Parent Borrowers Would Be Hit Hard by Student Loan Forgiveness And Repayment Reforms

Republican lawmakers in Congress are moving forward with a massive budget reconciliation bill that could reshape federal student loan forgiveness and repayment programs. Under the proposed changes, parent borrowers would be hit particularly hard.

GOP leaders hope to use the reconciliation process to enact President Donald Trump’s legislative agenda, primarily centered on extending and expanding tax cuts that are scheduled to expire at the end of the year. Without corresponding spending cuts, extending those tax cuts could add trillions of dollars to the deficit. So, to offset those costs, lawmakers are looking at cutting a broad swath of government spending, with federal student loan programs squarely in their crosshairs.

Last month, Republicans on the House Education and Workforce Committee passed the Student Success and Taxpayer Savings Plan, which is the component of the reconciliation bill that would impact federal student loan programs. The consequences for parent borrowers would be profound if the legislation is enacted in its current form.

Parent PLUS borrowers have always had fewer options for affordable payments and loan forgiveness

It’s not as if Parent PLUS borrowers have exactly had it easy up until this point. Parent PLUS loans, which are a type of federal loan issued to the parent of an undergraduate student (the parent, not the student, is the borrower), generally have less favorable terms than other types of federal student loans. Parent PLUS loans usually have higher interest rates and restricted access to most income-driven repayment plans, like Income-Based Repayment (IBR) and Pay As You Earn (PAYE).

Nevertheless, Parent PLUS borrowers have had options. They can access the Income-Contingent Repayment (ICR) plan if they consolidate their Parent PLUS loans into a Direct consolidation loan. ICR is the most expensive income-driven repayment option, but it can be a lifeline for Parent PLUS borrowers who have experienced a reduction in income or are in retirement. 

ICR has historically allowed for student loan forgiveness after 25 years in repayment, providing borrowers with a light at the end of the tunnel. Enrolling in ICR can also allow Parent PLUS borrowers to pursue Public Service Loan Forgiveness (PSLF), which can shorten the loan forgiveness timeline to as little as 10 years for borrowers who work full-time for qualifying nonprofit or government employers. Enrolling in an income-driven plan like ICR is usually a requirement to pursue PSLF.

And because Parent PLUS loans are a type of federal loan, they can qualify for a broad array of federal student loan relief and discharge programs. This includes administrative discharges based on death, disability, or certain types of school misconduct, as well as generous deferment and forbearance options during times of economic hardship. And borrowers who default on Parent PLUS loans have options to restore those loans to good standing again, such as through rehabilitation or Direct loan consolidation.

Many Parent PLUS borrowers would lose access to IDR and student loan forgiveness under GOP proposal

But if the Republican student loan reform proposals are ultimately enacted, it could have devastating consequences for some Parent PLUS borrowers.

Under the current version of the Student Success and Taxpayer Savings Plan, the ICR, PAYE and SAVE plans would all be repealed. In their place, the legislation would create a new IDR plan called the Repayment Assistance Plan (RAP). While payments under RAP may be affordable for many borrowers, it stretches out the student loan forgiveness timeline to 30 years. And importantly, Parent PLUS borrowers would be ineligible for RAP, even if they consolidate their loans via the Direct loan program.

Parent PLUS borrowers who have already consolidated their loans through the Direct loan program, and are repaying that Direct consolidation loan through ICR at the time of the bill’s passage, would be automatically moved to the IBR plan, which would be preserved for existing borrowers under the GOP plan. That actually could be very good news for Parent PLUS borrowers who have been in repayment under ICR, as IBR is usually a more affordable plan. These borrowers could see their monthly payments drop.

But all other Parent PLUS borrowers would be out of luck. They would have no way to access any income-driven repayment plan. Borrowers not already enrolled in the ICR plan at the time of the bill’s passage would be cut off from all existing IDR plans, including IBR. And they would be ineligible to enroll in the new RAP plan. 

Consequently, these Parent PLUS borrowers would have no way to access payments tied to their income, and no way to pursue student loan forgiveness under IDR plans. This could force many Parent PLUS borrowers into default if they cannot afford their monthly payments under Standard, Extended or Graduated repayment plans.

Student loan forgiveness through PSLF would also effectively be blocked, as IDR is usually a required component of that program. Parent PLUS borrowers could enroll in a 10-year Standard repayment plan instead, which is a qualifying plan for PSLF. But that would result in the loans being paid in full within 10 years, with no remaining balance to be forgiven at the end.

Parent PLUS program would be phased out, leaving parents with no good student loan options

The Student Success and Taxpayer Savings Plan would also limit the Parent PLUS program itself going forward. 

“For any period of instruction beginning on or after July 1, 2026, a parent, on behalf of a dependent student, shall not be eligible to receive a Federal Direct PLUS Loan,” reads the legislative text. 

There is a narrow exception if the student borrower maxes out their federal Direct Stafford loans, and the cost of attendance exceeds that amount; in those circumstances, the parent can take out a Parent PLUS loan for the difference, subject to $50,000 in total borrowing “without regard to the number of dependent students on behalf of whom such parent borrows such a loan.”

This could force some families to turn to riskier private student loans to cover the costs of education if they reach the maximum allowable limits for federal Direct Stafford and Parent PLUS loans. Private student loans typically have many of the same drawbacks as Parent PLUS loans — such as high interest rates — as well as additional risks and limitations. 

Private loans generally won’t qualify for any kind of long-term income-driven repayment plan; are not eligible for federal student loan forgiveness and discharge programs; generally have fewer repayment options and consumer protections; and can go into default much more easily during times of economic hardship, with no options to restore the loans back to good standing again.

Related: 10 Universities in Republican Swing Districts that Could Face Severe Financial Strain if PLUS Loans Were Repealed

What’s next for student loan reforms

So far, the proposed changes that would impact Parent PLUS borrowers are not yet in effect. House Republicans must still hammer out details about other, more controversial elements of the bill in order for the legislation to pass the full House on a narrow party-line vote. The Senate must then either pass its own version of the bill or adopt the House version. If there are differences between the House and Senate bills, those differences would have to be reconciled, and then both chambers may have to pass the revised legislation before it could be sent to President Trump for his signature. 

House leaders are hoping to pass their version of the reconciliation legislation by Memorial Day, although it’s unclear if that will happen.

In the meantime, student loan borrower advocacy groups are raising the alarm about these major changes to federal student loan forgiveness and repayment programs. 

“There’s no other way to see this reconciliation legislation than as a blatant attack on student borrowers and young people striving for economic opportunity,” said Alex Lundrigan, Federal Policy Manager of Young Invincibles, in a statement last month. “The changes to repayment plans will skyrocket monthly payments, even mine, limit access to college for low-income students, and stifle upward mobility for millions. But the cruelest blow? These cuts are being used to bankroll massive tax breaks for corporations and the ultra-wealthy, offering no real relief for working-and middle-class Americans during a cost-of-living crisis. It’s a gut-wrenching reversal of national priorities.”