One of the fastest-growing segments of student loan borrowers is senior citizens. Many seniors worry that Parent PLUS loans will consume the social security checks they need to survive.
Some face huge bills and major sacrifices. Others, despite their best efforts, find their social security checks garnished due to student loans.
The good news for student loan borrowers living on social security is that if they take the right steps, the odds are pretty good that they may never have to make a student loan payment again.
Income-Driven Repayment Plans for Parent PLUS Borrowers
One of the major advantages of having federal student loans is the income-driven repayment (IDR) plans. The significance of an IDR plan is that it allows borrowers to make payments based upon what they can afford rather than what they owe. Thanks to IDR plans, many borrowers can get a monthly payment of $0 per month.
These IDR calculations are done by determining a borrower’s discretionary income. The more a borrower makes each month, the more the borrower must pay.
Without going into the full details on discretionary income calculations, borrowers who live on social security and have no other income will likely qualify for a $0 per month payment.
The catch with Parent PLUS loans is that they are not eligible for any federal income-driven repayment plans. The good news is that borrowers can convert Parent PLUS loans into eligible loans by going through federal direct consolidation. After consolidation, Parent PLUS loans become eligible for the income-contingent repayment (ICR) plan.
ICR is not the best of the income-driven repayment plans, but it is the only option for Parent PLUS loans. ICR is eligible for $0 per month payments.
Parent PLUS Loans vs. Other Federal Loans: Parent PLUS loans are different than other federal loans. Borrowers living on social security who have other federal loans have more options and flexibility in repayment.
Federal Direct Consolidation
We will skip the history lesson on federal student loans that explains why federal direct consolidation is necessary for the ICR plan. This extra step is government red tape at its worst, but the good news is that the consolidation process is pretty simple.
The Direct Consolidation Loan Application is available through the Department of Education’s student loan website. According to the Department of Education, it takes about 30 minutes to complete the application.
They do a nice job explaining the process, but a couple of essential details are worth highlighting:
- If you have just a single Parent PLUS loan, you can consolidate the loan.
- Do not consolidate Parent PLUS loans with other federal student loans – the other federal loans lose their eligibility for certain repayment plans if combined with a Parent PLUS loan.
A Warning About ‘Help’ with Consolidation: There have been services that have popped up over the years, offering to help borrowers go through the consolidation process to get $0 per month payments. These “services” are usually shut down fairly quickly by the government. Most are nothing more than a scam. Borrowers shouldn’t pay for outside help to consolidate and enroll in an income-driven repayment plan.
Three Steps for $0 Student Loan Payments for Social Security Recipients with Parent PLUS Loans
Step #1: Apply for federal direct consolidation.
Visit the direct consolidation website and fill out the form. Be sure that Parent PLUS loans do not get combined with other federal student loans (if you also have other federal loans). If you get confused or need help, contact your federal student loan servicer for guidance.
Step #2: Sign up for an Income-Driven Repayment (IDR) Plan
For borrowers with Parent PLUS loans, the only IDR plan that they will be eligible for is ICR. Borrowers can submit IDR applications on the Studentloans.gov website. The easiest way to verify your income is to have them automatically pull your most recent tax return. However, if your income has dropped since your last tax return, you may have to go through the steps to submit alternative documentation.
Step #3: Certify income every year
Your student loan servicer should remind you each year, but it is important to certify your income yearly. This will keep payments low and manageable. If the monthly payment suddenly jumps up, it is likely because you missed a certification deadline. If that happens, complete the IDR request again.
How does the loan get paid off with $0 payments?
If you are making $0 per month payments, the loan balance will only grow. Though unfortunate, it is the only option for many senior citizens on the fixed income of social security.
There are provisions to have the loans forgiven after 25 years, but the reality for many seniors is that they will certify their income yearly and never make any payments on the loan.
Estate Planning Concerns
Those concerned that the government will collect the debt after they die do not have to worry.
One feature of all federal student loans is that the debt dies with the borrower.
Even if you still owe money on the student loan when you die, the government will not collect from life insurance proceeds or an inheritance left for your kids. The death discharge process is fairly simple.
Digging Deeper: Learn how to manage student debt during your retirement.
Dealing with Parent PLUS loans and Living on Social Security
The steps required for Social Security recipients to ensure their checks don’t get garnished is probably more complicated than necessary. Fortunately, jumping through a bit of government red tape will address the issue.
To make sure that steps don’t get missed, it is a good idea to have your child remind you of deadlines and help you with the paperwork. Given that you took out the loan to pay for their school, it is the least they can do.
Hi, Michael
I have a Direct Consolidation loan – consolidated from two federal Parent PLUS loans and an unsubsidized federal loan – which has been in forbearance since 2019, has an ICR plan, and has an outstanding balance of almost $84,000. The servicer, since April 4 of this year, has been Nelnet.
Next April, I can apply for renewed deferment; otherwise, on June 22, automatic $907 monthly withdrawals resume – which I can’t afford to pay.
Every month, my wife and I receive Social Security ($2,202 mine, $110 hers) and she gets $3,048 from our state’s Teacher Retirement System. As a semi-retired freelance writer, I make an uncertain and sporadic income, which will gross about $10,000 in 2023.
For tax purposes, it may be very advantageous for us to file jointly in 2023 for the first time, but I’m concerned my wife’s unearned income may be counted by the DOE against my loan repayment obligation.( I didn’t know her when I obtained the original loan, nor were we married when I consolidated it.)
So, do you think I have a chance of receiving a continued forbearance next year or, failing that, can I obtain a lower-cost loan or even negotiate a good-faith repayment of a small portion of my monthly bill – say a quarter to a third of it?
Hi Ray,
That is a tricky question.
For starters, that $907 monthly payment seems a bit high for a monthly ICR payment based on the numbers you have provided, especially if you filed seperately on your last tax return.
The important thing to remember is that the AGI is the critical number for IDR calculations. Many borrowers who live primarily on social security qualify for $0 per month payments.
Sadly, the timing of when you applied for the loan and when you consolidated it has no impact on your IDR calculations. As much as I hate to pile on, the odds of negotiating a smaller payment are likewise pretty small. You are kind of at the mercy of the IDR calculation.
If the joint filing is a one-time thing, you might be able to essentially bury that year from IDR calculations. However, if it will be ongoing, her income will impact your AGI as a couple, and that will increase your monthly bill.
The department of Ed says that “the icr plan is being sunsetted except for consolidated pp. On July 1, 2024”. They state that this does not apply to consolidated parent plus loans and “icr will still be available indefinitely for consolidated pp loans. Do they mean graduate plus loans inclusivly in this reference to pp loans? Specifically, will I be able to take out a graduate plus loan next year and later convert it to a consolidated loan eligible for icr repayment? Thank you for your invaluable assistance.
This is a tricky question. Do you have Parent PLUS loans?
Also, is there a particular reason that you want to have the ICR plan? If you don’t have any Parent PLUS loans, the new SAVE plan is almost certainly a better option.
I don’t currently have any parent plus loans. additional to the other loans that i will be accepting for graduate school that will be eligible for the SAVE payment plan i will also be taking out ineligible graduate plus loans. Will my graduate plus loans once converted into a consolidated loan continue to be eligible for the icr repayment plan as they state parent plus loans will be after the jul 1, 2024 sunseting of the program for other barrowers ?
I think I see the confusion. You will be able to sign up for SAVE for all of your graduate loans. Parent PLUS loans are the ones that don’t qualify for SAVE.
Thank you for your help and your excellent work for so many.
Hi Michael,
I have a parent plus loan that was consolidated pre pandemic and put in an Income driven repayment plan. I’m currently about to restart payments at the prior rate. Come July of 2024, my loan servicer has indicated my new payment may be $500 per month with out any regard to discretionary income only gross income. They also indicated I don’t qualify for the SAVE program. How do I qualify for low payments based on discretionary income?
It sounds to me like the large payment they are describing is the standard payment… which happens if you don’t submit your yearly certification (don’t worry, you have at least six months after the restart before certification is required).
Because you have Parent PLUS loans, you won’t be eligible for SAVE. However, the ICR plan should remain available.
If I want to consolidate my Parent Plus Loans and go off of income since I am 65 and get Social Security, do I have to include my husband’s income?
It will depend on how you file your taxes. If you file jointly, your husband’s income will be included in the calculation. If you file separately, it won’t be.
Thank you so much for your response. Is it always best to consolidate Parent Plus loans. I have a total of 4 for my son’s 4 years of education. I am the sole signer on the Parent Plus loans. I am soon to be 66, get Social Security and work a small part time job. Thank you in advance.
If you want to make income-driven payments on the ICR plan, qualify for forgiveness, or $0 per month payments, consolidating the Parent PLUS loan is a necessary step.
I am presently filing for social security disability income insurance. if thats approved but i still have a pension from previous employer, do i still have to pay parent plus student loans?
You may still have to pay, but those “payments” could be $0 per month payments.
It will all depend on how your various sources of income are taxed.
Hello Michael,
Is the process of requesting the Income Contingent payment the same if I already have parent plus loans consolidated? I am trying to mentally prepare for my retirement which will mostly be from SS.
Hi Jena,
If your Parent PLUS loan is already consolidated into a federal direct loan, there are no special steps required to enroll in ICR. Just use the Income-Driven Plan request page on studentaid.gov and enroll. The application only takes a few minutes to complete.
Hello Michael – Do you have any information on the Savi loan support service? This service is being offered through AARP as a loan support service.
Hi Bill,
I have limited information on Savi. The AARP partnership definitely lends some credibility, and I know they advertise an automated student loan guidance service, which could be very helpful if done right. However, I’m troubled by the “Up to $20,000 forgiveness… check eligibility”. This is in reference (I suspect) to the one-time forgiveness program announced by President Biden. Right now, it is held up in the courts, and nobody is eligible, and they are not taking applications. That hopefully will change, but it always gives me pause when a private company uses free federal programs as a sales pitch… especially when that program is in limbo.
Hello
What type of proof do you need to show as a step parent to get a parent plus loan for my step daughter?
Step parents can borrow a Parent PLUS loan if they are married to the custodial parent. If you are married to a non-custodial parent, you won’t be eligible.
Can I get a parent plus loan for my daughter if I receive ssi or ssd
You may not be able to qualify. Do you have an additional source of income? My understanding is that the application can be denied if your only source of income is ssi or ssd.
Hello Michael,
If I already have consolidated loans, can I still get an income contingent payment plan when I retire and go on social security?
Hello Michael – Thank you for publishing all of this great information. I am just retired and will have majority of my income be social security. I have Parent Plus and Direct student loans. Can I consolidate both of those loan types in order to qualify for the ICR plan?
Hi Bill,
Thanks for the kind words.
Consolidating everything together is an option, and you would qualify for ICR. However, I’d suggest consolidating the Parent PLUS loans into one consolidation loan. If you want, you could also consolidate your other loans into a separate loan. You loan servicer can talk you through the process.
I suggest not mixing your Parent PLUS loans with your direct loans because it will limit the repayment options for the direct loan debt.
I am a 42 year old single mom on ssi that signed a parent plus loan for my daughter under the impression I was simply helping but not taking on full responsibility for the loan. I mean how could I even be considered to even make enough to on ssi to be approved, I was confused. I’d never dealt with anything like this and honestly I simply didn’t understand. I definitely was given a different impression at the time from the college. I don’t see how this is entirely fair. Of course I want my daughter to have a great future but had things been explained more clearly I would have reached out to someone who was capable of making sure I knew what I was signing. I feel deceived and taken advantage of.
Hi Jennifer,
I know a lot of borrowers who feel the same way that you do. Hopefully you can consolidate the debt, get enrolled in an IDR plan, and have payments that are low (or even possibly $0) until the debt gets forgiven.
I agree with you Jennifer I am Total disability and i was told i could never get any loan for any kind of education so when the college that my kids go to told me to apply for a parent plus loan i was under the impression that I would be denied and than once it was denied they college could offer another type of grant. NOW I find out that both of my children parent plus loans did go through HOW??? This is so deciveing.
I am in the process of determining whether to sign up for my social security at age 62 or wait till full retirement age. I am wondering if and how social security income will impact my student loan payment which is in an IBR plan based on my spouse’s income as I am not employed.
That is a tricky question because the taxation of social security can get complicated. To the extent that your social security check increases your adjusted gross income on your tax return, your payments could go up. If it doesn’t affect your AGI, it should affect your IBR payments.