How to Prepare for the Parent PLUS Cliff in 2025

If you have Parent PLUS Loans, you might not realize it, but you could be heading toward a cliff. Starting in 2025, the Department of Education will close a loophole that allows parent borrowers to find relief through income-driven repayment (IDR) and other programs.

Once this “Parent PLUS cliff” hits, borrowers will experience reduced relief options after 2025. Here’s what you need to know about this education loan and how to prepare for the parent loan cliff — or potentially avoid it.

What is the Parent PLUS cliff?

The Parent PLUS loan is a form of federal student aid for higher education. It’s a way for parents to get unsubsidized loans to pay for their child’s education. They’re in the parent’s name, not the student’s, making parents responsible for repayment. Additionally, Parent PLUS Loans typically have fewer repayment plan options. 

The Parent PLUS cliff refers to the close of the “double consolidation” loophole for Parent PLUS loan borrowers. Once this cliff hits, parents will face a significant reduction in available relief options after 2025 due to the loss of access to IDR. This includes losing access to the new SAVE plan instituted under the Biden Administration.

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How the Parent PLUS cliff works

Starting in 2025, the U.S. Department of Education will close a loophole that allows parents to use a Direct Consolidation Loan to lump Parent PLUS Loans together with one fixed interest rate and then get on an IDR plan. Included in this process is the new SAVE plan, which bases monthly payments on a lower percentage of discretionary income. Using this type of relief, a Parent PLUS borrower could potentially take advantage of lower payments, as well as access a loan forgiveness program that automatically forgives the loan balance at the end of the life of the loan.

Double consolidation is a process of dividing Parent PLUS Loans into two different consolidation requests with two different loan servicers. Once those consolidations go through, the borrower then completes a second consolidation of the two consolidation loans. This makes them eligible for various income-driven repayment plans, including Revised Pay as You Earn (REPAYE), Income-Based Repayment (IBR) and the new SAVE plan.

After 2025, however, the loan consolidation process offered now will disappear, and parent borrowers will be stuck with some very limited options and loan terms.

Consequences of the cliff on borrowers

The biggest consequence of the Parent PLUS cliff for borrowers is that they will no longer be able to access double consolidation, which is necessary for access to certain IDR plans. 

One of the only plans left to parent borrowers will be Income-Contingent Repayment (ICR), which comes with higher monthly payments and fewer forgiveness protections.

Parent PLUS student loan repayment will become a bigger part of the budget. Additionally, there will be fewer relief options for federal parent borrowers, and middle-class parents could be stuck with debt payments, making managing other bills and financial goals challenging.

What Parent PLUS borrowers can expect after 2025

After 2025, parent student loan borrowers will be stuck with fewer options for consolidating their PLUS loans and getting access to IDR plans that offer more substantial relief.

The biggest impact is likely to fall on middle-class borrowers. Federal Direct Loan limits haven’t increased in more than a decade, and it can be difficult to pay for school without additional federal student aid. For many middle-class families, Parent PLUS Loans are an essential piece of the puzzle for higher education funding.

Some parents took Parent PLUS Loans with the expectation that they would be able to complete double consolidation to access lower payments through IDR plans and potentially student loan forgiveness. After 2025, the federal government will get rid of this option.

Actions to take before the cliff

With the cliff looming in 2025, time is of the essence to manage your student loans and see if you can reposition your Parent PLUS Loans.

Loan consolidation

If you already have Parent PLUS Loans, now is the time for federal Direct Consolidation. Here are the steps to double consolidation:

• Go to StudentAid.gov and look at your student loans. Identify the different Parent PLUS Loans you have.
• Divide your parent loans into two groups. Consolidate them separately, and request two different servicers. For this to work, you need to print out paper consolidation applications and mail them in.
• Wait for confirmation that both consolidations have gone through. Get back on StudentAid.gov and then consolidate your consolidated loans.

It’s important to note that, through the end of 2023, federal loan consolidation doesn’t “reset” your Public Service Loan Forgiveness (PSLF) clock. Use the IDR waiver to make sure that nonprofit or government work you’ve done while making payments is documented.

Check your eligibility for repayment plans

Once you’ve completed your double consolidation, check the qualifying criteria for different IDR plans to see if you’re eligible. Apply for the plan that works best for you. 

Many of these plans limit monthly payments to between 5% and 15% of your discretionary income, and they come with automatic forgiveness after a certain number of years.

If you qualify for PSLF, you’ll also see benefits.

Related: Do Parent PLUS Loans Qualify for PSLF? Pre- and Post-2025 Strategies

Private lender refinance

If you’re most concerned about lower interest rates, refinancing with a private lender might be an option. However, you need a good credit score in order to qualify. 

Additionally, once you use private refinancing, you no longer have access to federal loan forgiveness programs and protections. Carefully consider your financial goals and planning before you go this route.

Be proactive with financial planning

Look ahead and use proactive financial planning to prepare for reduced relief options and plan for college costs. You might need to increase your savings, encourage your kids to get scholarships or take other steps. Consider reducing costs and increasing your income to prepare for the Parent PLUS cliff.

What to do if you'll have students in school after 2025

If your students are going to school after 2025, now is the time to plan ahead. Consider that the credit check requirements for private loans are more stringent, so you might need to improve your credit so you qualify for low-cost loans.

Check with the school’s financial aid office to see what’s available in terms of need- and merit-based aid. Encourage your student to fill out the Free Application for Federal Student Aid (FAFSA) each year and look into alternatives like work-study in addition to grants and federal student loans.

Finally, consider saving up for a college education with the help of tools like 529 and Coverdell accounts.

The bottom line

Right now, parent borrowers can take advantage of double consolidation for their federal Parent PLUS Loans to access a variety of IDR plans that can potentially offer relief. However, in 2025, that loophole will close and borrowers will be left with fewer options.

Now is the time to take action. Consider seeking professional financial advice for personalized guidance from one of our planners, who can walk you through the process.

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