Are Parent PLUS Loans Eligible for Public Service Loan Forgiveness?
Federal Parent PLUS loans may qualify for the Public Service Loan Remission (PSLF), but it’s a bit complicated.
Parent PLUS loans are not eligible for the PSLF Limited Waiver.
How Parent PLUS Loans Can Qualify For PSLF
Parent PLUS loans are not directly eligible for income-based repayment plans, which are required to have any remaining debt to be canceled after 120 qualifying payments.
However, if the Parent PLUS Loans have been repaid since July 1, 2006 and are included in a Federal Direct Consolidation Loan, the Consolidation Loan is eligible for Income-Based Repayment (ICR), the oldest income-based repayment plan. income. A Federal Direct Consolidation Loan that has paid off a Parent PLUS loan is not eligible for other income-based repayment plans.
This provides a method of delivering Parent PLUS loans through PSLF by consolidating Parent PLUS loans and choosing an income-based repayment plan for the consolidation loan.
To count for forgiveness, 120 qualifying payments must be made while the loans are being repaid under the direct lending program, in an eligible repayment plan (income-based repayment or standard repayment), while the borrower is working full-time in a qualifying public service job.
The Extended Public Service Loan Temporary Discount (TEPSLF) allows payments made as part of a phased repayment or extended repayment to count, if the last year of payment is at least equal to what it would have been in an income-based repayment plan.)
All of these conditions must be fulfilled simultaneously. Payments made before the consolidation do not count because the consolidation resets the payment clock. Employment in the public service before the borrower begins repayment or before the loans are part of the direct lending program does not count.
The temporary waiver of the PSLF does not apply
US Department of Education sets up temporary program PSLF exemption until October 31, 2022, which allows payments on FFELP and Perkins loans to be counted before consolidation, as well as payments in any repayment plan, late payments and partial payments. This waiver, however, is not available for Parent PLUS loans.
What if you are retired or if you do not work in the public service?
To be counted towards the cancellation of the utility loan, qualifying payments must be made while the borrower is working full time in a qualifying public service job.
Volunteer work doesn’t count, except for AmeriCorps and the Peace Corps.
Payments made while a borrower is unemployed or retired do not count towards the PSLF, but do count towards the 20 or 25 year forgiveness in an income-based repayment plan.
The payment break and the interest relief count towards the PSLF as if the payments had been made, but the borrower must still have held a full-time job in the public service. This requirement has not been lifted.
There are two strategies pursued by people who retire with federal student loan debt. One is to pay off all the debt at retirement. The other is to use an income-based repayment plan or an extended repayment plan (whichever gives the lowest monthly payment) to reduce the impact of loan repayments on cash flow in retirement. Income-based repayment plans are based on Adjusted Gross Income (AGI), so depending on whether or not the pension plan distributions are included in the AGI, it can reduce the monthly loan payment.
Another, somewhat morbid benefit is the lengthening of the repayment term for retired borrowers. Federal education loans are canceled on the death of the borrower and are not charged to the borrower’s estate. Parent PLUS loans can also be canceled upon the death of the student on whose behalf the loans were borrowed. A longer repayment term increases the likelihood that the loans will survive you. Currently, the death waiver is tax free until December 31, 2025; this provision may be extended or made permanent.