Question: I just turned 60 and will probably have to work another 20 years. I currently owe about $50,000 in Parent PLUS loans which have grown to this amount over the years. My son cannot afford to pay his share, due to past, present and future incarceration. Can I get relief or am I stuck with the full loan amount? Do I have to make an agreement to pay according to my income?
Responnse: Unfortunately, despite the situation, you are probably responsible for at least some of this debt. Indeed, Parent PLUS loans are the sole responsibility of the borrowing parent, regardless of their child’s ability to pay. “Parent PLUS borrowers don’t have as many repayment options as undergraduate borrowers if they’re having trouble repaying their debt,” says Anna Helhoski, student loan expert at NerdWallet. That said, Leslie H. Tayne, financial attorney and founder of Tayne Law Group, says you might not have to pay the full amount. “And even if you do, there are ways to tailor the required payments to your budget,” says Tayne. Here are some options suggested by the pros, from loan forgiveness to refinancing your student loans.
Student Loan Forgiveness Programs
If you haven’t already, your best bet might be to consolidate your Parent PLUS Loans into Federal Direct Loans and then apply for the Income Contingent Repayment (ICR) Plan, both of which can be done online for free. . “Under the ICR plan, your required payments will be based on your income and could be as low as $0 per month. Then, after you’ve made qualifying payments for 25 years, you may be eligible for the remaining balance to be written off,” says Tayne.
Keep in mind, however, that you must recertify your income each year and may have to pay tax on the amount remitted. As one of four income-based repayment plans, ICR caps payments at 20% of a parent’s income or what you would pay with a fixed monthly payment over 12 years. “Borrowing parents can use the Federal Student Aid Loan Calculator to find out how much they would pay under this plan,” says Helhoski.
It is also possible to get forgiveness earlier through the Public Service Loan Forgiveness Program (PSLF). “To qualify, you must work for the government or a nonprofit organization and make ten years of qualifying payments under the ICR plan,” Tayne says. Some people may even qualify for $0 payments if their income is very low.
“You can also explore the Tiered Repayment Plan and the Extended Repayment Plan,” says Tayne. “If you think your income will increase over time, GRP might work for your budget because your payments would increase every 2 years and you would pay off the debt in 10 years.” Under ERP, payments would be spread over 25 years, which means you would pay significantly less each month.
There are extreme situations where loans can be forgiven, such as if your son dies or becomes totally and permanently disabled. Or, if your son’s school closed before he graduated or soon after he retired from school, you may qualify for debt forgiveness. It’s also worth mentioning that some employers offer student loan assistance and an employee rebate, including companies like Ally, Estée Lauder, Google, Hulu, and Peloton.
Student Loan Refinance
Finally, refinancing debt into a private loan might be a good idea if your finances are sound and you want a lower interest rate. However, “you will lose the benefits of federal student loans, such as access to the ICR plan if you do. If you think you can secure a path to forgiveness, it’s best not to refinance,” Tayne says. .