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9 ways to repay your Parent PLUS Loans
How to get out of debt faster, lower your monthly cost or apply for forgiveness.
3 ways to repay your Parent PLUS Loans faster
Aside from avoiding deferment and forbearance, you have a few options if you’d like to free up your credit as soon as possible. But these might not be the best choice if you want to apply for Public Service Loan Forgiveness (PSLF).
Refinance for a lower rate
- Get out of debt faster without paying more each month.
- Lose federal benefits and options are limited.
Parent PLUS Loans come with rates on the higher end of the federal loan spectrum, so it’s easier to get a better rate by refinancing with a private lender. If you keep the same term, this lets you repay your loans faster at the same monthly repayment. A shorter term gets you out of debt even faster and will save you more in interest — though your monthly cost goes up.
But it’s not a great option if you want to take advantage of benefits available to federal loans, like forgiveness or the flexibility to switch your repayment plan or pause repayments.
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Switch to the Standard Repayment Plan
- Keep federal benefits and save on interest.
- Pay higher monthly costs over refinancing.
The Standard Repayment Plan comes with the shortest loan term available on a federal loan — 10 years — and has the lowest cost. If you can afford higher monthly repayments, consider switching to this plan to get out of debt faster. You can do so by contacting your servicer and submitting a form.
Switching repayment plans is easier than refinancing, but you’ll still have the same interest rate. This means you’ll pay more each month and in overall interest than if you’d refinanced with a lower rate.
Make extra repayments
- Keep the same plan, rates and terms.
- Means extra work each month
Don’t want to make a commitment by refinancing or changing repayment plans? Putting your tax refund or bonus toward extra repayments can help you get out of debt faster.
Before you make your first extra repayment, contact your servicer to make sure the funds go toward the loan principal. Otherwise, your loan might go into “paid ahead” status. This means any extra funds simply go toward future repayments instead of lowering the overall cost of your loan.
3 ways to lower repayments on your Parent Plus Loans
When you’re struggling with high monthly repayments, the last thing you want to do is shorten your loan term. Instead, you might want to consider one of the following options.
Switch to the Graduated or Extended Repayment Plan
- Lower your cost without having to change servicers.
- Pay more in interest.
The Graduated Repayment Plan gives you repayments that increase every two years over a 10-year term. This can be helpful if you’re starting a new career or otherwise expect to make more money in the future.
If you expect your income to stay the same, the Extended Repayment Plan might be a better choice. This plan spreads your repayments out over 25 years. You can also sign up for the 25-year Graduated Extended Repayment Plan if you’d like something in the middle.
Getting a longer term might make sense in the short run, but it can cost a lot more in interest. Consider making extra repayments when you can to cut down on the amount of interest that adds up.
Refinance for a longer loan term or lower rate
- Save more on interest than simply changing your plan.
- Lose federal benefits.
If you’d like to lower your monthly cost but still want to keep your interest payments down, refinancing might be the way to go. If you’re able to qualify for a lower rate, you might not have to pay as much in interest, even if you have a longer term. But you won’t be able to take advantage of the benefits unique to federal loans when you refinance with a private lender.
Apply for deferment or forbearance
- Make no repayments during temporary circumstances.
- Increases your total and monthly cost.
Federal loans come with a wide range of deferment and forbearance programs to help you avoid defaulting on your loan in temporary situations. You can pause your Parent PLUS Loan repayments for a wide range of reasons, including going back to school, entering rehab or losing your job.
The downside is that interest capitalizes on these loans once repayments resume. With interest capitalization, the lender takes the interest that added up during deferment or forbearance and adds it to your loan balance, making your interest payments higher. You also pay more each month, since your loan term stays the same.
3 ways to get your Parent PLUS Loans forgiven
You have a few options if you want to have part or even all of your Parent PLUS Loans canceled — even if you don’t work for a nonprofit or government organization.
Apply for Public Service Loan Forgiveness
- Have your loan balance erased after 10 years of qualifying repayments.
- The application is especially complicated for parents and most get rejected.
Public Service Loan Forgiveness was designed to encourage recent graduates with high debt loads to enter public service, but you can qualify as a parent borrower too. It involves making 120 repayments on an income-driven repayment plan while working at an eligible public service job. If you qualify, you can have the remaining balance of your loans canceled.
But 99% of the initial round of applicants were rejected, mainly due to misinformation about the eligibility requirements and process. As a Parent PLUS borrower, you have an even harder time qualifying because you first have to consolidate your loans with a Direct Consolidation Loan to make qualifying repayments on an income-driven repayment (IDR) plan. And the only plan you’re eligible for — the Income-Contingent Repayment Plan — comes with the highest monthly cost of all the IDR plans.
Look into private options
- Many have fewer service requirements than PSLF.
- Prepare for lower forgiveness amounts.
Doctors, nurses, lawyers and teachers especially might want to consider applying for private forgiveness or loan repayment assistance programs. Like PSLF, these are generally incentive programs designed to encourage recent graduates to take low-paying jobs in areas of need. But parent borrowers can often qualify as well, as long as you meet the requirements.
These typically only require between two and five years of service. But you might not get your entire loan balance forgiven.
Find a job that offers forgiveness as a benefit
- Available to all professions.
- Usually capped at $10,000.
As the student debt crisis balloons, companies are increasingly offering student loan forgiveness as a benefit to their employees. While it’s popular in the tech sector, you can find forgiveness as a benefit in industries like finance, publishing and even cosmetics.
Companies typically offer up to $10,000 of forgiveness per employee over several years. It’s less than you’d get through other forgiveness programs, but it can still make a dent.
If you’re in the market for a new job, you might want to ask about this benefit. Or ask your current employer if they’d be willing to start offering it.
How to pass on the responsibility
After your child has made some headway in their career, you might want to consider refinancing the loan in their name. This might be the best way to go if you’re thinking of taking out a mortgage or financing a new car, since your debt-to-income ratio can affect your credit score and application.
However, your child will need to have high enough credit and income to qualify on their own. You could potentially stay on as a cosigner, but the loan would continue to affect your credit until you apply for cosigner release to take it off your hands completely.
Parent PLUS Loans are a little different than other federal loans. They have higher rates and come with fewer benefits than federal loans in a student’s name, making them a more attractive candidate for refinancing. You can learn more about how these loans work by checking out our guide to Parent PLUS Loans.
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