Parent PLUS Loan Repayment Options

Student loans aren’t limited to students. Parents often help their children cover college costs by taking out loans, including Federal parent PLUS loans.

The best parent PLUS loan repayment option is one that fits your family’s financial situation and goals, like repaying loans quickly, having a low monthly payment or getting loan forgiveness.

Here are four parent PLUS loan repayment strategies to consider.

1. Repay parent PLUS loans quickly

Choosing the standard repayment plan or refinancing your loan to get a lower interest rate are two ways to speed up repayment.

Follow the standard repayment plan

Making payments on the standard, 10-year federal repayment plan will pay off parent PLUS loans the fastest and save you the most money. To become debt-free even quicker, make extra student loan payments toward your principal balance.

Refinance to a lower interest rate

Refinancing to a lower interest rate can not only shorten the payoff period, but it can also save you money in interest. You can refinance parent PLUS loans in your name, or the student can take over the PLUS loan by refinancing it in their name.

To qualify, you generally need good credit and enough income to comfortably afford all of your expenses and debt payments — including housing, student loans and credit cards. Refinancing isn't a good option for borrowers who are pursuing student loan forgiveness or want to make payments based on their income. You'll lose these federal benefits by refinancing with a private lender.

Use this calculator to estimate how much you could save by refinancing parent PLUS loans:

2. Lower your loan payments

Two ways to lower your monthly student loan bill are consolidation and enrolling in the Income-Contingent Repayment plan.

Parent PLUS loan consolidation

Consolidating parent PLUS loans won’t save money in the long run, but it can lower your monthly payments by spreading your debt over a longer repayment term. You'll have 10 to 30 years to repay the consolidated loan, depending on the loan balance. On a longer repayment schedule, you'll have lower monthly payments but also pay more in interest over time.

When you consolidate parent PLUS loans, they become a federal direct consolidation loan. You can consolidate even if you only have one parent PLUS loan.

» MORE: What's the difference between consolidation and refinancing?

Income-Contingent Repayment

Income-Contingent Repayment reduces your monthly federal student loan payment to 20% of your income or the amount you’d pay on a fixed 12-year repayment schedule, whichever is less. It also offers forgiveness after 25 years if you’re still making payments at that time.

Income-Contingent Repayment is the only income-driven repayment plan parent PLUS loan borrowers can use. To be eligible, you must first consolidate your parent PLUS loans.

Switching to Income-Contingent Repayment could lower your payments significantly if you qualify. But you'll pay more in interest and you’ll be required to pay income tax on any amount forgiven.

3. Transfer a parent PLUS loan to the student

If you want to transfer parent PLUS loans into the student's name, you must refinance with a private lender, and not all refinance lenders allow transfers. To qualify, the student must have good credit — a score in the mid-600s or higher — and a low debt-to-income ratio, meaning they have enough income to cover their expenses and debt payments.

4. Get loan forgiveness

The best way to get parent PLUS loan forgiveness is through Public Service Loan Forgiveness.

Public Service Loan Forgiveness is a federal program that forgives nonprofit and government employees’ loans after they make 120 monthly payments, or 10 years' worth. Unlike with Income-Contingent Repayment, the forgiven amount won’t be taxed.

Make sure you fully understand the specific rules and requirements for Public Service Loan Forgiveness before pursuing it. For instance, the parent must work for a qualifying employer; the student's employment doesn't matter.

If you want to pursue PSLF, consolidate your parent PLUS loans to switch to the Income-Contingent Repayment plan. Otherwise, you may not have a balance left after 120 payments to be forgiven.

What to do when you can’t pay your parent PLUS loan

If you’re struggling to repay your parent PLUS loan and you’ve already considered refinancing or consolidating, getting loan forgiveness or transferring your loan, there are other options to consider.

If you’re unemployed or experiencing financial hardship, you may be able to temporarily postpone payments through deferment or forbearance.

Interest accrues on parent PLUS loans while they’re in deferment or forbearance. This interest gets added to your loan balance when you enter repayment, which increases your total balance.

Defaulting on parent PLUS loans

Not paying parent PLUS loans can eventually lead to default. This happens after 270 days of missed payments. At this point, your priority should be returning the loans to good standing.

There are three ways to get out of student loan default for federal loans: repayment, rehabilitation and consolidation. Rehabilitation or consolidation are probably your best options, and there are pros and cons to both.

While your parent PLUS loans are in default, the government can garnish your wages and take your tax refunds and Social Security checks, among other consequences. Defaulted loans also aren’t eligible for different repayment plans, deferment or forbearance.

» MORE: Student loan rehabilitation: Is it right for you?

Still overwhelmed? Talk to a pro

Your parent PLUS loans are one small part of your financial life. You may have a mortgage, car payment, some credit card debt or a retirement fund and an emergency savings account.