If your son or daughter just started college, your main focus is probably supporting your child in this new phase of life—or enjoying the empty nest! But this milestone also means that you’ll soon have to start repaying any loans you took out to help fund your child’s education. That includes Parent PLUS loans from the federal government.
Direct PLUS loans are available to parents (including adoptive or sometimes step-parents) of dependent children who are enrolled in an undergraduate degree program at least half-time. To qualify, you must pass a credit check, or take on a co-signer, and your child must be attending an eligible institution. The interest rates on these loans are fixed, which could make them an attractive way to help your child pay for college.
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 putting off payments temporarily or making them affordable. The choices can get overwhelming, and it can be hard to figure out which plan is right for you. Here’s a guide to help you navigate the loan repayment maze:
Starting Repayments—and Pausing Them if You Need to
You may have heard that many federal student loans come with a grace period—a six-month break after the student graduates, or drops below half-time enrollment, before payments are due. Parent PLUS loans do not have a grace period—typically their repayment period 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, and the federal government assumes you, as a parent, don’t need the same accommodation.
If you’re not ready to start paying, there is something you can do—you can 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.
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 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.
One of the most straightforward options is called 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 10 years.
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.
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.
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 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.
There’s another way you might be able to get your loans forgiven—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 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. You can get a preliminary quote online in just a few minutes to see whether refinancing makes sense for you.
Paying for Your Child’s Education Shouldn’t Be a Burden
Many parents try to save up to send their kids to college, but it’s not always possible to stock away enough in advance. By taking out a Parent PLUS loan, you are generously supporting your child to achieve his or her dreams of a higher education and a solid career.
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. Instead of worrying, you’ll be able to focus on the fruits of your investment—your child’s success!
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SoFi Student Loan Refinance
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