Parent PLUS Loans

Act Now Before Congress Strips Parent PLUS Borrowers of Income-Driven Repayment Access

What are Parent PLUS Loans?

Parent PLUS loans are federal loans issued to parents of undergraduate students. These loans are authorized by the PLUS loan program, which also includes loans to graduate and professional students. 

Risky Loans with Few Safeguards

Parent PLUS loans can be a lifeline for many families, but they come with serious risks. The loans carry higher interest rates and fees than undergraduate loans and have no borrowing cap. Parent PLUS borrowers also have limited repayment options. Their Parent PLUS loans are only eligible for the most expensive Income-Driven Repayment plan—which requires 20% of income above the federal poverty line (about $240 a month for a single borrower making $30,000). 

ACTION ALERT:

Congress is currently proposing significant changes to the student loan system in the Reconciliation Bill, which would eliminate access to all Income-Driven Repayment (IDR) plans for Parent PLUS borrowers not enrolled in Income-Contingent Repayment (ICR).  

Though much remains uncertain, Parent PLUS borrowers should strongly consider applying for Income-Contingent Repayment now to preserve their access to IDR. You can find more information about these proposed changes, and how to apply for ICR, on the Department of Education’s website here or via the button below.  

What does the proposed bill do? 

The Reconciliation Bill working through Congress would significantly narrow repayment options for Parent PLUS borrowers by restructuring the IDR landscape:  

  • The bill eliminates the Income-Contingent Repayment (ICR) plan, as well as the Pay As You Earn (PAYE) and Saving on a Valuable Education (SAVE) plans.  

  • The bill transfers existing borrowers in ICR, PAYE, and SAVE into a separate IDR plan, the Income-Based Repayment (IBR) plan. This transfer should include Parent PLUS borrowers enrolled in ICR.  

  • The bill creates a new IDR plan, the Repayment Assistance Plan (RAP), which excludes Parent PLUS borrowers (even if they consolidate).  

As a result of the bill’s changes, Parent PLUS borrowers who are not enrolled in ICR may permanently lose access to IDR. This will prevent borrowers from lowering their payments (in some cases, to $0) and increases the risk of student loan defaults.  

What can you do to preserve your IDR Access?  

IDR plans offer various student loan repayment options that set monthly payments based on a borrower’s income and family size.  Parent PLUS borrowers are ineligible for most IDR plans but can access one—the Income-Contingent Repayment (ICR) plan—if they consolidate their loans. Parent PLUS borrowers not yet enrolled in IDR can consolidate their Parent PLUS loans and apply for ICR.  

Before consolidating, borrowers should consider the following:  

  • Borrowers with Parent PLUS and non-Parent PLUS debt SHOULD NOT consolidate those loans together. Doing so will eliminate the borrower’s ability to repay their non-Parent PLUS loans through more generous IDR plans.  

  • Consolidation is a pathway out of default. If a borrower consolidates their Parent PLUS loans, they will not be able to consolidate themselves out of a future default unless they have at least one non-consolidated loan.  

  • Borrowers who have significant unpaid interest (or collection costs) will have those costs added to the principal balance of their Consolidation Loan. This will likely lead to the loan accruing more interest.  (This consideration is less relevant to borrowers seeking discharge through IDR or PSLF.) 

Congress Must Reform the Parent PLUS Program 

  • The Parent PLUS program was initially designed to help affluent families spread out the cost of their kid’s tuition bills over time. It served as a convenient source of liquidity for families who had the resources to pay for college. 

    Over time, the Parent PLUS loan has taken on greater importance for low- and moderate-income families as federal and state support for higher education has stagnated. In 2020, for example, 25 percent of Parent PLUS borrowers had a $0 Estimated Family Contribution (EFC), which reflects the federal government’s estimate of what a family can contribute to college costs. This statistic presents a stark reality—for a quarter of families, the government estimates that they cannot afford to contribute to a student’s education but nonetheless offers them an unlimited supply of Parent PLUS loans. 

    Congress must reform its higher education financing model to ensure that the promise of the Higher Education Act—to encourage social mobility—is realized. It must: 

    • Increase the Pell Grant and encourage States to contribute more higher education funding so that low- and moderate-income families can avoid over relying on federal loans, including Parent PLUS loans. 

    • Let Parent PLUS borrowers access the more generous IDR plans to prevent them from falling into delinquency and default, which risks wage garnishment, tax refund interception, and even the seizure of Social Security benefits for elderly parents.