Plus Loan Eligibility And Application Process
From the Department of Educations website:
To take out a Direct Loan for the first time, you must complete a PLUS Application and master promissory note . The MPN is a legal document in which you promise to repay your loan and any accrued interest and fees to the Department. It also explains the terms and conditions of your loan. The MPN will be provided either by your child’s school or the Department.
If your child’s school offers the option of completing the MPN electronically, you can do so online at the StudentLoans.gov website. If you are borrowing Direct PLUS Loans for more than one student, you’ll need to complete a separate MPN for each one. To complete an MPN online, you will be required to use your Department of Education-issued PIN . If you do not have a PIN, you may request one from the official PIN site.
In most cases, once you’ve submitted the MPN and it’s been accepted, you won’t have to fill out a new MPN for future loans you receive to pay for the educational expenses of the same student. Unless your child’s school does not allow more than one loan to be made under the same MPN, you can borrow additional Direct Loans on a single MPN for up to 10 years.
You’ll receive a disclosure statement that gives you specific information about any loan that the school plans to disburse under your MPN, including the loan amount and loan fees, and the expected loan disbursement dates and amounts.
Parent Plus Loans: How The Department Of Education Manages This Program
The parent PLUS loan is a subset of the direct PLUS loan program from the Department of Education . This program is specifically designed for parents to get financial help for their children. You take this loan out in your name and then make monthly payments on the interest while your child is in school. Many financial advisers recommend that you ensure your child pays the monthly installments, but you also have some options for parent PLUS loan forgiveness.
Public Service Loan Forgiveness For Parent Plus Loans
Parent borrowers may be eligible for Public Service Loan Forgiveness after making 120 qualifying payments .
Parent PLUS loans are eligible if they are in the Direct Loan program or included in a Federal Direct Consolidation Loan. The borrower must work full-time in a qualifying public service job.
Eligible repayment plans include standard repayment and income-driven repayment plans . If a borrower repays their loans under the standard repayment plan for 10 years, there will be nothing left to forgive. So, the borrower will need to repay their loans in an income-driven repayment plan to earn some forgiveness under public service loan forgiveness.
If a borrower consolidates their Parent PLUS loans into a Federal Direct Consolidation Loan, the consolidation loan will be eligible for income-contingent repayment, as noted above.
Another option is the Temporary Expanded Public Service Loan Forgiveness program, which was enacted by the Consolidated Appropriations Act, 2018 . A Federal Direct Consolidation Loan that repaid a Federal PLUS Loan is eligible for TEPSLF if some or all of the 120 qualifying payments were made under a graduated repayment or extended repayment plan, provided that the last year of payments were at least as much as the borrower would have paid under an income-driven repayment plan.
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Other Loan Options May Work Better Than Seeking Loan Forgiveness
Ultimately, parent PLUS loan forgiveness is attainable, but federal loan forgiveness is harder for parents than it is for undergraduate students. Your child will have more options for direct loan forgiveness, refinancing or consolidation, or debt reduction. Of course, you want to help them, but a parent PLUS loan may not be the best option for either of you.
Rather than taking student loan debt into retirement, consider finding private student loan options. While these loans require monthly payment as soon as the loan is disbursed , you may be able to find a lower interest rate or a good variable interest rate on a private loan.
The terms of the private student loan could be better for your child than a parent PLUS loan is for you. Private loans do not have forgiveness options, but your child can refinance their loans for a better interest rate, get deferment or forbearance, and receive loan counseling that can help them create a budget to repay student loans.
Everyone has different financial needs when it comes to college tuition and other costs. For many, the parent PLUS loan works well, but others find that private loans are a better option. Discuss college financing with your child in advance, so you can decide what risks you are both willing to take.
What Is Adverse Credit History
- A current delinquency of 90 or more days on more than $2,085 in total debt or
- More than $2,085 in total debt in collections or charged off in the past two years or
- Default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of federal student loan debt in the past five years
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The Extended Student Loan Repayment Plan
The Extended Student Loan Repayment Plan lets you extend the amount of time you have to pay off your loan, from the 10 year Standard plan, to a term of 12, 15, 20, 25 or even 30 years.
The amount of time youre able to extend is based on the amount of money that you owe, with bigger total debts being allowed to get repaid over longer periods of times
This obviously reduces your monthly payments, but again, while it means youll owe less each month in the short-term, it also means youll owe more over the course of your loan, since it gives more time for interest charges to accumulate.
Before agreeing to alter your repayment plan, the first thing you should do is play around with a Student Loan Repayment Calculator to determine which plan is truly going to work best for you, not just in the near-term, but over the lifespan of your loan.
Parent Plus Loans: How Much Debt Are Parents In And Can It Be Forgiven
The parents of dependent undergraduates can use a Direct PLUS Loan, commonly referred to as a Parent PLUS loan, to borrow up to the cost of the students attendance each year with no limit on the amount borrowed. While a loan without a cap may seem appealing, theres potential for parents to get into serious debt.
According to a July 2021 survey conducted by The Harris Poll on behalf of NerdWallet, 1 in 3 parents with federal parent PLUS loans say they wouldnt have taken out the loan if they could do it all over again.
Parent PLUS loans are much easier to acquire, with no income requirements and relaxed credit standards however, theyre more expensive than other federal student loans since they carry higher interest rates and origination fees, NerdWallet explains.
According to 2021 federal College Scorecard data, the median parent PLUS loan debt is $29,945, NerdWallet added, and one-third of parents arent ready for loans to restart, which have been paused since the onset of the pandemic.
New information on repayments published by the government just this year shows what a big problem Parent Plus loans have become. While the majority of parents have been able to make payments, 10% of loan takers are only able to afford the interest payments, leaving them with ballooning debt.
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Student Loan Interest Tax Deduction
When you pay parent PLUS loans, you may be eligible for a tax deduction. You can get up to $2,500 from the IRS based on your income and the interest you pay on your loans during the tax year. To qualify, you must:
- Have an annual modified adjusted gross income of less than $80,000 or $160,000 if married filing jointly.
- Not file as married filing separately.
- Be legally obligated to pay interest on the loan.
- Not be claimed as a dependent on anyone elses tax return. If married filing jointly, this applies to your spouse as well.
- At the time you borrowed the loan, the student was you, a dependent, or your spouse.
- Have only used the loan for qualifying educational expenses .
Disabled Student Loan Borrowers
The Biden administration approved $5.8 billion in automatic federal student loan discharges under the Total and Permanent Disability discharge program, which eliminates the federal student loan debt for borrowers who are unable to maintain substantial, gainful employment due to a medical condition. The relief applies to borrowers who were already determined to be disabled by the Social Security Administration and are receiving Social Security Disability benefits with a review period of at least five years. The administration also wiped out $1.3 billion in loan reinstatements for TPD borrowers who had their previous disability discharges undone because they didnt comply with the programs post-discharge monitoring requirements, which the Education Department has waived indefinitely due to the pandemic.
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Parents Hope For Student Loan Forgiveness As They Struggle With Loan Debt
A new study illustrates the broad struggles of Parent PLUS borrowers and their hopes for eventual … student loan forgiveness.
Its not just young adults who are grappling with the burdens of student loan debt parents are struggling, as well.
A new report released today by NerdWallet illustrates the broad, ongoing hardships of Parent PLUS borrowers. Parent PLUS loans are a unique type of federal student loan where the parent takes on student debt on behalf of their child who is pursuing an undergraduate degree. The parent, not the student, is the sole borrower responsible for the loans repayment. Parent PLUS loans can have much higher interest rates than other types of federal student loans, and fewer repayment options. As a general rule, Parent PLUS loans are excluded from income-driven repayment plans .
Between ballooning interest and more limited repayment flexibility, Parent PLUS borrowers are increasingly struggling. In its Harris Poll survey of 2,000 adults, including 130 Parent PLUS borrowers, NerdWallet reported the following:
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How To Apply For Non Profit Forgiveness
You dont apply for PSLF until youve fully satisfied the conditions of the program , BUT, as I mentioned above, you should be Certifying your Employment each year, as this can speed up the process of getting an approval once youve made the 120th payment.
Once you complete the 120th payment, fill out the PSLF Application, which you can find here and submit the paperwork along with your Employers Certification to FedLoan Servicing, the official Federal Government Loan Servicer for the PSLF Program.
You can Mail in your PSLF Application, Fax it, or Upload it via their website.
To Mail Your Form, Send It To:
- U.S. Department of Education
To Fax Your Application, Send It To:
To Upload Your Application, Go Here:
Rules For Public Service Loan Forgiveness
During your years of servitude trying to get the theoretical forgiveness of your loan balance, you must do all of the following:
- Work for a federally qualified employer, like a government agency or nonprofit.
- Work there full time and maintain full-time hours throughout your years in the PSLF program.
- Makeand prove that youve madeon-time payments for 10 years. Thats 120 payments in a row without missing a beat. And trust us, the Department of Education has been known to deny someone forgiveness after 10 years of payments over one late payment. That just doesnt seem very . . . forgiving, now does it?
- Have a Direct Loan .
- Have an income-contingent repayment plan . PSLF is itself a form of ICR, and well talk about the other, longer ICR road to forgiveness next.
- The only silver lining here is that unlike other forms of Income-Driven Repayment toward loan forgiveness, PSLF is not treated as a taxable event by the IRS. If they say theyre forgiving your balance, there wont be a tax bill thrown in.1
Now if you can jump through all those hoops and keep the dance going for 10 years straight without a misstep, the Department of Education has promised theyll forgive your balance. Sounds exhausting!
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Is Parent Plus Loan Forgiveness Real
So you did it: After your child didnt receive enough financial aid for undergad schooling, you decided it would be a good idea to sign up for a Parent PLUS Loan. Now youre wondering if having it forgiven is an option.
Yes, there are a couple of ways to have your Parent PLUS Loan forgivenbut there are a lot of conditions and caveats around that possibility. So the short answer is that forgiveness does happen, but its both rare and difficult to pull off.
One thing that does not exist today is any option to have a Parent PLUS Loan canceled overnight. Both of the student loan forgiveness routes in place right now require you to make many years of payments before you can even become eligible to apply for forgiveness.
As for existing programs, even after hitting the required number of payments, many borrowers find that the forgiveness theyve been looking forward to for years ends up being deniedoften for technical reasons they had no idea could derail their plan.The bottom line on the reality of Parent Plus forgiveness is its a crapshoot: You might hear of someone winning here and there, but its not common. And basing your financial plans on it would be ridiculous.
Parent Plus Loan Discharges
In case youre not eligible for the PLUS Loan forgiveness explained earlier, there are still other ways to clear your loan debt. You can do so if you qualify for the following discharge programs:
The discharge programs do the same thing as the forgiveness programs but with a minute difference. The program can eliminate your student loan debt. But the more significant issue with the discharge program is that its challenging to be eligible. Lets take a look at the qualifications for each of them.
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Reducing Nates Monthly Payments
For example, if Nate qualifies for PAYE and he and Nancy file their taxes using the Married Filing Separately status, only Nates $60,000 income is used to calculate his monthly payment. His monthly payment now would be reduced to $282. If he had chosen REPAYE, he would have to include Nancys annual income of $60,000 for the monthly payment calculation after marriage regardless of how they file their taxes so his payment would have been $782.
Double consolidation can be quite an arduous process, but Nate decides to do it to reduce his monthly payment from $1,443 down to $282.
Are Parent Plus Student Loans Eligible For Forgiveness
Q. I have a Parent PLUS loan. I recently retired, so is this loan eligible for loan forgiveness? And if I pass away, does it go away?
Tired of debt
A. Student loans are an enormous burden on millions of Americans, and the loans that parents take for their children are part of that.
Getting rid of student loans isnt easy.
Generally, parent plus loans can be forgiven or put on an income-based repayment plan if a parent is struggling to pay this type of debt, said Karra Kingston, a bankruptcy attorney in Union City.
First, to qualify for an income-based repayment plan on the Parent Plus loan, the borrower must have entered repayment on or after July 1, 2006, she said.
To qualify under the income-based repayment plan, the monthly payment is based on 20% of the borrowers discretionary income, which is defined as the amount by which the borrowers adjusted gross income exceeds 100% of the poverty line, Kingston said. If you can qualify for this, the loan will be forgiven after 25 years of qualified on-time monthly payments.
You also may be able to qualify for student loan forgiveness under the Public Service Student Loan Forgiveness plan.
Parent PLUS loans are eligible to be forgiven if they are a federal loan and worked full-time in a qualifying public service job, Kingston said. Generally, the borrower would have to be on an income-based repayment plan for 10 years and this loan would be forgiven.
Good luck to you with your debt.
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Parent Plus Loan Vs Private Student Loan
The government provides Parent PLUS loans while private lenders offer private student loans. The main distinction between the two options is that student aid programs like Parent PLUS loan forgiveness are not available to private loans. If a federal borrower wants to get rid of the debt, he/she will find some programs.
Meanwhile, private loan borrowers do not have many options. Some lenders offer death and disability discharge, together with student loan forbearance, for a short time. Otherwise, it is not possible to request forgiveness for private loans.
However, above mentioned Parent PLUS loan forgiveness programs are available to Parent PLUS loans. Additionally, usually, federal loans have lower interest rates than private loans.