What Parent PLUS borrowers need to know about student loan forgiveness

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President Joe Biden’s announcement last month that he would forgive up to $20,000 in student debt for borrowers will also impact the millions of parents who have taken out loans for their children’s education.

The debt relief applies to so-called Eltern-PLUS loans, federal loans that parents can take out to help pay for their dependent children’s college tuition.

As tuition fees have skyrocketed over the past few decades, more and more students are reaching the limits of their student loan borrowing options, urging parents to borrow more.

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Currently, more than 600,000 parents take out student loans for their children each year, according to higher education expert Mark Kantrowitz, up from about 450,000 in 2000. The average outstanding Parent PLUS loan is about $30,000, he said.

Many of these parents will now experience some relief.

“Both students and parents should ask for forgiveness,” Kantrowitz said.

Here’s what you should know.

1. Am I qualified?

President Joe Biden announced in August that most federal student loan borrowers are entitled to some forgiveness: up to $10,000 if they haven’t received a Pell Grant, a type of grant for low-income undergraduate students, and up to $20,000 -dollars if they did.

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Regardless of the relief their children may be entitled to, parents with Direct PLUS loans are also eligible for loan foreclosure as long as they fall below the income limits set by the President: $125,000 for individuals or $250,000 for households. If you earned below these amounts in 2020 or 2021, you should be good.

In some cases, both parents have applied for Parents PLUS loans for their children, and they are both individually entitled to a loan termination.

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If a parent received a Pell Scholarship during their own college years, they can receive the $20,000 in loan forgiveness whether or not their child had the scholarship in their financial aid package. If the parent did not receive a Pell grant but their child did receive a Pell grant, the parent may also qualify for a cancellation of just $10,000.

You can check your account on Studentaid.gov under the My Help section to see if you received the scholarship. Most recipients come from families earning less than $60,000, Kantrowitz said.

2. What if I have Parent PLUS loans and my own student loans?

The forgiveness amounts announced by Biden, either $10,000 or $20,000, are per borrower. That means this is the limit on your relief on all types of federal student loans you own. It’s also the limit regardless of how many kids you borrowed for.

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Although your Parent PLUS loans can be forgiven over your own student loans because the US Department of Education prioritizes loans with higher interest rates.

Currently, Parent PLUS loans have an interest rate of almost 8%, compared to under 5% for student loans.

3. Should I ask forgiveness with my child?


“Parents should apply separately from their children,” Kantrowitz said, since you are both entitled to your own relief.

The Department of Education has said an application will be ready by “early October.” Ideally, you’ll be ready to request relief as soon as the application is launched.

4. What if I still have Parent PLUS credit after forgiveness?

If you’re still in debt after student loan forgiveness, be prepared for bills to resume in January.

Then the aid policy from the pandemic period, with which payments and interest on federal student loans were suspended, is to end.

You might consider refinancing your remaining balance to get a lower interest rate, Kantrowitz said.

While it can save you money, there are a number of reasons why consumer advocates say you should exercise caution when considering converting your government student loans into personal debt.

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Your rate doesn’t matter if you lose your job, suddenly have medical expenses, can’t afford your payments and realize that defaulting on payments is your only option.

Betsy Mayotte

President of the Institute of Student Loan Advisors

The Department of Education allows some borrowers reduced monthly payments when their income is low, and others can defer their bills without accruing interest when they face economic hardship. The government also offers loan forgiveness programs for teachers and civil servants.

Private lenders typically only allow limited breaks in your payments during which interest rates rise.

As a result, Betsy Mayotte, president of the Institute of Student Loan Advisors, said she could count on one hand the number of borrowers for whom she thought refinancing their federal loans into private loans would be a good idea.

“Refinancing private student loans can generate a lower interest rate than state student loan rates,” Mayotte said, “but your interest rate doesn’t matter if you lose your job, have sudden medical expenses, can’t afford your payments and find out you can’t.” the case is your only option.”

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