Parent student loan forgiveness could help parents to eliminate educational debt they've taken on for their kids.
Many parents borrow money to help their children afford school. This is different from co-signing because the loans are in the parents' names and the parents are solely responsible for repayment. This can become a financial hardship in some circumstances, so looking into forgiveness options could be beneficial.
Fortunately, there are various forgiveness programs for federal parent PLUS loans, each with their own criteria. You might even get at least partial repayment assistance, perhaps from your employer, and for private parent loans, too.
When referring to parent student loan forgiveness, it's important to distinguish between different kinds of programs that might be available depending on your situation. Options for getting repayment help can include:
Good to know: The Biden Administration announced a mass student loan forgiveness plan that is currently in legal limbo pending a Supreme Court decision. If passed, the program promises to forgive up to $20,000 if your child received a Pell Grant while in college and your annual income is less than $125,000 for single people or less than $250,000 for couples who file a joint tax return. If your child didn’t receive a Pell Grant, you’re eligible for $10,000 in forgiveness.
Each of these options provides relief from paying back your student loans, but not all options are available in all circumstances.
Federal loans are issued by the Department of Education. There are more options for parent loan forgiveness for federal loans than for private loans. Here are some of the different ways you could get these loans forgiven or discharged.
This is an option for parent loan forgiveness if you consolidate parent PLUS loans into Direct Consolidation Loans.
Under the PSLF program, your remaining balance will be forgiven after 120 on-time payments are made while working at an eligible public service job. Parent borrowers must choose the Income-Contingent Repayment (ICR) Plan after consolidation and work full-time for an eligible non-profit or in a qualifying job for the state, federal or local government.
Moms and dads may become eligible for this parent student loan forgiveness program if they become permanently and totally disabled. The parent who took out the loans must become disabled to be eligible for this program. The child's disability will not entitle the parent to discharge.
If the student passes away, the remaining balance on parent PLUS loans would be discharged.
In very limited circumstances, parent PLUS loans will be discharged in bankruptcy. As the Department of Education explains, federal student loans are canceled during bankruptcy proceedings only in limited circumstances when being forced to repay would cause "undue hardship." This usually means showing:
If your student was not able to complete their program as a result of the closure of their school, you can also get parent student loan forgiveness in these circumstances. This can include situations where the school closed while the child was attending or soon after withdrawal.
If the school your student attended falsely certified your eligibility to receive the loan — or if your eligibility was falsely certified as a result of the theft of your identity — then any loans granted as a result of this false certification can also be forgiven.
A GUIDE TO STUDENT LOAN FORGIVENESS PROGRAMS
There are fewer options for parent student loan forgiveness for private education debt. That's because private lenders don't offer debt cancellation for things like public service work or school closure. But there may be some circumstances where you can get debt forgiven or get some extra help paying off what you owe. Here are some options.
Private student loan lenders are not required to discharge debt in the event of the death of the student or in case of total and permanent disability of either the parent or the student — although some lawmakers are trying to change that.
Meanwhile, some lenders offer loan discharges to parents who have become totally and permanently disabled. This option would need to be discussed with your lender on a case-by-case basis.
Some employers offer student loan repayment assistance as a workplace benefit. Whether or not these programs apply to parents who borrowed for their children's education would be determined by the programs set up by the individual employer. Talk to your human resources department to learn about its offerings.
LRAPs may be offered by schools, private organizations or employers. They may require you to work in certain public interest jobs and may have income caps. Whether LRAPs allow for repayment assistance for parents who borrowed on behalf of children will also vary by program.
If parent student loan forgiveness is not an option — or wouldn’t extinguish 100% of your debt — there may be helpful alternatives. Here are a few possible things to consider.
If you borrowed parent loans on behalf of your children, you might decide that transferring the debt to them is best for your situation.
Unfortunately, you can’t transfer parent PLUS loans to students through the Department of Education. The only way for children to assume responsibility for parent PLUS loans is to permanently refinance student loans into their name, which would mean that all the federal borrower benefits are lost.
Many private lenders allow children to refinance either parent PLUS loans or private parent loans into their own names. However, the child, as the primary borrower, would need to be able to qualify independently or add a creditworthy cosigner to their application. (A cosigner, like a borrower, assumes legal responsibility to repay the debt.)
HOW TO REFINANCE STUDENT LOANS IN 6 STEPS
If you’re struggling to repay private parent loans, you might consider pursuing a debt settlement. This would involve negotiating with the private lender to repay a reduced amount. Debt settlement can damage your credit, but could still be an option if your loans aren’t affordable.
Federal student loans can’t be settled in most cases, although you may be able to lower their monthly payment by opting for a different repayment plan. Changing repayment plans will not hurt your credit score.
Explore these options to decide what’s best for your situation. If refinancing proves to be the right strategy, visit Credible and compare prequalified rates from multiple lenders.
