . To be eligible for forbearance, however, you must be unable to pay because of financial hardship, medical bills, or a change in your employment situation. The amount of forbearance you can receive for your payments depends on your situation. Interest will still accrue 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.
💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.
Parent PLUS Loan Repayment Options
You typically can’t put off payments forever. Depending on the repayment plan you choose, you will have between 10 and 25 years to pay off the loan in full. However, you have three different repayment options to choose from. Here’s a closer look at each plan.
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 10 years. 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 may be 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.
Recommended: 6 Strategies to Pay off Student Loans Quickly
Graduated Repayment Plan
With the graduated repayment plan, you will also pay off your loan within 10 years. However, the payments will start out smaller and then gradually 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 can be 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. However, this payment plan can be a good way to make monthly payments more affordable while knowing you are on track to pay off the loan in full.
💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.
Loan Forgiveness for Parent PLUS Loans
Parent PLUS borrowers don’t have as many opportunities for loan forgiveness as students do. And, the newly introduced changes to income-driven repayment (IDR) plans, called SAVE, won’t help you. However, there are other options to get debt relief for parent PLUS loans. Here are two to consider.
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’ll need to consolidate your Direct PLUS loans into a Direct Consolidation Loan . You can (and will need to) do this even if you only have one Parent Plus loan.
A Direct Consolidation Loan combines any existing federal Parent loans into one and may change your monthly payment, interest rate, or the amount of time in which you have to repay the loan. You can’t, however, consolidate Direct PLUS Loans received by parents to help pay for a dependent student’s education with federal student loans that the student received.
Once you consolidate, you may be eligible for the Income-Contingent Repayment (ICR) Plan. Under this plan, your monthly payment would be no more than 20% of your discretionary income for 25 years. After that time, any remaining debt is forgiven.
The ICR plan can potentially lower the required monthly payment to an affordable level. Depending on your income, you can potentially get a payment as low as $0.
Public Service Loan Forgiveness
Another way you might be able to get your loans forgiven is by signing up for Public Service Loan Forgiveness (PSLF). 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.
To be eligible for PSLF, you’ll need to first consolidate your Parent PLUS loans (or loan) into a Direct Consolidation Loan and start repayment under the ICR Plan. Once you make 120 qualifying payments on the new Direct Consolidation Loan, your loan may be forgiven (prior Parent Plus Loan payments do not count towards 120 payments required for PSLF).
Considering Student Loan Refinancing
If you’re looking for another way to tackle your Parent PLUS loan, you may want to consider refinancing your Parent Plus loan with a private lender. This involves taking out a new loan and using it to repay your current Parent PLUS Loan.
Refinancing your PLUS loan can potentially reduce the total interest you pay over time, lower your monthly payment, and/or help you get out of debt faster. Note: You may pay more interest over the life of the loan if you refinance with an extended term. Depending on the lender, you may also have the option to transfer the debt into your student’s name.
When you apply for a parent PLUS loan refinance, the lender will conduct a credit check and look at your income and other debts to determine if you qualify for a refinance and at what rate. Generally, the better your credit, the cheaper the loan will be. In fact, if you have exceptional credit, your interest rate could be substantially lower than what the federal government originally offered you. Keep in mind, however, that when you refinance a federal student loan with a private lender, you are no longer eligible for federal student loan benefits, such as forgiveness or forbearance.
The Takeaway
By taking out a Parent PLUS loan, you are generously supporting your child’s dream of getting a college education and launching a successful 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.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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