Debt Relief for Parents: Who Eligible and How Can They Get Help?
When President Biden signed one supreme command With the cancellation of up to $20,000 in student debt, the most obvious beneficiaries were students. But many parents could also share the relief, because millions of them have taken out loans to finance their children’s education.
“There are a significant number of parental borrowers out there, and they will benefit,” said Mark Kantrowitz, student loan expert and author of the book How to apply for more college financial aid.
Due to the rising cost of higher education in the US, the average year of schooling at a private college is now $38,185 – Students applying for financial aid are often exhausting what they can borrow from the federal government, but still cannot pay their tuition. In many cases, the parents make up the difference by taking out loans themselves – leaving both generations in debt.
The figures on this subject are sobering. according to a Recent study According to think tank The Century Foundation, more than 3.7 million American families owe money on federal Direct PLUS loans — colloquially known as “parent PLUS loans” — which help parents pay for their children’s undergraduate courses. For these families, the average debt at the time of graduation is approximately $29,600.
“Very few parents actually borrow … to help their child get a bachelor’s degree, but those who do borrow a lot,” Kantrowitz said.
So for many families, Biden’s executive order could provide much-needed help. The plan offers relief in two ways: first, it extends the pause in federal loan repayments until December 31, 2022. And second, it forgives up to $10,000 in debt for those with Department of Education loans. Those who received Pell Grants are eligible for an additional $10,000 in relief, for a total of up to $20,000.
Are parents entitled to this help? The answer is complicated. Some loans are eligible, some are not, and many fall somewhere in between. Also, the administration is still gradually explaining the details of the plan, so answers may change over time — and to muddy the waters even further, Republicans opposed to the relief may challenge the order in court.
“Congress never considered that this was a presidential authority,” said Scott Buchanan, director of the Alliance to service student loans. “We are developing a program that has no legal framework.”
Here’s a look at which loans are currently eligible for relief and how financial advisors can help clients get them.