If you borrowed money to pay for your child’s education, you’re probably wondering how coronavirus impacts parent student loans.
I’m sure the question, Do the student loan relief measures in the CARES Act apply to parent loans? has crossed your mind.
The answer all depends on what types of loans you’ve borrowed.
- Eligible Parent Loans: Parent PLUS loan, Federal Family Education Loan (FFEL) program loans backed by the Department of Education
- Ineligible Parent Loans: Commercially held FFEL program loans, private parent loans, cosigned private student loans
Parents with eligible loans—regardless of how COVID-19 has influenced their employment or finances—have access to the following coronavirus relief measures:
- 0% interest rate and no payments until next year (administrative forbearance)
- A temporary cease on defaulted student loan collections
- Refunds of any money put toward your loans during administrative forbearance
- Administrative forbearance still counts toward loan forgiveness
- Option to enroll in an income-driven repayment plan
- Option to continue making payments
0% Interest Rate & No Payments until Next Year
The CARES Act dropped the interest rate of your Parent PLUS loan to 0% and suspended payments beginning March 13, 2020, through December 31, 2020. Eligible loans, which include Parent PLUS loans, were automatically placed in this administrative forbearance. The government also stopped all auto payments.
Temporary Cease on Collections
Are your Parent PLUS loans in default? You may have noticed that the collections agency stopped calling.
The CARES Act also suspended collections efforts, including harassing phone calls and mail from collections agencies. Plus, the government can’t garnish your tax refund, wages, or Social Security benefits to pay this debt until at least January 1, 2021.
Refunds are Available
If you make any payments on your loan during administrative forbearance, you’re entitled to a refund (if you want it). Contact your loan servicer to make a refund request.
Borrowers are entitled to refunds of any payments that were made between March 13, 2020, and December 31, 2020. This includes any auto payments that went out between March 13, 2020, and the passage of the CARES Act later in the month.
The Time Still Counts Toward Loan Forgiveness
Parents working toward loan forgiveness should be pleased to know that the months of suspended payments—called administrative forbearance—count. This includes Public Service Loan Forgiveness and the debt cancellation offered by the Income-Contingent Repayment plan after 25 years.
Option to Enroll in an Income-Driven Repayment Plan
An income-driven repayment plan not only makes your monthly payments more manageable, but it also qualifies the debt for forgiveness after a set number of years of qualifying payments. And it’s not just for student borrowers.
Parent PLUS borrowers can enroll in the income-contingent repayment (ICR) plan after consolidating the Parent PLUS loans with a Direct Consolidation loan.
If you’re not already enrolled in ICR, now is a great time to sign up. That way, you get credit for the months of suspended payments and are ready to go by the time payments resume in January.
ICR helps borrowers by:
- Capping monthly payments at the lesser of 20% of your discretionary income or what you’d owe on a fixed, 12-year plan (adjusted for income)
- Forgiving your loan after 25 years of repayment
- Extending the repayment period to 25 years
Option to Continue Making Payments
The government suspended payments, but your loans are still there.
If you can afford to, continue making whatever payments you can. Since interest isn’t accumulating, whatever you pay first pays off any interest that accrued before March 13, 2020, and then goes directly on the principal.
This means that your payments made during these no-interest months will make a larger dent in your loan balance.
Before paying your Parent PLUS loans, you might want to:
- Make sure you can cover living expenses
- Build up an emergency fund
- Pay off higher interest rate debt first, including credit card debt or a personal loan
Relief for Borrowers with Private Parent Loans
Do you have private parent loans?
Unfortunately, these aren’t eligible for CARES Act relief, federal loan forgiveness, or federal repayment plans. However, you aren’t out of luck.
You might be eligible for:
- Private student loan relief measures from your lender
- Other borrower assistance from your lender
- Refinancing your private PLUS loan
COVID- 19 Private Student Loan Relief from Your Lender
Several states negotiated with private student lenders to secure private student loan relief measures for their residents. The measures include:
- At least 90 days of forbearance
- No late payment fees
- 90-day pause on collections
- No negative credit reporting
- Help with enrolling in debt assistance programs
Private parent loan borrowers residing in CA, CO, CN, IL, MA, NJ, NY, VT, VI, WA, or D.C. who borrowed from any of the following loan servicers are likely eligible:
- Aspire Resources
- College Ave Student Loan Servicing
- Earnest Operations
- EdFinancial Services
- Kentucky Higher Education Student Loan Corp.
- LendKey Technologies
- SoFi Lending
- Tuition Options
- United Guaranty, now Arch MI
- Upstart Network
- Utah Higher Education Assistance Authority
- Vermont Student Assistance Corp.
Reach out to your lender directly with any questions.
Other Borrower Assistance from Your Lender
Not eligible for the relief described above? Talk to your lender about their borrower assistance programs.
Many private lenders—even before COVID-19—provided borrowers with benefits like economic hardship forbearance, unemployment forbearance, or temporary payment plans. See what options your lender has available.
If your lender can’t work with you, your next best option for relief would be to refinance your private parent loan.
Refinancing to Make Payments More Manageable
Refinancing involves securing a new loan to pay off your existing debt. It can help you achieve financial goals like lowering monthly payments, saving money on interest, or paying off your student loans faster.
Parents can refinance their private parent loans. They can also work with their child to refinance any student loans they cosigned.
Refinancing Private Parent Loans
If you’re struggling to keep up with payments during the coronavirus, you can refinance your private parent loan to:
- Lower the interest rate to reduce your monthly payment
- Extend the loan term to reduce your monthly payment
- Secure borrower protections like unemployment or economic hardship forbearance
Our partner Education Loan Finance (ELFI) makes refinancing private parent loans easy. You won’t pay any application fees, origination fees, or prepayment penalties. Best of all, prequalification takes just minutes.
Although you can refinance Parent PLUS and private parent loans together, we don’t recommend it when the interest rate on your Parent PLUs loans is set to 0%.
Refinancing Cosigned Student Loans
As the cosigner on a student loan, you don’t have the legal authority to refinance the loan yourself. Your child, as the primary borrower, will need to initiate the refinancing process.
Bring your concerns to your child and tell them about how they can save money through refinancing, especially now since rates are low.
If you want off of the loan, your child can refinance the loan without you. Keep in mind that they might get a better rate with a creditworthy cosigner. If that’s you, consider cosigning the new loan.
Some private lenders offer cosigner release programs, releasing a cosigner after a set number of on-time payments. View of list of student loan lenders with cosigner release.
We break down the process of refinancing a loan you cosigned here.
Final Thoughts on How Coronavirus Impacts Parent Student Loans
Many parents struggled to make parent loan payments even before COVID-19 struck. Now, times are tougher than ever for millions of borrowers. Fortunately, the CARES Act, private lenders’ borrower assistance programs, and refinancing can make managing your parent student loans a little easier.
Learn more about how the coronavirus affects student loans: