Who’s Left Out of the Latest Student-Loan Plan? Parents

livemint.com:

Millions of parents who took out student loans on behalf of their children were left out of the Biden administration’s new repayment plans. Parent Plus loans, which account for more than $111 billion in outstanding student debt, aren’t eligible for the lower monthly payments and shorter paths to forgiveness offered under the new Saving on a Valuable Education (SAVE) program announced in January. Neither were they part of the one-time adjustment in July to other income-driven repayment programs that awarded borrowers nearly $40 billion dollars in debt relief.

There is a way to convert Parent Plus loans into one that is eligible, but it is complicated. “We are committed to continuing to explore options for parent borrowers," the Education Department said. Many of the 3.7 million parents who hold this debt are low-income borrowers, leaving them especially vulnerable to the toll such debt can take, said Awilda Rodriguez, associate professor of education at the University of Maryland.

People often choose Parent Plus loans when standard federal loans and grants from schools don’t cover their child’s tuition and expenses. “It is so much more emotional. When parents are trying to decide whether or not they’re going to sign on the dotted line, they want to realize their children’s dreams," said Rodriguez.

Parent Plus loans allow parents to borrow as much money as needed to cover all costs of school attendance, minus any financial aid the child receives as a student. The interest rate on Parent Plus loans is often higher than those of other federal student loans. As of July 2023, the interest rate for parent borrowers was 8.05%, according to the Education Department.