Students are not the only borrowers benefiting from President Joe Biden’s Student Debt Relief Plan. Parents who have taken out federal loans will also be eligible for forgiveness.
On Wednesday, Biden announced that his administration would pass along $20,000 in student loan debt to Pell Grant recipients and $10,000 to all other federal borrowers earning less than $125,000. annually ($250,000 for household). More details will be announced in the coming months, but most the borrower will need to apply for forgiveness and verify their income.
Although negotiations over forgiveness have been underway for months, it remains unclear exactly who will qualify. Many advocates worry that only students with federal loans will be eligible, leaving millions of parents and grandparents behind — many of them low-income and people of color — bearing the brunt of the burden. debt so that their children or grandchildren can go to college.
But Parental PLUS loans — as well as graduate student loans — are eligible for forgiveness. That will help estimate 3.7 million families owe at least $104 billion.
In general, a parent and their child may be eligible for as little as $30,000 in relief, says Peter Granville, senior policy associate at Organization of the Century, because forgiveness is on a per-borrower basis, not on a student basis. It’s $20,000 for the child if they’re a Pell Grant recipient and $10,000 for the parents. That’s important, as half of Parent PLUS families also receive Pell Grants, according to Granville.
It remains unclear whether parental loans are eligible for Pell Grant forgiveness. It is also unclear whether divorced or unmarried parents are eligible for relief.
Overall, Granville is happy that the administration decided to “go big” and include Parent PLUS loans in its relief efforts.
“It’s really a beautiful thing,” said Granville.
Parental PLUS loans are designed to help middle-income families pay for college. But over the years, they have also become a tool for many low-income and low-net-worth families. The loans are guaranteed at higher interest rates than other federal student loans and have much higher limits on how much parents can borrow, often leading to a debt spiral for families, according to a report from The Century Foundation authored by Granville.
Granville wants Congress to address several other concerns about the affordability of these loans — such as Congress fixing interest rates on student loans. An invoice is called PLUS Loan Improvement Act for ParentsLast introduced in 2019 by Marcia Fudge, now the U.S. Secretary of Housing and Urban Development, will lower interest rates and will “make it easier for parents to pay off debt in the future.”
But for now, Granville says the relief is worth celebrating. Just make sure your parents know it’s coming and that they will have to apply for forgiveness when it is offered.
“I would encourage anyone out there who knows their parents took out a Parent PLUS loan to make sure they know this news,” Granville said.
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