Parent PLUS Loan Borrowers Face Imminent Repayment Plan Deadline

In-Depth Analysis

The Parent PLUS loan program allows parents to borrow on behalf of their dependent undergraduate students. Approximately 3.6 million people hold these loans, with the total debt exceeding $114 billion. The typical parent balance is around $32,000.

**Consolidating for IDR Access:** To maintain access to IDR plans, parent borrowers must consolidate their Parent PLUS loans into a Direct Consolidation Loan. During the application process, borrowers must select the Income-Contingent Repayment plan and make at least one payment under that program. After that, they should be able to move into the Income-Based Repayment plan, which will likely result in the lowest monthly payment.

**Fewer Options Without Consolidation:** Parent PLUS borrowers who do not consolidate their debt will have fewer repayment options. Current borrowers will continue to have access to the Standard Repayment Plan, while new borrowers will be able to repay their debt back on the new Tiered Standard Repayment plan. There is no loan forgiveness under the Tiered Standard Plan.

**Impact on College Choices:** Changes to Parent PLUS loans may cause families to choose schools that are more affordable or offer more scholarships. Families may now be forced to turn from Parent PLUS loans to private loans, which could have potential downsides, such as higher interest rates and fewer protections.

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FAQ

- **Q: What is the deadline to consolidate Parent PLUS loans to maintain access to IDR plans?

- **Q: What happens if I don't consolidate my Parent PLUS loans?

- **Q: How will the changes to Parent PLUS loans affect college choices?

Takeaways

**Act Now:** If you have Parent PLUS loans, start the consolidation process immediately to preserve your access to income-driven repayment plans.
**Understand Your Options:** Research the different repayment plans available and choose the one that best fits your financial situation.
**Consider Alternative Funding:** If you are planning to take out Parent PLUS loans in the future, be aware of the new borrowing limits and explore alternative funding options, such as scholarships, grants, and private loans.

Discussion

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Sources

Parents with student loans are running out of time to secure forgiveness and affordable payments Changes to Parent PLUS loans cap borrowing at $20,000 per year Deadline approaches impacting parents who borrowed student loans on behalf of children

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