Big Changes for Parent Loan Borrowers: What You Need to Know

Parents who have been paying for their child’s college through Direct PLUS (Parent Loan for Undergraduate Studies) loans and are planning to pay them back through an income-based repayment program offered by the U.S. Department of Education (ED) are getting bad news. 

The Department of Education recently posted on its website that as of July 1, no new applications are being accepted from Parent PLUS Loan borrowers for the Income-Contingent Repayment (ICR) program. 

How the Income-Contingent Repayment program works

ICR is one of four programs offered by the Department of Education that calculates monthly student loan payments based on income and family size. Unpaid balances are forgiven after 20 years. 

Until now, parents who had borrowed under Direct Parent PLUS could apply for ICR but were required to consolidate their loans. Unfortunately, this is no longer an option for new borrowers unless they meet one of the two exceptions.

There are two exceptions to the new guidelines:

• Borrowers who applied for the ICR Plan before July 1 but have yet to have their applications processed will still be placed on the plan if approved.
• Borrowers with a Direct Consolidation Loan that repaid a Direct PLUS loan can continue to enroll in the ICR Plan.

This could devastate families, particularly low-income families, with six-figure debt in Direct PLUS loans because ICR was their only option unless they consolidated their loans into a Direct Consolidation Loan. Now, since new applications for ICR aren’t being accepted, they can no longer do that.

Why many aren’t aware of this change

What's especially upsetting about the Department of Education's message is how it was delivered – quietly posted on the student loan website rather than announced and reported by national media outlets. As of late September, authoritative websites still claimed that ICR was alive and well for Direct PLUS borrowers. 

Indeed, the availability of ICR to Parent PLUS Loan borrowers was reaffirmed in a Forbes article as recently as Sept. 27. Also, borrowers will still find the same information about ICR on the Consumer Finance Protection Bureau website. 

Here at My College Planning Team, we are working on plans to advocate for our families who were counting on using ICR to start repaying their Parent PLUS Loans. Meanwhile, we are seeing signs of hope in Congress in the form of pending legislation. 

Proposed new legislation 

On Sept. 19, Sen. Chris Van Hollen (D-Md.) and Rep. Alma Adams (D-N.C.) introduced the Parent PLUS Parity Act to ease the burden of student loan debt for parent borrowers who helped their children pay for their higher education. Under the legislation, Parent PLUS borrowers could access several newer, more favorable repayment, loan forgiveness, and discharge programs.

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