Would student loan forgiveness include parent plus loans

Student Loan Forgiveness Applies to Parents, Too. How Older Americans Will Benefit.

Aug. 25, 2022 3:30 pm ET

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Parents who took out loans to help their children pay for college are among the millions of borrowers who stand to benefit from President Joe Biden’s plan to forgive some student debt, a potential boon for the retirement savings of qualifying older Americans.

Biden on Wednesday unveiled a one-time plan to cancel up to $10,000 in student debt for individual borrowers without Pell grants; borrowers with Pell grants, who tend to be lower income, are eligible for up to $10,000 in additional relief. Borrowers are eligible if their income is less than $125,000 for individuals or $250,000 for households.

A new study illustrates the broad struggles of Parent PLUS borrowers and their hopes for eventual ... [+] student loan forgiveness.

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It’s not just young adults who are grappling with the burdens of student loan debt; parents are struggling, as well.

A new report released today by NerdWallet illustrates the broad, ongoing hardships of Parent PLUS borrowers. Parent PLUS loans are a unique type of federal student loan where the parent takes on student debt on behalf of their child who is pursuing an undergraduate degree. The parent, not the student, is the sole borrower responsible for the loan’s repayment. Parent PLUS loans can have much higher interest rates than other types of federal student loans, and fewer repayment options. As a general rule, Parent PLUS loans are excluded from income-driven repayment plans (although they can access a less-generous income-driven repayment option in certain limited circumstances).

Between ballooning interest and more limited repayment flexibility, Parent PLUS borrowers are increasingly struggling. In its Harris Poll survey of 2,000 adults, including 130 Parent PLUS borrowers, NerdWallet reported the following:

34% of Parent PLUS respondents are not confident that they will be able to resume payments once the nationwide student loan payment pause ends in January. The Biden administration extended the payment pause and interest suspension to January 31, 2022, characterizing this as the “final” extension of the relief.
24% of Parent PLUS respondents say will have to request an additional voluntary forbearance to continue postponing payments after January. Once the payment pause and interest suspension ends, any additional forbearance could have significant interest accrual and capitalization consequences for borrowers.
21% of Parent PLUS respondents regret taking out their loans, and 27% would take out lower amounts — or none at all — if they could have a do-over.
22% of Parent PLUS respondents expected their child to be able to take over their payments, but so far that has not happened, leaving the parent borrower on the hook.
26% of Parent PLUS respondents say they’ll be unable to retire as expected because of their loan burden.
28% of Parent PLUS respondents say they’re counting on student loan forgiveness to help wipe out a large sum of their debt.

“At this point, student loan debt is affecting families across multiple life stages,” said NerdWallet’s Cecilia Clark. “We have new high school graduates signing up for debt, young adults burdened with debt as they try to build their lives and others near retirement who see their financial lives upended by this debt. And many of those retirement-aged debtors are parents and grandparents who took out loans to help a loved one get through school.”

Parent PLUS loans are eligible for many of the same student loan forgiveness programs as federal student loans, including Borrower Defense to Repayment, a Total and Permanent Disability (TPD) discharge, and Public Service Loan Forgiveness. But these programs have narrow eligibility criteria, and because Parent PLUS loans have fewer repayment options in general, navigating these programs can be even more difficult for some parent borrowers. Parent PLUS loans can be refinanced via a private loan to get a lower interest rate, but this can come with enormous risks including fewer consumer protections and less flexibility during catastrophic hardships.

According to the survey, many Parent PLUS borrowers are hoping for eventual student loan forgiveness. It is unclear whether the Biden administration will prioritize parent borrowers in any new student loan relief initiatives, however. The administration has used executive action to cancel nearly $10 billion in federal student loans over the course of the last eight months using a “targeted” approach through existing federal student loan forgiveness programs. While these actions are resulting in very real, tangible benefits for many borrowers, it has barely put a dent in overall outstanding student loan debt. The Biden administration has not issued any announcement yet on its ongoing review of legal authorities that could be used as a basis for wider student loan cancellation.