How to Unlock Income-Based Repayment Plans for Parent PLUS Loans

Editor's note: Big changes are underway for Parent PLUS borrowers. To remain eligible for income-driven repayment (IDR), you must complete a Direct Consolidation Loan and have it disbursed by June 30, 2026. Missing this deadline can significantly limit your options, locking you out of income-based repayment and forgiveness opportunities.

With processing delays, it's important to act quickly if you haven't consolidated yet. Any Parent PLUS consolidations or new Parent PLUS Loans after July 1, 2026 will result in being permanently ineligible for IDR options.

Additionally, the double consolidation strategy is no longer necessary. Parent PLUS borrowers can now consolidate, enroll in Income-Contingent Repayment (ICR) and then switch to Income-Based Repayment (IBR) after making at least one ICR payment. This creates a simpler path to lower payments and maximized forgiveness.

When you took on Parent PLUS Loans it was likely because you wanted to do what’s best for your college-bound kid. Those loans helped them pay for school, but now that they’ve graduated, you’ll have to start repaying that six-figure debt just as you’re thinking about retirement.

You might worry that you won’t be able to afford the payments, if you retire. There are a handful of repayment options — including an income-based repayment plan for Parent PLUS Loans — to help make repayment more manageable.

Parent PLUS Loan repayment options

When it’s time to make your first payment, the Loan Simulator on StudentAid.gov offers you the following repayment options:

• Consolidated Standard Repayment
• Consolidated Graduated Repayment
• Extended Fixed Repayment
• Extended Graduated Repayment
• Income-Contingent Repayment (ICR)

Related: How to Pay Off Your Parent PLUS Loans

Income-based repayment plans for Parent PLUS Loans

Scanning the list above, the only “income-based” or income-driven repayment option is the Income-Contingent Repayment (ICR) plan.

Here are some facts about ICR for Parent PLUS Loans:

• Borrower must consolidate Parent PLUS Loans into a Direct Consolidation Loan.
• Payment will be the lesser of 20% of their discretionary income, or the amount they’d pay with a fixed payment over 12 years, adjusted to income.
• Borrowers must update their income annually; payments adjust, accordingly.
• If married and filing taxes jointly, payments are calculated based on joint income.
• Repayment plan lasts 25 years with the remaining balance forgiven after 25 years. The balance will likely be treated as taxable income in the year it’s forgiven.

However, due to provisions of the One Big Beautiful Bill Act, ICR and PAYE plans will sunset by June 30, 2028. Therefore, Parent PLUS borrowers can now switch into the more affordable Income-Based Repayment (IBR) plan after making just one ICR payment. The IBR plan is based on 10% to 15% of discretionary income (depending on when you first borrowed) and comes with a forgiveness timeline of 20 to 25 years.

Graduated Repayment vs. income-based repayment plan for Parent PLUS Loans

Most borrowers choose the Extended or Graduated Repayment plans, because the payment feels the most manageable. However, these frequently carry a higher price tag over time.

For example, under the Consolidated Graduated Repayment Plan or the Extended Graduated Repayment Plan, let’s say a borrower and his spouse each make $75,000 per year, have a family size of four, and a student loan balance of $95,000 at 5.3%. The borrower’s lowest monthly payment option is $424 per month.

All Graduated Plan payments increase every two years. This means payments will be higher in retirement than when you first entered repayment. Not ideal.

Another downside of Graduated Repayment Plans is the total amount you’ll pay over time. For the income and loan scenario above, the total amount paid ranges from $188,000 to $210,000. These plans cause borrowers to effectively pay double their original student loan balance.

The Income-Contingent Repayment, however, boasts the lowest paid amount over time at $117,000. However, payments range from $1,200 to 1,300 per month.

Switching into IBR after making at least one ICR payment can significantly lower your monthly payment and reduce your total repayment through forgiveness.

How to lower your ICR or IBR payment amount

Borrowers can adjust their income, allowing for a lower monthly payment under ICR and IBR plans. Below are four strategies to reduce your payment.

1. Maximize pre-tax retirement contributions

Contributing to pre-tax retirement accounts or health savings accounts (HSA) reduces your Adjusted Gross Income (AGI). Since the ICR and IBR plans use your AGI to calculate your monthly payment, a lower AGI translates to a lower monthly payment.

2. Married borrowers can file their taxes separately

Typically, only one parent holds the Parent PLUS Loans, so filing taxes separately means only the borrower’s income (excludes spousal income) is considered for the ICR or IBR payment calculation.

There are some things you miss out on by filing separately, so it’s important to meet with a tax professional before taking this step.

3. Combine pre-tax savings and file taxes separately

Under this scenario, married borrowers file their taxes separately, but if their budget is tight, only max the borrower’s 401(k) savings. This could reduce their ICR payment by up to $800 per month using the example of the couple, above.

4. Borrowers can retire

If retirement is on the horizon, but you’re worried about your student loan repayment amount, consider that income-based repayment is based on your income. If you plan to retire and can live off of taxable savings or monthly Social Security payments alone, your payments will drastically decrease alongside your decreasing income.

Public Service Loan Forgiveness for Parent PLUS Loans

If you work for a public service organization and plan to continue doing so for at least 10 years, Public Service Loan Forgiveness (PSLF) is available. You’ll still need to consolidate your Parent PLUS Loans to get on an Income-Contingent Repayment plan.

It’s important to note that you can’t retire for 10 years from the date you start repayment using this strategy. PSLF requires full-time employment, which is 30 hours per week or the employer’s definition of full time, whichever is greater.

Income-driven repayment vs. refinancing for Parent PLUS borrowers

How does an income-based repayment plan like ICR compare to private refinancing? Refinancing might sound like a much better deal depending upon where interest rates are at a given time. If borrowers can’t take advantage of any of the money-saving strategies listed above, refinancing might be the way to go. But it’s important to weigh the pros and cons of private refinancing before taking the leap.

Pros of refinancing student loans

• Lower interest rates
• Potentially lower payments depending on the loan term
• A lower amount paid over the life of the loan

Cons of refinancing student loans

• Most private loans don’t allow forbearance or a payment pause.
• You can’t re-enter the federal loan system after refinancing.
• If you die, your loan balance is still due by your estate or heirs. If you stay in the federal system, your loan balance dies with you.
• Payments don’t adjust with income changes.

We’ve partnered with some great student loan refinancing companies, so it’s worth exploring this option, periodically.

We can’t promise that Parent PLUS Loans will always look the same as they do now. However, if you need our help navigating this overly-complex system, we’re here to help!

Get a Student Loan Consult for Your Parent PLUS Loans