Parent PLUS Loans: The Double Consolidation Loophole

The Trap of Parent PLUS

Parent PLUS loans are explicitly excluded from the most generous income-driven repayment plans. By default, parents are only eligible for the Income-Contingent Repayment (ICR) plan, which often results in payments nearly as high as standard 10-year plans.

The Double Consolidation Loophole

For decades, a loophole has existed in the administrative code. If a parent has multiple PLUS loans, they can consolidate them into two separate Direct Consolidation Loans. Once those two new loans are formulated, the borrower consolidates those two together into a final, third Direct Consolidation Loan.

Because the final loan is a consolidation of consolidation loans (rather than a direct consolidation of PLUS loans), the Department of Education's systems classify it as a standard Direct Consolidation Loan. This technically opens access to alternate IDR plans like standard IBR.

Warning: The Department of Education has signaled they intend to permanently close this loophole by the end of standard regulatory cycles. If you are considering this, consult a fiduciary student loan advisor immediately to ensure the exact mailing order of your paper applications is flawless.