Parent PLUS Loan Repayment Options: Find the Best Plan for You

You took out a Federal Direct Parent PLUS Loan to help your student get through college. Now, it’s your responsibility to repay—not theirs.

Parent PLUS loan repayment typically begins 60 days after full disbursement, but you can request a deferment to delay payments until six months after your student graduates or drops below half-time enrollment.

Fortunately, several Parent PLUS Loan repayment options exist to pay off student debt. Here’s our complete list.

Income-Contingent Repayment Plan

To obtain income-contingent repayment (ICR) on a Parent PLUS loan, you must include Parent PLUS loan in a Federal Direct Consolidation Loan, and the Parent PLUS loan must have entered repayment on or after July 1, 2006. The Parent PLUS loan is not eligible for other income-driven repayment plans except when using the Double Consolidation Loophole, as explained below.

Income-contingent repayment bases the monthly payment on your income, not the amount you owe. The monthly payment is set at 20% of your discretionary income, which is defined as the amount by which your income exceeds 100% of the poverty line.

After 25 years of payments under income-contingent repayment, the remaining balance will be forgiven. 

Double Consolidation Loophole

Parent PLUS loans are typically only eligible for income-contingent repayment (ICR), which has higher monthly payments than other income-driven repayment (IDR) options. However, the Parent PLUS Double Consolidation Loophole allows borrowers to bypass this restriction and qualify for lower payments under other IDR plans.

Through double consolidation, Parent PLUS loan borrowers consolidate their loans twice using Direct Consolidation Loans. The key is to first consolidate multiple loans into two separate Direct Consolidation Loans, then consolidate those two loans again into a single Direct Consolidation Loan.

If completed correctly, the system no longer recognizes the loan as being from a Parent PLUS Loan, making it eligible for more favorable repayment plans like SAVE (formerly REPAYE), PAYE, or IBR. These plans generally offer lower payments and better loan forgiveness options.

Borrowers who work for qualifying employers may also benefit from PSLF, reducing their repayment term to just 10 years with tax-free loan forgiveness.

However, this loophole will close on July 1, 2025, and both consolidations must be completed by then. Since this can take several months to complete, and with reported servicer processing delays, the window for this option is rapidly closing.

Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is available to borrowers working full-time in a qualifying public service job while repaying their loans for 120 payments (10 years) in the Direct Loan program in an income-driven or standard 10-year repayment plan. Qualifying public service jobs include working for city, county, state, or federal government or a 501(c)(3) tax-exempt charitable organization.

Since income-contingent repayment is the only income-driven repayment option for Parent PLUS loans, Parent PLUS Loan borrowers must first consolidate their loans into a Federal Direct Consolidation Loan to qualify for public service loan forgiveness. Repaying the loans under standard repayment would yield no forgiveness on Parent PLUS loans, as the loans would be paid off in full after 10 years under standard repayment.

Public service loan forgiveness is tax-free and reduces the forgiveness period from 25 to 10 years.

Refinancing your loan

Another option is to refinance your Parent PLUS loans into a private student loan, a private parent loan, or a non-education loan. You might qualify for a lower interest rate if you have excellent credit. However, you will lose the federal repayment options for Parent PLUS Loans and other benefits since the loan will no longer be a federal loan after refinancing.

While this may be a good option for some borrowers, it will not necessarily save you money.

Remember that refinancing federal student loans means losing many benefits, including federal student loan forgiveness programs, including PSLF, generous deferment and forbearance options, and more.

Transferring the loan

Your child can refinance the loan in their name through a private lender, which will transfer responsibility for repaying the loan to them. To qualify for a private refinance, however, they must have a strong credit score, enough income to make the appropriate payments, and a history of making on-time loan payments.

Other federal student loan repayment plans

Standard Repayment Plan

Standard repayment involves level amortization for a 10-year repayment term. This means that monthly student loan payments are the same for all 10 years.

Standard repayment is the repayment plan with the highest monthly payment. But, it also involves the lowest total payments over the life of the loan, saving you money.

You will also finish repaying your federal Parent PLUS loans in 10 years. Generally, you should aim to pay off all debts by retirement. If your total Parent PLUS loans for all your children are less than your annual income, you should be able to afford to repay the loans in 10 years or less.

Other repayment options for Parent PLUS Loans may offer a lower monthly payment, but your loans will be in repayment longer and at a higher total cost. It is best to choose the repayment plan with the highest monthly payment you can afford.

Graduated Repayment Plan

Under the graduated repayment plan, your monthly payments start lower, barely above interest-only payments, and will increase every two years. No payment will be more than three times any other payment.

The repayment term under graduated repayment depends on the loan balance and whether the loans are consolidated. The repayment terms include 10 years, 12 years, 15 years, 20 years, 25 years, and 30 years, similar to the repayment terms for extended repayment.

Note that payments increase every two years, which can result in significantly higher payments later in the term.

See also: 14 Things That Could Happen If You Don’t Pay Student Loans

Extended Repayment Plan

Like standard repayment, extended repayment involves level amortization but with a longer repayment term. There are two types of extended repayment.

According to this table, the repayment term depends on the loan balance if the borrower has consolidated their federal loans.

Extended Repayment Options for Parent PLUS Loans

If the borrower has not consolidated their federal loans, they are eligible for a 25-year repayment term if the total loan balance is $30,000 or more.

Under extended repayment, the monthly loan payments will be lower than under standard repayment, but the total interest paid will be greater.

Deferment Options

Parent PLUS loans are eligible for deferments and forbearances for up to three years, the same as other federal education loans. They are also eligible for a deferment if the student on whose behalf the parent borrowed returns to college on at least a half-time basis.

Interest continues to accrue during a deferment or forbearance. If the interest isn’t paid as it accrues, it will be capitalized, adding it to the loan balance. This increases the amount of debt, making it more difficult to repay.

It is best to avoid deferments and forbearances unless the parent cannot repay the debt due to a short-term financial difficulty, such as unemployment or medical/maternity leave. Instead of completely suspending the repayment obligation, the parent should choose a repayment plan with low monthly payments for longer-term financial challenges.

Deferment will give you time to organize your finances. You are not required to make payments during this time; however, the loan will still accrue interest.

Stay the loan repayment course

You may have been happy to fund your child’s education, but paying off a Parent PLUS Loan can be burdensome and will take time. You will repay the debt for 10-25 years regardless of your selected option. Choose a parent PLUS Loan repayment option that works for you and your family and stay the course.

Parent PLUS loans do not have prepayment penalties. You can pay off the loans sooner than 10 years by making extra payments on the debt. Bring in a new source of income or cut items from your budget to get rid of the loan even faster.