Parents who took federal loans to pay for their kid’s college education can use a loophole to cut their monthly repayments, student loan experts say.
When President Joe Biden announced plans to provide relief to the more than 40 million Americans with federal loans, he excluded these so-called Parent PLUS Loans from the most lucrative income-driven repayment (IDR) plans. There are 3.8 million Parent PLUS borrowers, and they’re disproportionately Black and Latino. And they’re only eligible for the Income-Contingent Repayment (ICR) plan, which has higher monthly payments than the other plans.
The only way parents can access one of the more money-saving IDR plans is through a loophole, but they must act fast. The Department of Education knows the loophole exists and plans to close it July 1, 2025.
What is the ICR plan?
The ICR plan is always available for Parent PLUS Loan holders:
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Payments under the ICR plan are always based on your income and family size. It’s the lesser of:
- Twenty percent of your discretionary income.
- Fixed payments over 12 years, adjusted according to your income.
Note: In some cases, your payment can be higher than the amount you would have to pay under the 10-year Standard Repayment Plan, the Department of Education warns.
◾ Repayment length: 25 years.
◾ Parent PLUS loans must be consolidated into a direct loan to be eligible.
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