Parents Would Have Billions of Dollars in Student Loans Forgiven Under New Plan

Several Democratic lawmakers have banded together to demand President Joe Biden provide more student loan relief.

Millions of families have taken out Parent PLUS loans, a special kind of student loan that parents take in their own name to help their children attend college. Many end up borrowing for the full four-year cost of attendance.

However, now, nine Congress members sent a letter to Education Secretary Miguel Cardona demanding parent PLUS borrowers get special student loan forgiveness. The lawmakers included Democratic Sens. Chris Van Hollen and Elizabeth Warren and Independent Sen. Bernie Sanders.

"We write to you out of deep concern that Parent PLUS borrowers have been left out of key student loan actions the Administration has taken," the group wrote in their letter last week.

Currently, PLUS loans see borrowers take on some of the highest interest rates of all federal loans, which can be difficult for parents who are already struggling to make ends meet.

The Board of Education previously unveiled its new SAVE income-driven repayment plans, which give federal borrowers less costly payments and a shorter amount of time to get loan forgiveness. But parent PLUS borrowers were left out of the plan, with the senators suggesting they too need to be eligible.

"The interest rates on these loans can really add up, and the limited options for income-driven repayment plans or forgiveness programs leave families in a tough spot," finance expert Michael Ryan, who runs michaelryanmoney.com, told Newsweek. "I've worked with clients who have put retirement on hold or taken on second jobs to cover PLUS loan payments. It's heartbreaking to see such an intense burden placed on parents who simply wished to see their child achieve their dreams."

The senators also suggested the Education Department seek loan forgiveness for parent PLUS borrowers through a second try for forgiveness under the Higher Education Act of 1965. Biden's administration will hold its next negotiation sessions on Feb. 22 and 23 about creating a category for help for borrowers experiencing financial hardship.

"Without addressing the intergenerational debt experienced by families with Parent PLUS loans, the Biden Administration will fall short of its commitments to fix our nation's broken student loan system and to advance affordable access to higher education for all," the letter reads.

Late last year, NAACP President Derrick Johnson and National Youth Director Wisdom Cole also suggested the Education Department expand its eligibility for relief programs to PLUS loans.

"Borrowers need relief, and full forgiveness remains a hot-button issue both on Capitol Hill and in court rooms," Alex Beene, a financial literacy instructor for the state of Tennessee, told Newsweek. "The easiest and quickest solution is a plan that lowers the short-term and long-term burden through an income-based system."

Despite these previous requests for PLUS loan relief, a senior administration official told Business Insider last year that PLUS loans are not able to be repaid on an income driven plan, and there are no changes to this law that the department is pursuing at this time.

Ryan said for the families he counsels on parent PLUS student debt, the relief would make a huge difference, but it's unclear if that is a viable path forward.

"I had one friend literally in tears when we discussed the possibility, as it would allow her to finally start saving and stop worrying whether her next payment would clear," Ryan said. "However, the red tape involved means nothing is guaranteed."

Today, borrowers over 50 with significant amounts of student debt are one of the fastest growing student loan groups. According to Value Penguin, student loan debt for those 60 and older surged 1,256 percent since 2004, when that age group only had $6.3 billion in student debt.

Experts say it's common to see six-figure parent PLUS balances, and the burden of their debt often weighs down on future retirement plans.

"Parent Plus loans are basically uncapped meaning you can take on as much debt as you are willing to," Mike Hunsberger, a certified financial planner and the owner of Next Mission Financial Planning, told Newsweek. "The problem with that is most of these borrowers are in their late 40s or 50s. They could still be paying back loans well into their retirements."

For parent borrowers who took out loans under the parent PLUS program, there are still options available, even if nothing changes, said the founder of The Student Loan Sherpa, Michael Lux.

"The good news is that there is a repayment and forgiveness path forward for many Parent PLUS borrowers, even those in retirement," Lux told Newsweek. "In fact, many retirees who live on social security are able to qualify for $0 per month payments on their Parent PLUS loans and eventually qualify for loan forgiveness.

"Even if the administration can't offer new repayment options, I'd like to see them do a better job of explaining the opportunities available for Parent PLUS borrowers."