These Student Loan Borrowers Must Act Now, Group Warns, Or Risk Losing Access To Key Plan

A student loan borrower legal organization is urging certain borrowers to take immediate action or they may lose access to key repayment plans and loan forgiveness paths as Congress moves forward with major legislative changes.

“ATTENTION Parent PLUS Borrowers: Protect your student loan options,” said the Project on Predatory Student Lending in a statement posted on X on Friday. “Congress’ Reconciliation Bill could eliminate Income-Driven Repayment (IDR) options for Parent PLUS borrowers.”

But the situation is extremely complicated for Parent PLUS borrowers right now. Many borrowers may not be able to afford their student loan payments under the main IDR plan that would be available to them (and which may also get repealed by Congress). There may be insufficient time for some borrowers to act before Congress implements legislative changes. And the legislation itself is also facing greater uncertainty now after a top official ruled last week that key provisions impacting student loan forgiveness and repayment plans do not comply with Senate rules.

Here’s what’s going on, and what these student loan borrowers should know.

The Future Of Student Loan Forgiveness And Affordable Payments For Parent PLUS Borrowers Is Uncertain

Parent PLUS loans are type of federal loan issued to the parent of an undergraduate student. While the child – the student – is the person who benefits from the loan, the parent is the legal borrower and the person responsible for repayment of the loan.

These types of federal student loans have historically had less favorable terms than other types of federal loans, including higher interest rates and limited access to affordable repayment options. In particular, Parent PLUS loans are generally not eligible for payment plans tied to income, commonly referred to as income-driven repayment (or IDR) plans. IDR plans also have, until recently, provided a pathway to student loan forgiveness, typically after 25 years in repayment.

The exception to the rule that Parent PLUS loans are ineligible for IDR plans is that Direct consolidation loans that repaid Parent PLUS loans can be enrolled in the Income-Contingent Repayment plan. ICR is the least affordable of the current IDR options, and may be too expensive for many borrowers. But it can provide a true lifeline for Parent PLUS borrowers who have experienced a major reduction in their income.

But reconciliation legislation that Republicans are trying to pass through Congress could cut off Parent PLUS borrowers from any IDR plan, including ICR. If enacted, this could mean that Parent PLUS borrowers would not be able to reduce their payments in accordance with their income, or pursue student loan forgiveness.

Group Warns Parent PLUS Borrowers To Take Action Or Risk Losing Access To Affordable Student Loan Plan

The proposed Republican-led reconciliation legislation would, if enacted in its current form, repeal most existing IDR plans for current federal student loan borrowers in repayment. This would include the ICR plan, as well as the PAYE and SAVE plans, too. Borrowers enrolled in these plans would be automatically moved to the IBR plan, which – depending on the borrower – could result in higher or lower monthly payments. The legislation would also create a new IDR option called the Repayment Assistance Plan, or RAP, but Parent PLUS borrowers would be ineligible.

Since Parent PLUS borrowers would also not be eligible to enroll in IBR, this would effectively mean that these borrowers would be cut off from any IDR option, as well as student loan forgiveness under IDR and Public Service Loan Forgiveness (which requires that borrowers enroll in either the 10-year Standard plan or an IDR plan to make qualifying payments). The one exception to this under the proposals would be Parent PLUS borrowers who have already consolidated via the Direct loan program and are enrolled in the ICR plan the day before the bill goes into effect would get to maintain access to IDR plans (and they would be moved from ICR to IBR).

“Congress’ Reconciliation Bill proposes significant changes to the student loan system – including elimination of all income-driven repayment (IDR) plans for Parent PLUS borrowers not enrolled in Income-Contingent Repayment (ICR),” said the Project on Predatory Student Lending. “Congress’ Reconciliation Bill could eliminate Income-Driven Repayment (IDR) options for Parent PLUS borrowers. If you’re not already enrolled in Income-Contingent Repayment (ICR), you could permanently lose access to affordable monthly payments—even $0 plans. Parent PLUS borrowers should strongly consider applying for ICR now to preserve access to IDR.”

Student Loan Landscape Is Extremely Complicated For Parent PLUS Borrowers

But whether Parent PLUS borrowers should actually take action right now is an extremely complicated question, and depends heavily on a borrower’s unique circumstances. To make matters even more challenging, the landscape appears to be changing by the day. Consider the following:

• Last week, the Senate Parliamentarian ruled that the provisions of the reconciliation bill that would repeal IDR plans for current student loan borrowers in repayment (including ICR) do not comply with Senate reconciliation rules, and therefore would require 60 votes to pass. That is likely impossible, given that Republicans only hold 53 seats in the Senate. So that means that the provision either will not become law (meaning Parent PLUS borrowers may not need to rush to act), or Republicans will need to find a way to rewrite the provision to comply with senate rules. It’s unclear at this juncture what, exactly, will happen.
• ICR can be an extremely expensive repayment plan for even modest income earners. A Parent PLUS borrower with an Adjusted Gross Income of $60,000 would have an ICR payment of around $740 per month. With an AGI of $80,000, they would have ICR payments of nearly $1,100 per month. A borrower with an AGI of $120,000 would have an ICR payment of more than $1,700 per month. These payments may simply be unaffordable for many borrowers.
• Even if borrowers act immediately, there simply may not be enough time to enroll in ICR. Republican lawmakers are hoping to pass the legislation by July 4th. While that timeline is now in question, particularly after the recent Senate Parliamentarian ruling, there is a 1.5 million IDR application backlog right now as the Department of Education and its loan servicers struggle to process applications; there are no guarantees of a speedy turnaround. And borrowers who must first consolidate their loans to access ICR may have little chance of enrolling in time, as the consolidation process alone typically takes 30 to 60 days before loan servicers would even initiate processing the ICR request.
• Student loan forgiveness under ICR has been blocked since earlier this year as a result of a related legal challenge over the SAVE plan. There is a possibility that even if ICR survives as a repayment plan, student loan forgiveness under the plan will not. It is not at all clear what happens to borrowers who reach the 25-year student loan forgiveness threshold for ICR, but cannot receive a discharge.

What Should Parent PLUS Borrowers Do Given The Threats To Affordable Student Loan Payments And Loan Forgiveness?

Parent PLUS borrowers are in an extremely tough spot, as affordable payments and student loan forgiveness pathways are under threat. But the right move really depends on a borrower’s own unique circumstances and their risk tolerance.

For Parent PLUS borrowers who have already consolidated their loans via the Direct loan program but are not enrolled in ICR, it may make sense to apply as soon as possible. But first, it’s important to evaluate whether or not the ICR payments would be affordable. If not, you could be signing up for payments you will not be able to maintain, which could put you at risk of defaulting. This is especially risky if the Senate Parliamentarian’s ruling holds – that would mean ICR is preserved for current borrowers (which is good news), but borrowers enrolled in ICR would not be switched to IBR, which would be comparatively more affordable in most cases.

For Parent PLUS borrowers who have not yet consolidated their loans into a Direct loan, there may simply not be enough time to complete consolidation and enroll in ICR (even if congressional Republicans take longer than expected to pass the reconciliation legislation, the consolidation process alone can take a couple of months). Borrowers can try, anyway, but should be clear-eyed about the chances of this working out, and should also evaluate whether the student loan payments under the ICR plan (if they wind up enrolling) or other student loan repayment plans (if they cannot) would be affordable.