Parent PLUS loans have allowed millions of parents to help finance their children’s education over the years. However, with interest rates higher than most federal student loans and fewer repayment options, they can also become a significant burden. As discussions continue around broad student debt cancellation, many are wondering if Parent PLUS loans might be included in any future relief programs.
What are Parent PLUS Loans?
Let’s start with an overview of what Parent PLUS loans are. Officially called Federal Direct PLUS Loans for Parents, they allow parents to borrow up to the total cost of attendance aside from any other financial aid for their dependent undergraduate children enrolled at least half-time in an eligible degree or certificate program. Unlike other federal student loans, Parent PLUS loans require no credit check or proof of financial need. All eligible parents are able to take out the maximum amount.
Some key points about Parent PLUS loans:
- They are originated and funded directly by the federal government through the U.S. Department of Education.
- The interest rate for Parent PLUS loans is higher than most other federal loans, currently set at 7.54%.
- Parents are solely responsible for repaying the full balance and interest on Parent PLUS loans. The child’s name is not associated with the debt.
- Repayment begins within 60 days of the final loan disbursement, with options to defer payments while the child is enrolled at least half-time.
- Defaulting on a Parent PLUS loan can severely damage a parent’s credit and comes with serious legal consequences like wage garnishment.
So in summary, while Parent PLUS loans increase access to funding higher education, the lack of underwriting and higher rates mean the debt can become difficult to repay, especially for lower-income families. This backdrop has fueled calls for potential future Parent PLUS loan forgiveness programs.
Potential Pathways for Parent PLUS Loan Forgiveness
With broad-based student debt cancellation remaining an ongoing political debate, many are exploring possible avenues through which Parent PLUS debt held by the Department of Education could see relief. Here are a few of the major potential pathways under discussion:
Broad Executive Action
Some advocates argue the Higher Education Act gives the Secretary of Education authority to broadly cancel federal student debt held by the Department of Education, which would include Parent PLUS loans. Previous Democratic presidential candidates like Senator Elizabeth Warren and Bernie Sanders campaigned on canceling up to $50,000 in student debt per borrower through executive order. If enacted, this could wipe out balances for many Parent PLUS loan holders. However, the use of executive authority remains controversial and untested, facing legal challenges.
Targeted Administrative Relief
A more narrow administrative approach could provide targeted Parent PLUS loan forgiveness. For example, the Department of Education has discretionary authority to modify existing Public Service Loan Forgiveness (PSLFP) eligibility to include Parent PLUS loans. Others propose expanding Income-Driven Repayment (IDR) plans to better help financially struggling Parent PLUS borrowers meet obligations. Administrative action faces fewer legal hurdles but more limited relief.
New Legislation
Comprehensive student, loan reform bills introduced in Congress could establish a new Parent PLUS Loan Forgiveness program. The ambitious “Student Loan Forgiveness Act of 2021” proposed canceling up to $50k of federal loans per borrower, including Parent PLUS. More tailored bipartisan bills have also focused relief specifically on Parent PLUS holders. While the legislation allows shaping detailed programs, passage remains difficult given political divides.
Included in Next Term’s Spending Bill
A closer-term possibility is the inclusion of targeted Parent PLUS forgiveness in a must-pass government funding measure or larger reconciliation package. Funding bills require only a simple majority to bypass the filibuster. The last COVID relief package in 2021 wiped out $1.3 billion in Parent PLUS debt using this strategy. Success would depend on political will during budget negotiations.
In summary, while pathways differ in scope and feasibility, campaign promises and ongoing organizing indicate Parent PLUS loan relief remains very much on the table as discussions continue to address the broader student debt crisis. With the midterm elections approaching, 2023 budget maneuvering could prove pivotal.
Potential Eligibility Requirements
If a Parent PLUS loan forgiveness program does come to fruition, eligibility would need to be defined. Most proposals focus relief on struggling borrowers, though specifics vary widely. Here are some examples of possible eligibility requirements policymakers may consider:
Income Thresholds
Income caps based on existing IDR program standards could qualify borrowers up to a certain adjusted gross income (AGI) level, such as up to 150-200% of the federal poverty line. This targets relief to lower-income families.
Total Balance Amounts
Caps on total eligible loan balances, such as canceling up to $10,000-$50,000 per borrower, could ensure resources stay focused on those deeper in debt despite repayment efforts.
Date of Origination
Only canceling debt from loans originated before a set cutoff date, like loans from years before 2010 or 2015, may incentivize timelier legislative action.
Dependency Status
Requiring the child to have been claimed as a dependent on parent’s tax returns during enrollment balances targeting relief to families who took on education costs.
Repayment History
Factors like demonstrating consistent Income-Driven Repayment plan eligibility or being current with payments could show real financial need.
Loan Purpose
Limiting to Parent PLUS loans solely used for dependent children helps ensure resources aid true education costs rather than personal spending.
Specific eligibility rules would depend heavily on policy objectives, available funding, and political compromises. A targeted approach focused on lower incomes seems most equitable and has bipartisan appeal. Broad cancellation would provide the most widespread relief but raises larger cost concerns.
Potential Timelines for Implementation
If policy changes do bring Parent PLUS loan forgiveness, implementation would face administrative and legal complexities. Based on recent discussions and precedents, here are some potential timelines stakeholders may consider:
Late 2023 – Early 2024
This window centers around the current student loan payment pause expiration slated for December 31, 2023. Major debt relief before then sets a smooth transition. Budget bills due by fall 2023 provide the quickest legislative path.
Mid-Late 2024
If relief extends into 2024, inclusion in that year’s appropriations bills remains viable. New leadership could also pursue administrative actions independent of legislative timelines.
2025 and Beyond
Standalone reform bills take longer to craft but allow customizable, permanent solutions. Ongoing organizing and election pressures may eventually yield results, but timelines become less predictable as future plans extend.
Immediate vs. Phased Implementation
Programs could entail either blanket immediate cancellation up to caps or phased approaches to paying down portions of debt over multiple years. Phased approaches spread costs but prolong relief.
As with any complex undertaking, working through procedures and guarding against legal challenges may involve transition periods. But with strong motivation, focused relief for struggling Parent PLUS borrowers seems achievable on an accelerated timeline. Continued advocacy will influence how soon that becomes a reality.
Frequently Asked Questions
Here are some of the most common questions readers may have about the potential for Parent PLUS loan forgiveness in 2024 and beyond:
Are Parent PLUS Loans Eligible for Existing Relief Programs?
While existing limited forgiveness programs like Public Service Loan Forgiveness do not explicitly include Parent PLUS debt, policy discussions center on administrative or legislative changes to expand eligibility. Proposals to do so through reformed IDR plans or targeted cancellation also aim to buttress families affected by both education debt types.
What Happens if I Consolidate Parent PLUS Debt?
Consolidating Parent PLUS loans into a federal Direct Consolidation Loan could allow unpacked bundled payments to enroll in Income-Driven Repayment plans offering monthly payment relief. However, doing so also resets the loan term, meaning any future debt cancellation might not resume until 20-25 years of qualifying payments are made in the new program. Borrowers consolidating should consider all impacts.
How Could Pursuing Bankruptcy Impact Eligibility?
While exceedingly difficult to achieve, some borrowers in financial crisis attempt student loan debt discharge through bankruptcy. A successful Parent PLUS loan bankruptcy usually exempts that specific debt from future federal forgiveness eligibility due to the “no forgiveness of debts discharged in bankruptcy” stipulation. Administrative solutions remain the most viable path.
If I Die or Become Disabled, Will My Parent PLUS Loans Be Forgiven?
Federal student loans are discharged if the borrower passes away or becomes permanently disabled. While private lenders’ policies vary, most federal loans in the parent’s sole name, including Parent PLUS debt, follow the same forgiveness rules and are erased under these circumstances to provide relief for families coping with hardship.
