Relief options if you're in debt from your kid's education

In January, the Department of Education unveiled details of a repayment plan overhaul that could halve monthly payments for many federal student loan borrowers. But one group, the 3.7 million parents who owe parent PLUS loans, won’t benefit. Policymakers have long excluded parent PLUS loans from most relief, though the program looks much different today than it did during its 1980 debut.

While parent PLUS loans were initially intended as a tool for well-off families, says Robert Kelchen, a higher education professor at the University of Tennessee, Knoxville, they’ve increasingly become the loan of last resort for lower-income families. Parents, who can borrow up to the total cost of attendance per child (minus other federal aid) with PLUS loans, use the loans to fill funding gaps after their student hits the borrowing limit of no more than $7,500 per year from the government.

“These are intergenerational debts,” says Alpha Taylor, a staff attorney at the National Consumer Law Center in Washington, D.C., focused on student loans. “The parents have their own student loans, so they have their own debt that they're carrying. And on top of that, they're carrying their children's debt, and the children are also in debt.”

Though the latest payment plan overhaul won’t help, there are other options to get debt relief for parent PLUS loans.

Permanent federal relief programs 

The parent who originally took out the loan — not the child who benefited — must work for a qualifying employer.

Consider other relief options first: Interest will accumulate during these pauses.

Temporary pandemic-tied relief

The Supreme Court is expected to announce a final decision on Biden’s plan by late June.

The automatic adjustment will also apply to PSLF-eligible loans.

However, it may be worth exploring bankruptcy now “if you're someone who can't afford Income-Contingent Repayment, you've had the loans for over a decade (and) you're closer to your retirement than you are to the beginning of your work history,” Tate says.