Parent PLUS Loan Repayment

If you have Parent PLUS student loans, you need to understand how repayment works and your options.

Payments for Parent PLUS loans are due as soon as the loans are disbursed for the academic year, but parents can defer payments while their child is enrolled at least part-time. They can also defer payments for six months after either: graduation or the child drops below part-time status.  

Read on to understand your options for repaying Parent PLUS loans. 

In this guide:

• Repayment plans for Parent PLUS loans
• Parent PLUS loan forgiveness
• Consolidate Parent PLUS loans
• Refinance Parent PLUS loans
• Can Parent PLUS loans be transferred to the child?

Repayment plans for Parent PLUS loans

Parent PLUS loans are eligible for the following four repayment plans:

Standard Parent PLUS loan repayment plan

The standard plan is the default repayment plan for federal loans and often results in paying the least total interest. The payment term is 10 years. Payments remain the same for the entire term, and all borrowers are eligible for this plan.

Here’s how your payment may work if you have $50,000 in loans with a 7% interest rate:

The pros and cons of the standard plan include the following.

Graduated Parent PLUS loan repayment plan

The graduated repayment plan’s monthly payments start low and increase every two years. The total repayment term is 10 years, and all borrowers are eligible for this plan.

Here’s how your payment may work if you have $50,000 in loans with a 7% interest rate:

With this plan, you’d pay off your loans in the same time as the standard plan, but it would cost about $5,500 more.

The pros and cons of the graduated repayment plan include the following.

Extended Parent PLUS loan repayment plan

The extended repayment plan has a 25-year term. Borrowers can choose from a graduated extended plan, where payments increase every two years, or a fixed extended plan, where payments remain steady.

To qualify for the extended repayment plan, you must have at least $30,000 in Direct Loans. (Parent PLUS loans are also called Direct PLUS loans.) You must not have had an outstanding Direct Loan balance if you received another Direct Loan on or after October 7, 1998. 

Here’s how your monthly payments might look under the extended plan if you have $50,000 in loans with a 7% interest rate and a 25-year term.

The pros and cons of the extended plan include the following.

Income-contingent Parent PLUS loan repayment plan

The income-contingent repayment (ICR) plan is the only income-driven repayment plan for which Parent PLUS loans are eligible. If you sign up for ICR, your monthly payment will depend on your income, family size, and residing state. 

ICR payments are limited to the lesser of 20% of your discretionary income or what you would pay over a 12-year term. The Department of Education defines discretionary income as your income minus 150% of the federal poverty guidelines for your state and family size. 

ICR is the only repayment plan that offers a loan forgiveness component. After making payments on the ICR plan for 25 years, the remaining balance is forgiven. Until 2025, loan balances forgiven under an income-driven repayment plan are not considered taxable income. Many experts believe the government will extend this provision.

Here’s how your monthly payments might look under the income-contingent plan if you have $50,000 in loans with a 7% interest rate. (Note: We assumed a $35,000 adjusted gross income, family of three, and location in the continental U.S.)

If you’re interested in Public Service Loan Forgiveness (PSLF) for your Parent PLUS loans, you must be on the ICR plan to qualify. 

The ICR plan has the highest monthly payment among all income-driven repayment plans. This makes it harder for parents to benefit unless they have a high loan balance and low income.

Parent PLUS loan forgiveness

Parent PLUS loans are eligible for PSLF. This program forgives the remaining loan balance after you make eligible payments for 10 years while working for a qualifying employer, including a nonprofit or government agency.

To qualify for forgiveness, parents need to meet the employment requirement, not the child. This is one of the most significant sources of confusion around Parent PLUS loans and PSLF.

Parents must work full-time or the equivalent of a full-time schedule. If you have two part-time jobs, they must both be for eligible employers. 

To be eligible, the parent must consolidate all Parent PLUS loans into a Direct Consolidation Loan and switch to the income-contingent repayment plan. After 120 payments on that plan, the remaining balance will be forgiven. The 120-payment requirement only counts once you’ve consolidated your loans and switched to ICR. 

Consolidate Parent PLUS loans

The federal government’s Direct Consolidation program lets you combine multiple Parent PLUS loans into one. Consolidating your loans makes you eligible for the income-contingent repayment plan, allowing you to qualify for loan forgiveness programs. Federal loan consolidation will not save you money unless you’re eligible for loan forgiveness.  

You can also opt for private loan consolidation—aka refinance—which involves applying with a private lender. If you have private and federal loans, you may be able to consolidate them into one loan. 

Private consolidation converts your federal Parent PLUS loans into private loans, which renders you ineligible for benefits including loan forgiveness, income-driven repayment plans, and longer forbearance programs.

The pros and cons of consolidation include the following.

The table below shows the interest you’d pay on three separate loans without consolidating.

If you consolidated these loans, the weighted average interest rate would be 6.91%. The total amount you’d pay is $69,387.60—$5,748.60 more in interest.

Refinance Parent PLUS loans

Interest rates on Parent PLUS loans can be higher than what the private loan market offers. And because parents have fewer income-driven repayment and forgiveness options than students have, refinancing a Parent PLUS loan into a private loan may be worth the financial savings if you’re confident you won’t miss the federal benefits. 

The federal government doesn’t offer a refinancing program, so the only way to refinance a Parent PLUS loan is to turn it into a private student loan. When you refinance, the loan will remain in the parent’s name. If parents want to refinance the loan in their child’s name, the child must submit a refinancing application. 

Take a look at how your payments might differ if you refinance a $50,000 loan with a 7% interest rate:

There is no limit to how often or how many times you can refinance to get a lower rate. We recommend keeping an eye out for when rates begin to fall by checking your lender’s website. When they fall, you can refinance again. 

We can’t predict when or by how much rates will change, but keeping tabs on the Federal Reserve, which often influences interest rates, can give you an indication.

The lender will consider your credit score, income, and total debts to determine your eligibility. You may not qualify for refinancing if the loan balance is too high compared to your total income. It may also deny your application if you have poor credit. 

The pros and cons of refinancing include the following.

Can Parent PLUS loans be transferred to the child?

The federal government can’t transfer Parent PLUS loans to a child. However, the child can refinance the Parent PLUS loan into a private loan under their name. This will convert the federal loan to a private loan.

Not all private lenders allow this kind of refinancing, so do your research and ensure the company will put the loan into the child’s name. Your child must have a good credit score and steady income to qualify for refinancing. 

If the child does not qualify for refinancing on their own, you may be able to cosign the loan. They will become the primary borrower, but you’re responsible if they default. Your credit may also take a hit if they stop making payments or make late payments. 

If you go this route, look for lenders that offer cosigner release to remove the cosigner after a certain number of on-time payments.