Dear Penny: I’m Struggling to Pay Back a Parent PLUS Student Loan I Took Out For My Children. Am I Eligible for Forgiveness?
I’ve been repaying $200,000 Parent PLUS student loan debt for my two children for over 10 years on an income-driven plan. People, including my accountant, told me to look into filing for forgiveness. Does this pertain to me as a parent?
I’m going to be 72 in August, still working two jobs, and my husband passed away a year ago, leaving me without his income to support my bills. I can’t retire because of these loan payments. Is there something that can be done now that my income is substantially lower?
The income-driven plan feels like a loan shark. The interest is 7.64% — does the government need to make such a substantial profit? I’m only paying monthly minimums, so I actually owe more than I borrowed! It’s very disheartening that I won’t have these loans paid off until 2042 — I’ll be 91! If I pass away first, are the loans forgiven?
— Will My Debt Die With Me?
Dear Will,
Folks are giving you incorrect information, but with seeds of reality.
Federal Parent PLUS loans would go into a repayment plan called Income-Contingent Repayment (ICR), which sets your monthly payment at up to 20% of your discretionary income. You’ll be eligible to apply for forgiveness of any remaining balance after making monthly payments for 25 years. The loans would also be discharged if you die; your family would have to provide your servicer with proof of death.
(Your sources might be conflating your options with Public Service Loan Forgiveness, which has gotten a lot of headlines this year. Loans in that program are eligible for forgiveness after 10 years.)
You should be able to get lower monthly payments by reporting your reduced income to your student loan servicer. You can find your loan servicer through StudentAid.gov. Income-driven plans are meant to eliminate the burden of high monthly payments, so if the debt is a strain, something probably needs to change about your plan.
A final note: The federal government doesn’t actually make a profit off of student loans. The interest we pay is used to cover the costs of administering loan programs — i.e. private loan servicers. With recent pandemic-era complexities, student loan programs have indeed cost our government money rather than generated revenue.
Dana Miranda is a Certified Educator in Personal Finance® and author of YOU DON’T NEED A BUDGET. She writes Healthy Rich, a newsletter about how capitalism impacts the ways we think, teach and talk about money.
