As your child starts to receive acceptance letters for college, they should also begin applying for financial aid, like student loans.
This starts with filling out the Free Application for Financial Student Aid (FAFSA) and then collecting information packets from the schools your child is considering. This will give you a list of all the federal, state, and institutional-based financial aid available, including federal direct loans.
Many students find that they can cover each year of school with the help of grants, scholarships, and various student loans, but you may find that the loans your child directly qualifies for are not enough to cover the first year. You can look at private loans through a bank or nonprofit, but you can also consider taking out your own federal loan: the parent PLUS direct loan.
Parent PLUS Loans: How the Department of Education Manages This Program
The parent PLUS loan is a subset of the direct PLUS loan program from the Department of Education (DOE). This program is specifically designed for parents to get financial help for their children.
You take this loan out in your name and then make monthly payments on the interest while your child is in school. Many financial advisers recommend that you ensure your child pays the monthly installments, but you also have some options for parent PLUS loan forgiveness.
Qualifying for a Parent PLUS Loan May Lead to Loan Forgiveness
There are few qualifications you must meet to take out the parent PLUS loan:
- You must be the legal guardian (biological or adoptive parent) of the dependent undergraduate student
- Your child must be enrolled at least half time in college
- You must have no adverse credit history, like bankruptcies or defaulted loans
- Your child must meet other general requirements for federal student loans
For direct PLUS loans disbursed between July 1, 2019, and July 1, 2020, the interest rate is 7.08%. Because parent PLUS loans fall under the direct loans program with the DOE, this interest rate is fixed, so you will not have higher interest over the course of repayment. 
If, for any reason, you find that you cannot cover the loan payments while your child is in school, you can request loan deferment. This is not parent PLUS loan forgiveness, but it will stop you from having to make interest payments while your child is enrolled in school, at least six months after they graduate, or for six months after they drop below half-time attendance.
You can also set up repayment schedules that work best for you, including:
- Standard repayment of 10 years
- Graduated repayment, which starts at low monthly payments and increases over 10 years
- Extended repayment over 25 years
However, none of these programs gets rid of the loan; they only make payment simpler for you, depending on your needs.
If you took out a parent PLUS loan, you have two basic options for loan forgiveness: Public Service Loan Forgiveness (PSLF) or income-contingent repayment.
Public Service Loan Forgiveness for Parent PLUS Loans
The Public Service Loan Forgiveness program makes student loan forgiveness available to people all over the U.S. The program encourages students (and in some cases, their parents) who took out direct loans to work in public service for a few years, which will translate into some or all of their student loans being forgiven.
The direct PLUS loan program and related, consolidated federal student loans qualify for student loan forgiveness under the PSLF. The basic qualifications for this program include:
- Working for a government agency or qualifying nonprofit organization
- Working full time, which is defined either by your employer or as 30 hours or more per week
- Having a direct loan, including a parent PLUS loan
- Setting up an income-driven repayment plan for the loan
- Having made 120 qualifying monthly payments on the loan
It is important to note that your job, not your child’s post-graduation job, is what qualifies your parent PLUS loan for student loan forgiveness. This means that you will need to work in qualifying public service somehow. If you work for the government or a nonprofit, you can ask your current employer if you qualify for this plan now. If you have always wanted to volunteer in the Peace Corps, this is an excellent reason to do so.
Chances are you have a job you enjoy or need already, so you cannot change careers or volunteer for at least two years just to qualify for parent PLUS loan forgiveness. More parents benefit from the second method of loan forgiveness: income-contingent repayment.
Parent PLUS Loan Forgiveness Using Income-Contingent Repayment
The income-contingent repayment (IRC) plan is the only form of income-driven repayment available to parent PLUS loan borrowers. This first requires you to consolidate your parent PLUS loan into a direct consolidation loan, allowing you to get the current fixed interest rate and re-plan your payment schedule over 25 years rather than the standard 10 years. If the parent PLUS loan is not totally repaid at the end of this repayment period, the remaining balance is forgiven. 
Like other forms of income-driven repayment, IRC may reduce your monthly loan bill to zero. You will continue to receive bills from your loan servicer, but if they are for nothing because your income qualifies you for this low rate, you obviously do not owe anything that month.
These payments will vary based on your annual income, so you may owe more one year than the next. Your loan servicer will notify you when it is time to recertify your ICR payments for the coming year.
The amount of the parent PLUS loan that is forgiven after 25 years is considered taxable income. As an older adult, this could make a difference in your retirement plans. That said, if you are already retired and have limited income from retirement accounts, this can reduce the amount you pay every month on the parent PLUS loan, putting loan forgiveness within reach.
Other Loan Options May Work Better Than Seeking Loan Forgiveness
Ultimately, parent PLUS loan forgiveness is attainable, but federal loan forgiveness is harder for parents than it is for undergraduate students. Your child will have more options for direct loan forgiveness, refinancing or consolidation, or debt reduction. Of course, you want to help them, but a parent PLUS loan may not be the best option for either of you.
Rather than taking student loan debt into retirement, consider finding private student loan options. While these loans require monthly payment as soon as the loan is disbursed (so your child will begin paying the loan while they are still in school), you may be able to find a lower interest rate or a good variable interest rate on a private loan.
The terms of the private student loan could be better for your child than a parent PLUS loan is for you. Private loans do not have “forgiveness” options, but your child can refinance their loans for a better interest rate, get deferment or forbearance, and receive loan counseling that can help them create a budget to repay student loans.
Everyone has different financial needs when it comes to college tuition and other costs. For many, the parent PLUS loan works well, but others find that private loans are a better option. Discuss college financing with your child in advance, so you can decide what risks you are both willing to take.
