Since taking office, the Biden administration has canceled a historic $138 billion in student debt through existing relief programs and a new income-driven repayment (IDR) plan. Now, the U.S. Department of Education intends to go a step further, using its regulatory authority to deliver relief that would benefit under-resourced parents who borrowed money through the federal Parent PLUS loan program in order to finance their children’s education but are not currently eligible for an IDR plan. TCF analysis indicates planned regulations would especially benefit parents of students at historically Black colleges and universities (HBCUs), defaulted parent-borrowers whose Social Security benefits are being garnished, and parents juggling debt for their own education along with debt for their child’s education. This is welcome relief, and the department, Congress, and the states could go farther in making the student loan system less burdensome for parent-borrowers.

The Regulatory Proposal

In February, the U.S. Department of Education released a draft of regulatory text for new agency action that would broadly deliver student debt relief for struggling borrowers by waiving student loan debt for borrowers experiencing acute financial hardship. A committee of stakeholders assembled by the department has approved the proposed regulatory text, and in the coming months, the department will further develop this regulatory text and is expected to put it on track to be put into action later this year.

The stakes are especially high for borrowers with Parent PLUS loans, federal student loans borrowed by a parent for their child’s education. These 3.9 million borrowers and their spouses cannot access the most generous income-driven repayment plans, meaning they have little recourse if their monthly debt obligation is more than they can bear. Debt cancellation through agency action is perhaps their best shot for relief.

The good news is that the Department of Education’s proposed regulatory text, if put into action, would likely deliver relief to many Parent PLUS borrowers experiencing hardship. Though many hurdles remain to be cleared, the plan would help alleviate the worst outcomes of Parent PLUS borrowing, which can exacerbate racial wealth disparities, create financial distress in retirement, and strain family relationships.

While the U.S. Supreme Court’s striking down of an earlier plan for student cancellation has taught borrowers not to bank on proposed relief, this new plan is one to cautiously celebrate.

Who Are Parent PLUS Borrowers?

In 1980, Congress authorized the student loan program that would become known as Parent Loans for Undergraduate Students (Parent PLUS), intending to help middle-class borrowers close the gap between college costs and their college savings. Since then, the profile of Parent PLUS borrowers has changed dramatically, with lower-income families comprising a larger share of borrowers and with low-resourced Black and Latino families driving that growth. Today, 3.9 million parents owe $112 billion in outstanding Parent PLUS loans, which, along with PLUS loans to graduate students, have the highest interest rates of the federal student loan programs.

A parent can borrow up to the full cost of attendance through Parent PLUS, but they cannot access the Saving on a Valuable Education (SAVE) plan, an IDR plan that is the most generous student loan repayment plan. As a result, nothing stops a low-income family from borrowing well beyond what they can manage, soon finding themselves unable to bring their monthly payment amount within their means. This happens all too often for a family that wants to see their child rise up the economic ladder through higher learning, even though the cost of a college education has skyrocketed as states have disinvested from postsecondary education.

Parent-borrowers differ from other student loan borrowers in that they do not reap economic benefits from the education supported by the loan, offering little hope that their incomes will rise in a way that makes their loan payments more affordable. Despite this reality, parents—including those with too few economic resources—continue to borrow to support their children’s education, in the hope they can lessen the financial burden for their child or afford a more expensive college option than they could without borrowing. This assumption of debt by the parent(s) allows their child access to a brighter future with a reduced debt burden.

But Parent PLUS loans can be disastrous for parents who can’t repay them. A borrower who is delinquent on their loan for 270 days sees their loan enter default, which can torpedo their credit and make purchasing a home or auto loan significantly more difficult. Parent PLUS borrowers comprise an outsized share of defaulted borrowers who see their Social Security payments garnished, as a form of government collections.

Both Democratic and Republican lawmakers have introduced legislation that would overhaul (or, simply, eliminate) the Parent PLUS program. Bills such as these indicate a recognition on both sides of the aisle that policy change is necessary in order to address challenges in the Parent PLUS program portfolio. But changing the terms of new Parent PLUS loans, or eliminating the program altogether, does nothing for parents who already carry this debt. For them, cancellation is the best chance at relief.

Prior Debt Cancellation Efforts

President Biden and a host of Democratic presidential candidates campaigned in 2020 on a promise to deliver meaningful debt relief to borrowers amid a swelling student loan debt crisis. Once in office, the administration called on Congress to introduce and pass legislation that would have canceled at least $10,000 in student loans per borrower, for all qualifying borrowers. When Congress failed to act, it was not clear whether the White House would pursue debt cancellation through other avenues.

In spring 2022, The Century Foundation (TCF) called for Parent PLUS borrowers to be included in any wide-scale debt cancellation effort. Media coverage focused on concerns about the cost of loan forgiveness and who stood to benefit from it, which stoked fears that Parent PLUS borrowers might be excluded from Biden’s debt relief plan based on the mistaken idea that Parent PLUS borrowers were in relatively high-asset families, and that they were less burdened by student loan repayment than other types of federal student loan borrowers.

In August 2022, the administration announced its intent to forgive up to $10,000 in student loan debt for low- and middle-income Americans. Borrowers, including those with Parent PLUS loans, would need to attest they earned less than $125,000 individually or $250,000 as married couples to qualify. The announcement included an additional $10,000 in relief if the borrower received a Pell Grant for their education, and it allocated relief on a per-borrower rather than a per-student basis, ensuring both parent and child could benefit. As a result, the family of a Pell Grant recipient could have received $30,000 in total debt relief under the plan.

Almost immediately, several states and other entities challenged the legality of the proposed forgiveness program and cited concerns about executive overreach and eligibility requirements. The administration’s plan for broad-based, one-time debt relief was struck down by the U.S. Supreme Court in June 2023 through the Biden v. Nebraska ruling. Since then, the administration has continued pursuing targeted debt relief through the Department of Education’s rulemaking process, known as Negotiated Rulemaking.

Negotiated Rulemakings allow representatives from government agencies and interested or impacted groups to negotiate the terms of administrative rules. The Student Loan Debt Relief Negotiated Rulemaking convened key stakeholders beginning in October 2023 through February 2024. The administration seeks to walk a fine line, designing a plan that calls for broad relief while moderating the risk that judicial review will see the plan struck down.

The Significance of Excluding Parent PLUS Borrowers from IDR

Just weeks after the Supreme Court decision blocked the administration from implementing its relief plan, the administration unveiled the SAVE plan. Although SAVE is touted as the most affordable student loan repayment plan ever, Parent PLUS borrowers are explicitly excluded from relief through the plan.

Eligibility for the SAVE plan carries significant benefits. A borrower living below 225 percent of the poverty line pays $0 per month in debt repayment, and borrowers earning more than that amount must only pay 10 percent of income above the 225 percent threshold, with SAVE waiving any unpaid interest from that month. (Starting in summer 2024, borrowers with undergraduate loans pay as little as 5 percent, instead of 10 percent.) After a certain number of years making minimum payments—as few as ten for those with small loan principal amounts, and capped at twenty or twenty-five years based on graduate loan borrowing—the balance is forgiven.

Parent PLUS borrowers not only are not eligible for SAVE, they are not eligible for equivalent benefits. Parent PLUS borrowers cannot take advantage of any income-driven repayment plan, except by first consolidating their loans. Even then, the only IDR plan they can access is income-contingent repayment (ICR). Compared to SAVE, ICR protects much less discretionary income, just 100 percent of the federal poverty guideline, which is $31,200 a year for a family of four. ICR requires borrowers to pay 20 percent of the income above that protection, versus 10 percent under SAVE. For a parent in a family of four earning $60,000, monthly student loan payments under ICR would be $480, versus $0 under SAVE. (See Figure 1.) And for all borrowers on ICR, balances are canceled after twenty-five years of monthly payments, which would be more than double the length under SAVE for someone starting with a low balance.

Figure 1

In the Department of Education’s final rule on the SAVE plan, the exclusion of Parent PLUS loan borrowers was justified by a statement asserting that expanding the benefits of SAVE to all loan types “did not address the Department’s goals of targeting benefits on the types of loans that are most likely to experience delinquency and default. The result would be expending additional transfers to loans that have a higher likelihood of being successfully repaid.” However, nearly one in eleven Parent PLUS borrowers default, with low-income, Black and Brown borrowers carrying a significantly higher risk.

For this reason, it’s especially crucial Parent PLUS borrowers be among the groups most likely to benefit from relief based on financial hardship.

Parent PLUS and Hardship

It has been known since November that the Department of Education was considering five categories of borrowers for relief through its new regulation.

The fifth category—borrowers experiencing hardship that is not otherwise addressed by the existing student loan system (“the hardship category”)—is likely to be the most promising for Parent PLUS borrowers: because of their exclusion from IDR, struggling Parent PLUS borrowers could make a particularly strong case that their hardship is not addressed by the existing student loan system. However, the details of the hardship category were released only recently. After negotiators and advocates pressed the Department of Education, it added a session to discuss borrowers affected by hardship and released a drafted regulatory text on February 15.

Advocates stressed that the provision based on hardship is meant to be the most inclusive, reaching the most expansive scope of borrowers. The Department of Education affirmed this vision in their design of the text: rather than establish discrete groups of borrowers who could qualify, the department proposes to assess on an individual basis whether an applicant’s hardship is likely to push them over the brink into default, which would trigger relief. Functionally, the text works in four parts. The text:

  • establishes the authority for the department to grant relief for all or part of a balance for a borrower experiencing hardship, if the hardship “is likely to impair the borrower’s ability to fully repay the Federal government” or if “the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt”;
  • identifies a list of “factors that substantiate hardship,” ranging from financial measures such as income and assets to educational characteristics such as degree completion;
  • details “immediate relief” that would discharge loans for borrowers who, based on the aforementioned hardship categories, are “at least 80 percent likely to be in default” within two years of the regulation’s effective date; and
  • authorizes the department to use existing data in its possession and information acquired through an application.

This text is not yet settled law; it represents the Department of Education’s current thinking and planning. The department will release a notice of proposed rulemaking, receive comments, and then issue a final rule. But if the final rule hews closely to this text, many Parent PLUS borrowers may at last receive relief.

Based on what we know about borrowers’ financial lives, we identify a few groups of Parent PLUS borrowers who may be especially likely to qualify under the hardship provision.

Parents Carrying Loans for a Child’s Education, plus Their Own

Many parent-borrowers shoulder student debt from two educations: their children’s and their own. Borrowers such as these may have completed education as an adult, perhaps while raising the children they would later borrow student loan debt for. The fact that these parents still hold debt for their own education while borrowing for their children’s undergraduate education indicates that they are struggling to repay debt and may have been for years. Stakeholders in Negotiated Rulemaking identified this group of borrowers as a priority group when assessing hardship.

One in six parent-borrowers carries this unique cross-generational burden, according to TCF’s estimates using Federal Reserve data. As a group, borrowers doubling up on parent loans and loans for their own education (“double-up borrowers”) are more financially vulnerable than those with only parent-loans and those with only own-loans:

  • Double-up borrowers are more likely to be low-income than borrowers with only parent loans, and more than half of double-up borrowers reported receiving any public benefit (the highest rate of any group).
  • Nearly four in five double-up borrowers carry unpaid credit card debt, the highest rate of any group by a large margin.
  • More than half of double-up borrowers say that they cannot cover three months of expenses with savings, and one in four double-up borrowers says they cannot currently pay their monthly bills. (See Figure 2.)
  • Among retired respondents, double-up borrowers are the most likely group (close to one in three) to say that they could not withstand a $400 emergency expense.
  • More than seven in ten double-up borrowers who are not retired say that their retirement savings plan is not on track.
Figure 2

Like candles being burned at both ends, double-up borrowers face financial pressures from both of their student loans, leading to precarious financial circumstances. As a function of the hardship captured here, a substantial number of these borrowers would likely qualify under the hardship provision. (An appendix to this commentary contains more details about these parents.)

HBCU Parents

Due to more than a century of chronic under-funding, historically Black colleges and universities (HBCUs) lack the ability of predominantly white peer institutions to close affordability gaps with institutional aid, leading to a high concentration of Parent PLUS loan debt among HBCU families. HBCUs provide an excellent pathway for low-resourced families to help their child move up the income ladder; however, many HBCU families borrow Parent PLUS due to insufficient family resources, which itself poses a barrier to repayment. In academic year 2019–20, more than one-third of all dependent undergraduate students at private HBCUs had parents who took out federal Direct PLUS Loans. (See Figure 3.) As of June 2022, more than 212,000 families’ Parent PLUS loans taken out for children to attend HBCUs totaled $5.8 billion in outstanding debt.

Figure 3

These families’ debt can prove unmanageable, as HBCUs comprise many of the institutions with the highest Parent PLUS default rates: TCF has found that HBCUs make up a third of colleges and universities where a significant portion (more than 20 percent) of students’ parents default on their Parent PLUS loans within three years of the start of repayment. The burden to pay back Parent PLUS debt is amplified by high interest, which compounds for families with few resources, as is true for a large share of HBCU families.

The hardship provision of the Department of Education’s proposed regulatory text bases an applicant’s eligibility on their likelihood of default within two years. While federal student loan borrowers who were in default in 2020 can restore good standing through the Fresh Start initiative, a Parent PLUS borrower whose financial circumstances have not significantly changed may quickly slip back into default. Based on default statistics, it follows that an outsized number of Parent PLUS borrowers whose loans supported an HBCU education would likely qualify for hardship-based relief.

Social Security Recipients in Student Loan Default

To understand how pernicious student loan default can be, consider what happens when a Social Security recipient defaults on their student loan. They will likely see portions of their monthly benefits withheld as a form of government collections. A borrower with no other income source may suddenly find themselves beneath the poverty line, all because they did not pay a student loan bill they could not afford.

Social Security withholding is a particular hazard for Parent PLUS borrowers: according to the U.S. Government Accountability Office (GAO), 40,000 disabled or retired Parent PLUS borrowers saw portions of their Social Security benefits withheld from them in 2015 due to student loan default.

Relief based on hardship may reduce the incidence of older Parent PLUS borrowers seeing their Social Security payments withheld due to student loan default. The undeniable and lasting hardship experienced by these borrowers would likely meet the standard for loans whose costs of collection—requiring the mobilization of multiple government agencies—exceed the value of keeping the debt on the books.

Reasons for Caution

It is too soon to project how many borrowers, Parent PLUS or otherwise, would qualify for relief under the Department of Education’s proposed regulatory text. The proposal links eligibility for relief to a borrower’s likelihood of default, lowering the loan balances of applicants who are at least 80 percent likely to default within two years. Many individual borrowers who experience hardship will fall short of this mark. Even for those who do qualify, it is not known how much relief they will receive.

By contrast, the one-time student debt cancellation plan announced in August 2022 would have delivered a predetermined amount to borrowers based only on their and their spouse’s combined income and Pell Grant recipiency: it offered a simple scheme that almost any borrower could easily understand. The relative complexity of this latest plan is, no doubt, a byproduct of the Department of Education’s need to fashion relief within the bounds of what the U.S. Supreme Court, which struck down the August 2022 plan, will deem acceptable. Time will tell whether this latest plan threads the needle effectively.

The Department of Education can help simplify borrowers’ experiences with the new policy where possible, such as by automatically lowering the debts of borrowers who were in default at the start of the repayment pause in March 2020. The department can also mine federal data sources for indicators of hardship among student loan borrowers that have already been identified by federal agencies. As it happens, all three of the groups of Parent PLUS borrowers listed above—double-up borrowers, HBCU parents, and Social Security recipients in default—could be identified through existing federal data systems and sent targeted outreach about relief based on hardship.

Relief Plus Reform

The Department of Education’s latest cancellation proposal will provide relief to many borrowers, including many with unmanageable Parent PLUS loans. However, even if the latest plan survives judicial review, lawmakers should not declare victory over the problem of Parent PLUS debt. The underlying affordability challenges that drive parent-borrowing among low-income families persist, and the department’s relief proposal does not create a policy of continuous, ongoing relief. It also raises concerns that working-class families might borrow massive amounts of high-interest Parent PLUS debt in the hopes that the department will forgive their debt at some yet-unknown future date—a date that may never come.

Parent PLUS borrowers still lack the safety net that the SAVE plan offers student-borrowers. Building on the Department of Education ’s commitment to make the student loan system less burdensome for borrowers, Congress and the department should commit to new action to reduce the long-term burdens of Parent PLUS loans, present and future.

  • Congress and the Department of Education should scrutinize the decisions colleges and universities make in putting Parent PLUS loans on the financial aid award letters of students, which can function as destiny for families who do not fully understand the program.
  • Parent PLUS loans need not be so costly that they return the government a sizable profit (a projected $6 billion for the Parent PLUS loans disbursed in fiscal years 2018 through 2021). Accordingly, Congress should eliminate origination fees and reduce interest rates for Parent PLUS loans, as proposed in the Parent PLUS Loan Improvement Act. At the same time, Congress could extend the benefit to existing Parent PLUS loan borrowers by authorizing the Department of Education to reduce existing Parent PLUS loans balances in amounts commensurate with the origination fees and interest already paid on those loans.
  • The Department of Education should initiate a Negotiated Rulemaking to revise the ICR regulations to provide enrollees with many of the benefits of SAVE, including the noncapitalization of interest and shorter timeline to forgiveness for loans with smaller principal balances.
  • States and Congress should fortify the finances of HBCUs, acknowledging the consequences of deliberate underfunding by governments and downstream impacts on outsized Parent PLUS borrowing among Black families.

For more TCF analysis of parents with loans for both their own education and their children’s, see here.