When parents take out federal loans to help students pay for college, the government doesn’t offer quite as favorable terms as it does when it’s providing loans directly to students. Parents pay a higher interest rate and larger fees, and their loans aren’t directly eligible for repayment plans based on income.
However, some parent borrowers have for years taken advantage of a sort of side-alley route to qualify for the income-driven repayment plans that can significantly reduce their loan payments. It’s clunky and complex, but it’s often worth it.
It’s also about to go away. The One Big Beautiful Bill Act slaps a padlock on that popular backdoor, eliminating any path to eligibility that parent borrowers will have for income-driven repayment plans.
And while the workaround officially ends on July 1, parents need to act much earlier if they want to potentially lower their payments. Those who miss key upcoming deadlines will lose access to more favorable repayment plans as well as loan forgiveness opportunities.
[Read: Best Private Student Loans.]
How and When to Make Parent PLUS Loans Eligible for Income-Driven Repayment
The federal student loans available to parents, known as Parent PLUS loans, come with a fixed rate and several repayment term options, none of which base monthly payments on income. But by completing several steps, Parent PLUS borrowers can access income-driven repayments plans.
Here’s what parents need to do if they want access to income-driven plans now or in the future:
— Consolidate your Parent PLUS loan or loans into a Direct Consolidation Loan. You can apply to consolidate your loans on the federal student aid website. Once your application is submitted, it typically takes four to six weeks to be processed. Consolidation must be completed by July 1, 2026. To ensure you’ll have enough time to complete the process, the Department of Education “strongly encourages” you to submit your application by April. Key deadline: Apply by April 1, 2026.
— Apply for the Income-Contingent Repayment plan. While other plans are more affordable, you must first enroll in the ICR plan. This can be done at the same time you apply to consolidate your loans or at a later date. You’ll need to make at least one ICR payment before you can again switch plans. Key deadline: You must enroll in ICR by July 1, 2028.
— Apply to switch to the Income-Based Repayment plan. After you’ve made at least one payment in your ICR plan, you have the option to switch to the slightly more affordable IBR plan if you choose. On July 1, 2028, all parent borrowers in the ICR plan will automatically be moved over to the IBR plan because ICR will be phased out on that date. Key Deadline: None.
Starting on July 1, 2026, any new federal student loans or newly consolidated loans are only eligible for the new standard plan or the income-based Repayment Assistance Plan. However, Parent PLUS loans or consolidated loans containing Parent PLUS loans will only qualify for the standard plan, not RAP.
After July 1, 2028, there will be two repayment plans left that base payments on income: RAP and IBR. IBR will be only for borrowers who enrolled in the program before July 1, 2028.
In essence, consolidating Parent PLUS loans before July 1 is your final chance to preserve access to an income-driven repayment plan of any type.
‘A Great Safety Net’: Why Parents of All Incomes Might Want to Act
The path to income-driven repayment can provide a financial lifeline to some parent borrowers who can’t keep up with payments. But many aren’t aware of it.
“I think a lot of Parent PLUS borrowers who are struggling with repayment don’t realize that this is an option,” says Kyra Taylor, a staff attorney at the National Consumer Law Center who focuses on student loans. “Many parents instead have been using forbearances and deferments, and in many cases that’s pretty expensive because interest is still accruing on the loan while you’re not making payments.”
It’s easy to see how some parents can end up with hefty payments.
Although new caps will limit parent borrowing starting in July, parents have previously been able to borrow up to the cost of attendance regardless of their income or credit score. Parent PLUS loans currently come with a fixed rate of 8.94%, higher than the 6.39% rate that a student borrower would get. And many parents may be taking out loans for several kids, piling on additional debt with each student.
Taylor says consolidating and enrolling in an income-driven plan could be a wise decision to make now even for higher-income parents who aren’t struggling with payments. Even if the move doesn’t lower their payments now, it keeps that option open should they face a job loss or other life changes in the future.
“Being enrolled in an IDR plan is a great safety net,” says Taylor. “Even if you don’t think you’re going to need that low payment, just knowing that you have it available if life goes sideways is incredibly valuable.”
[Read: Best Student Loan Refinance Lenders.]
Have Another Child Headed to College? Beware of Borrowing Again
Let’s say you’ve successfully followed the steps and enrolled your Parent PLUS loans into an income-driven repayment plan. You’re in the clear, right?
Not exactly. That’s because if you take out another Parent PLUS loan any time after July 1, 2026, your existing consolidated loan that was in income-driven repayment immediately gets shifted to a standard repayment plan. This creates an especially thorny predicament for parents with another kid headed to college soon.
“I’m very worried especially for families where they still have kids going through the college pipeline who are going to need to borrow again or borrow more on or after that date,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. “They may have been counting on having access to these lower payment options, and they’re not going to.”
Parents in this situation could go ahead and take out the federal loan and forfeit their more affordable repayment plan. They could also opt for private student loans if they qualify for a decent rate. Mayotte offers up a third potential strategy. If one parent took out the existing PLUS loans in their name, have the other parent sign for any future student loans. That would keep the affordable repayment plan intact, although the new loans would be repaid using the standard plan.
“At least the old loans aren’t affected, and they can still use those options,” says Mayotte.
For now, Taylor says Parent PLUS borrowers’ first priority should be to take a close look at the deadlines coming up.
“I would strongly encourage parents who currently owe and are paying down Parent PLUS loans to consider (consolidating) right now because if they miss that deadline, they’re going to be out of luck,” says Taylor.
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Why Parent PLUS Borrowers Must Act Now to Reduce Student Loan Payments originally appeared on usnews.com
