Feeling stuck in a Parent PLUS Loan? You’re probably looking for the easiest way out of it, including getting the whole debt forgiven. But is Parent PLUS Loan forgiveness real? And what are your options to get rid of this thing for good? Time to find out!
Is Parent PLUS Loan Forgiveness Real?
So, you want to get rid of a Parent PLUS Loan. Maybe your child didn’t receive enough financial aid for undergrad or maybe you’re the student looking for a way to relieve your parent of this financial burden. Either way, we know you’d rather not have a loan hanging over your relationship and making things awkward at family dinners.
But can Parent PLUS Loans be forgiven? Short answer: Yes—there are a couple ways to have your Parent PLUS Loan forgiven, one with more conditions than the other. But let’s dig into the details of both options so you can make the best decision for your situation.
Will President Biden Forgive Parent PLUS Loans?
You’ve probably heard about President Biden's new student loan forgiveness plan that would cancel up to $20,000 of federal student loan debt for each borrower. And yes, that includes Parent PLUS Loans.
Ready to get rid of your student loans once and for all? Get our guide.
To qualify for this forgiveness, the person who took out the loan—in this case, the parent—can have up to $10,000 of the student loan debt forgiven if they make less than $125,000 (or $250,000 per household). If the parent also happened to receive a Pell Grant when they were in college, they could have another $10,000 of the loan forgiven for a total of $20,000 off their debt.1
But since parents and their kids are considered separate borrowers, students can also have their own federal student loans forgiven under Biden’s plan—but only if those loans are in the student’s name. And if the student is still in school, their eligibility is based on their parent’s income.
And yeah, this is a quick way to have some student loan debt canceled. But don’t count on sweeping forgiveness like this to keep happening. If you’ve got more student loans than Biden is planning to forgive, you’ll need to find another way to knock out the rest of your debt.
Parent PLUS Loan Forgiveness Options
Besides Biden’s forgiveness plan, there are also federal forgiveness programs available that technically cover Parent PLUS Loans. But you’ll have to jump through a lot of hoops before you can apply—and even then, the approval rate is pretty terrible.
One way you can have your Parent PLUS Loans forgiven is with an Income-Contingent Repayment Plan.
There’s a group of repayment options for student loan borrowers known as Income-Driven Repayment Plans (IDR). Within those plans, the only type that Parent PLUS Loan borrowers can use is an Income-Contingent Repayment Plan (ICR). The goal with this plan is to pay a smaller monthly payment in the hope that your student loans will be forgiven after 25 years.
But here’s the tricky thing about applying for an ICR: Parents with Parent PLUS Loans are not eligible for any kind of Income-Driven Repayment Plan. The only way to qualify is to consolidate your Parent PLUS Loan into a Direct Consolidation Loan—you can do this with either one Parent PLUS Loan or with any other student loans you have as the parent. (Remember how we said parents and their kids are considered separate borrowers? That means you as a parent can’t consolidate your loans with any loans that are in your child’s name.)
And the income-contingent portion of the program is pretty strict. Not only do you have to verify that your income is low enough to qualify, but you also have to prove it again annually to keep your lower payment. If you don’t, you’ll get kicked off the IDR and onto the standard 10-year repayment plan (which means you may not have a balance to forgive in the end). Plus, if your income increases enough, you could actually end up paying more than you would on the standard repayment plan.
And in April 2022, the National Consumer Law Center reported that even though student loan cancellation under IDR has been a thing since 2016, only 32 borrowers have ever had their loan balances forgiven.2
But beside that, the IDR repayment plan is forever long—twenty-five years for an ICR. Do the math and ask yourself how old you’ll be on the other side of that bargain. Do you really want to carry student loan debt into retirement?
Oh, one last government gotcha: If you ever do manage to have your loans forgiven through an ICR, you should know you’ll probably have to pay income tax on the amount forgiven. The IRS demands such a sizable cut of the forgiveness, some have even called it a tax bomb because of the way it blows up your bank account. Yikes!
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) is another way you might be able to get a Parent PLUS Loan forgiven, but you’ll have to be on an Income-Driven Repayment Plan (IDR) to qualify—they’re kind of a package deal.
Basically, the borrower (the parent) has to work full time for an approved employer (usually the government or a nonprofit) for 10 years and make 120 payments under a qualifying IDR (more specifically, the income-contingent plan we just talked about).
And that’s just to apply. Getting approved for PSLF is a whole other thing. But get this: Between November 2020 and July 2022, there were 1,684,233 total PSLF applications, and only 24,743 of them met the proper requirements. That’s a success rate of less than 2%!3 In other words, it basically never happens.
As if that’s not bad enough, some people who believed their loan balances were forgiven, received letters of denial sometimes years later.4 Talk about depressing.
The best thing we can say about PSLF is that it’s not treated as a taxable event by the IRS. If they say they’re forgiving your balance, there won’t be a tax bill thrown in.5 And yeah, 10 years is much shorter than the 25 years with IDR alone, but it’s still 10 years of your life that will most likely end with your student loans not being forgiven.
Hundreds of thousands of borrowers have entered PSLF and taken on low-paying jobs (because let’s face it, that’s what most government and nonprofit work often is) only to have their hopes of loan forgiveness dashed years later. That’s not only super disappointing—it’s super frustrating. They could have paid off their student loans a lot faster by either taking higher paying jobs, working the debt snowball method, or both!
Should I Apply for Parent PLUS Loan Forgiveness?
Phew! That was a lot to get through. But do you see how complicated applying for forgiveness is, especially for Parent PLUS Loans? Yeah, Biden’s plan may offer some relief. But in most cases, you’ll still have plenty of student loan debt left over.
And programs like Public Service Loan Forgiveness and Income-Driven Repayment may seem like the answer, but they have yet to be successful for more than a few people. Even after meeting all the criteria and hitting the required number of payments, many borrowers end up being denied for the forgiveness they’ve been looking forward to for literal decades—often for technical reasons they had no idea could derail their plan.
Here's the bottom line on the reality of Parent Plus forgiveness: It’s a crapshoot. You might hear of someone winning here and there, but many people end up super disappointed in the end. It’s not worth it when you can knock out your student loans faster and on your own terms.
Alternatives to Parent PLUS Loan Forgiveness
Forgiveness plans rarely pay off for borrowers. A much better (and way more reliable) plan is to get intentional with your money and focus on becoming debt-free as fast as possible.
How? Here are some ways you can get rid of your Parent PLUS Loans (without relying on the government):
Don’t take on more debt.
Sounds simple, right? But many people keep taking out new loans even as they’re trying to pay off others. That’s like a dog chasing its tail, and it will only put you deeper in the hole. Nope, you’ve got to get mad at your debt and avoid it at all costs! (If you need some help, our Borrowed Future documentary is sure to get you fired up.)
Get on a budget.
Your income is your most powerful tool for getting out of debt. And the only way to make sure you’re putting it to good use is with a monthly plan (aka a budget). When you give every dollar of your income a job to do, you save more money and make progress faster. A budget will help you pay off your student loans way faster than before! Go ahead and create your budget for free with EveryDollar.
Work the debt snowball.
We mentioned it before, but the debt snowball method really is the best way to destroy your debt. Just list all your debts (that includes other debts besides student loans) from smallest to largest. And don’t worry about the interest rate—the goal is to knock these out fast. Then, pay minimum payments on everything but the smallest debt. Now, attack that smallest debt with a vengeance until it’s gone. And repeat the process with the next smallest debt—and so on, until you’re debt-free!
Whether your Parent PLUS Loan becomes your immediate focus or falls later in the snowball, it’ll be gone in no time if you keep working this plan.
Refinancing your student loans can be a great option, depending on your situation. And it can even help with Parent PLUS Loans.
There are some details to keep in mind: Never pay a fee to refi, only get a fixed rate, look for a net interest rate lower than your current net rate, never agree to a longer repayment period, and never use a refi as an excuse to lose your focus on getting debt-free as soon as possible. But since refinancing Parent Plus Loans can be a complicated process, you need to make sure you’re doing it the right way—with a RamseyTrusted provider.
Here’s the deal: Don’t rely on forgiveness to make your Parent PLUS Loan go away. You’re much better off taking control of your student loans yourself and paying them off as fast as you can. You’ll leave your Parent PLUS Loan behind in no time!
Guide to Getting Rid of Your Student Loans
Counting on the government to forgive your student loans? Find out the truth about loan forgiveness and how to make progress with this in-depth guide.Get the Guide