- Can You Refinance Parent PLUS Loans?
- Can you refinance your Parent PLUS loans?
- How to refinance through a private lender
- 1. Calculate the total amount of the loans you're refinancing
- 2. Compare rates through private lenders
- 3. Pick a lender
- 4. Apply for a loan
- Transferring Parent PLUS loans to your child
- How federal loan consolidation works
- Should you refinance or consolidate your Parent PLUS loans?
- New terms on your Parent PLUS loans
- Best Lenders To Refinance Parent PLUS Loans
- What is a parent PLUS loan?
- How to refinance a parent PLUS loan
- Best lenders for refinancing a parent PLUS loan
- Education Loan Finance
- When to refinance parent PLUS loans
- Consolidating parent PLUS loans
- Learn more:
- 5 Parent PLUS Loan Repayment Options for Families
- Refinance to a lower interest rate
- Parent PLUS loan consolidation
- Income-Contingent Repayment
- Refinancing with a private lender
- Public Service Loan Forgiveness
- Top 5 Lenders to Refinance Parent Plus Loans in 2021 [+ Cash Bonus]
- A look at student loan refinancing
- 5 lenders offering Parent PLUS Loan refinancing
- 1. CommonBond
- 2. Laurel Road
- 3. Earnest
- 4. SoFi
- 5. PenFed
- How to refinance Parent PLUS loans
- What to know before refinancing Parent PLUS Loans
- 6 Pros and Cons of Refinancing Parent PLUS Loans
- Benefits of Refinancing Parent PLUS Loans
- 1. Refinancing could save you money
- 2. You’ll have one easy payment
- 3. Refinancing could reduce your monthly payment
- Drawbacks to Refinancing Parent Loans
- 4. You won’t be eligible for alternative payment plans
- 5. You won’t qualify for Public Service Loan Forgiveness
- 6. You may end up paying more in interest
- Tackling Your Debt
Can You Refinance Parent PLUS Loans?
Parent PLUS loans are a popular way for parents to help finance their children's education. If you went that route and are paying back those loans, you may be wondering about your refinancing options.
There are plenty of reasons to refinance Parent PLUS loans. It could help you secure a much lower interest rate. You could use refinancing to get a more affordable monthly payment. Or you may want to refinance after your child graduates and has a job so you can transfer the loan to them.
Whatever your reason for refinancing, here are all the details you need on how to do it.
Image source: Getty Images
Can you refinance your Parent PLUS loans?
Yes, you can refinance Parent PLUS loans, but only through a private lender.
Although the U.S. Department of Education offers consolidation on federal student loans, it doesn't offer refinancing. It also doesn't allow you to transfer your Parent PLUS loans to your child, either. You need to refinance through a private lender for that.
If you choose to refinance your loans this way, you replace them with a private student loan. This means you're no longer eligible for any potential benefits that are unique to federal student loans. That includes income-based repayment plans and loan forgiveness. Because there are very limited circumstances where Parent PLUS loans can be forgiven, this might not be a big deal.
How to refinance through a private lender
To refinance through a private lender, you need to
- calculate the total amount of the loans you're refinancing,
- compare rates through private lenders,
- pick a lender, and
- apply for a loan.
Here are more details on each step:
1. Calculate the total amount of the loans you're refinancing
Since you're applying for a new student loan to pay off your previous loans, you need to know how much those loans will cost to pay off.
You can find out your total loan balances on your Parent PLUS loans through the online account you use to make payments. Another option is to contact the loan servicer.
2. Compare rates through private lenders
Now it's time to see what kind of refinancing rates you can get through different lenders. There are a few things to check to verify that a lender is a good match:
- The amount you need to borrow is within their lending limits.
- You meet their minimum credit score requirements (if you don't know yours, here are some ways to check your credit score).
- They offer the term length you need.
Once you have some lenders in mind, go to their websites and see what kind of rates you prequalify for.
3. Pick a lender
After doing your homework on loan rates from several lenders, it's time to choose one for your loan.
You may think you should choose the lender that offers the lowest interest rate. That's an important factor in your decision, but there are a couple other things to consider.
You'll need to decide whether you want to refinance with a fixed or variable interest rate. This could affect your choice of lender, as the lender with the lowest fixed rate may be different than the lender that has the lowest variable rate.
Also look at which lenders let you defer your loan if you can't make the payment. Hopefully you won't need to do this, but it's helpful to have that option available just in case.
4. Apply for a loan
The final step is to fill out a loan application, which you can do online. The application process requires your personal and financial information and takes 10–20 minutes.
Keep making your loan payments until you're approved for your refinancing loan. Only after you've used it to pay off your original Parent PLUS loans can you stop making your standard monthly payments.
Transferring Parent PLUS loans to your child
The process for transferring Parent PLUS loans to your child is similar to the refinancing process described above. The difference is that your child needs to apply for the refinancing loan with their own information.
After they're approved for the loan, they can use it to pay off your Parent PLUS loans.
There are two common reasons to do this:
- You want to transfer responsibility for the student loans to your child.
- You want to refinance your loans, but your child has a better credit score and could secure a lower interest rate.
How federal loan consolidation works
While there's no federal option to refinance student loans, there is federal loan consolidation. Consolidating federal loans means you'll only have one monthly loan payment. And you can apply for an income-contingent repayment (ICR) plan.
Consolidation results in a slightly higher interest rate. You'll have the option of extending your loan term when you consolidate, which could be good or bad. It results in a lower monthly payment, but this means you end up paying more overall for your loan. The longer you have your loan, the more you'll pay in interest.
To consolidate your federal loans, fill out the Direct Consolidation Loan application online or print it out and mail it in. A consolidation servicer will get in touch with you to complete the process. Until your loans are consolidated, keep making payments you would if you were refinancing.
It's important to note that you can only consolidate federal loans that you, the parent, took out. You can't consolidate your loans and your child's federal loans, even when all those loans were for your child's education. You and your child have to consolidate your federal loans separately.
Should you refinance or consolidate your Parent PLUS loans?
If your credit score is good enough to qualify for low rates, refinancing your Parent PLUS loans is typically a better option than consolidating them. As long as you won't have any trouble making your loan payments, you could save a lot of money.
Parent PLUS loans have a fixed interest rate of 7.6% as of 2019, and that interest rate goes up when you consolidate. The top student loan providers, on the other hand, have fixed rates under 4% and variable rates under 3%.
Consolidation is a better option if you think you could need an income-based repayment plan in the future. It's also a way to get a lower monthly loan payment if you don't have good credit.
New terms on your Parent PLUS loans
If there's anything you'd to change about your Parent PLUS loans, refinancing is generally the best way to do it. You can see what private lenders will offer and get the terms you want, or even transfer those parent loans over to your child.
Of course, any type of refinancing, you'll have more options the higher your credit score is. With a good to excellent score, you could end up with a much better deal on those federal loans.
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Best Lenders To Refinance Parent PLUS Loans
While parent PLUS loans can help you foot the costs of your child’s higher education, the higher interest rates and loan amounts tend to make them expensive. Currently, more than 3.5 million Americans have this type of federal student loan, totaling $96 billion in debt, according to research by Trellis Company.
If you have a parent PLUS loan and you’re looking for ways to make your payments more manageable, refinancing may help. Below are four of the best lenders to refinance parent PLUS loans, interest rates, features and repayment options.
What is a parent PLUS loan?
A parent PLUS loan is a federal loan that parents can take out to pay for their children’s education costs. These come with fixed interest rates and generous loan limits: The parent can borrow up to the cost of the child’s attendance each year, minus the student’s other financial assistance.
These loans differ from other federal student loans because the parent is fully responsible for repaying the debt and must go through a credit check during the application process.
How to refinance a parent PLUS loan
When refinancing a parent PLUS loan, you’ll take out a private loan, pay off the original debt and then pay down the new loan over time.
Typically either you or your child can take out the new private loan — but if the new loan is in your child’s name, then you no longer have responsibility for the debt. Here are the steps you (or your child) would take to refinance the parent PLUS loan:
- Get rate quotes. Compare offers from multiple lenders to see what your interest rate and monthly payment would be. Some lenders offer prequalification to let you see if you qualify for the loan, which involves a soft credit pull that won’t hurt your credit.
- Apply for the loan. Once you’ve spotted a good deal, go through the application process to apply for the loan. This will involve a hard credit pull, and you may need to provide documentation. Once you’re approved, the lender will pay off your parent PLUS loan and issue the new loan. From there, you’ll make payments to a new loan servicer.
If your child’s financial standing has improved since graduation, they may be eligible for competitive interest rates. This can make repayment easier if they take over the debt. Eligibility requirements vary with each lender, but your child will generally need a good credit history and enough income to afford the payments.
Best lenders for refinancing a parent PLUS loan
The lenders selected below are interest rates, repayment terms and eligibility requirements.
Founded in 2011, SoFi is a well-known online lender that offers student loans, personal loans and even mortgages and investing products. You can refinance parent PLUS student loans at competitive rates that range from 2.99 percent to 5.94 percent for a fixed APR or 2.24 percent to 5.94 percent for a variable APR.
- Soft credit check: To check whether you qualify, SoFi performs a soft credit pull that won’t impact your credit.
- You or your child can refinance: You can apply for the loan in your name or have your child apply and take over the debt.
- No fees: Borrowers won’t pay application fees, origination fees or prepayment penalties.
- Co-signer release: Loans that are refinanced after May 1, 2019, may qualify for co-signer release.
- No credit score disclosed: SoFi does not state a minimum credit score for its student loan refinancing, so it’s hard to know if you’ll qualify without going through prequalification.
Education Loan Finance
Education Loan Finance (ELFI) opened in 1994 as a division of Tennessee-based SouthEast Bank. It originates and refinances private student loans for undergraduates, graduate students and parents.
Variable annual percentage rates start at 2.39 percent, while fixed rates start at 2.79 percent.
When you apply, ELFI will pair you with a personal loan adviser who can walk you through the application process and answer any questions along the way.
- Strong customer service: Borrowers are assigned a personal loan adviser to answer questions.
- No fees: Borrowers won’t pay application fees, origination fees or prepayment penalties.
- You or the child can refinance: You can apply for the loan in your name or have your child apply and take over the debt.
- High minimum loan amount: Refinance loans start at $15,000, so it’s not a good fit if you’re looking to refinance a smaller amount.
- Shorter loan terms: You can choose from loan terms of five, seven or 10 years, but other lenders offer longer term lengths.
- Strict eligibility requirements: Borrowers must have a minimum credit score of 680 and earn at least $35,000. ELFI will also verify that you’ve earned at least a bachelor’s degree.
Earnest opened its doors in 2013 and was acquired by loan servicer Navient Solutions in 2017. Borrowers can choose from 180 repayment options and have access to generous forbearance programs if they hit financial trouble while in repayment. Variable rates start at 1.99 percent, while fixed rates start at 2.98 percent.
CommonBond was launched in 2011 and offers private student loans and refinancing. This lender offers generous forbearance options, low minimum loan amounts and a soft credit check to see if you qualify. Fixed APRs range from 2.83 percent to 6.74 percent, and variable APRs range from 1.97 percent to 6.82 percent.
When to refinance parent PLUS loans
Refinancing any federal student loan comes with a major drawback: You lose borrower protections offered by the Department of Education. But if you qualify for a lower interest rate than what you have now, it might be a good option for you. Here’s what to consider:
- Go over your monthly budget. Can you comfortably pay all of your bills, or do you need some breathing room? If refinancing your student loan helps you secure a lower monthly payment or lower interest rate, then you might be able to better manage your budget.
- Talk with your child. If your child agreed to take over the parent PLUS loan after graduation, talk with them about transferring the debt to their name. Help them figure out what they can afford.
- Shop around. Get loan quotes from multiple lenders and compare interest rates, fees and repayment options to see how much you could save by refinancing.
Consolidating parent PLUS loans
If refinancing into a private student loan isn’t right for you, or you want to keep protections that come with federal loans, consolidation is another option. With this move, the parent PLUS loan becomes a federal Direct Consolidation Loan.
A Direct Consolidation Loan won’t save you money in the long run, and this technique won’t allow you to transfer the debt to your child. But you might be able to lower your payments if you enroll in an income-driven repayment plan once you consolidate. You can also access other parent PLUS loan repayment options, such as loan forgiveness.
Depending on your balance, you can pay down the loan over 10 to 30 years. Keep an eye on interest costs, though. On a longer repayment schedule, you could pay more in interest over time.
5 Parent PLUS Loan Repayment Options for Families
Student loans aren’t limited to students. Parents often help their children cover college costs by taking on debt — often in high-interest federal parent PLUS loans.
The best parent PLUS loan repayment option is the one that fits your family’s financial situation and goals, repaying loans quickly, getting a manageable payment or qualifying for loan forgiveness.
Here are parent PLUS loan repayment strategies to consider.
Refinance to a lower interest rate
If you want to pay off parent PLUS loans quickly, refinancing to a lower interest rate can help you become debt-free faster and save you money in interest. You can refinance parent PLUS loans in your name, or the child can take over the PLUS loan by refinancing it in his or her own name.
To qualify, you generally need good credit and enough income to comfortably afford all of your expenses and debt payments — including housing, student loans and credit cards. Refinancing isn't a good option for borrowers who are pursuing student loan forgiveness or need to make payments their income. You'll lose these federal benefits by refinancing with a private lender.
Use this calculator to estimate how much you could save by refinancing parent PLUS loans:
Parent PLUS loan consolidation
Consolidating parent PLUS loans won’t save you money in the long run, but it can lower your monthly payments. It’s also necessary for accessing other parent PLUS loan repayment options, such as income-driven repayment plan and loan forgiveness.
When you consolidate parent PLUS loans, they become a federal direct consolidation loan. You can consolidate even if you only have a single parent PLUS loan.
You'll have 10 to 30 years to repay the consolidated loan, depending on the loan balance. On a longer repayment schedule, you'll have lower monthly payments but also pay more in interest over time.
» MORE: What's the difference between consolidation and refinancing?
Income-Contingent Repayment reduces your monthly federal student loan payment to 20% of your income or the amount you’d pay on a fixed 12-year repayment schedule, whichever is less. It also offers forgiveness after 25 years if you’re still making payments at that time.
Income-Contingent Repayment is the only income-driven repayment plan parent PLUS loan borrowers can use. To be eligible, you must first consolidate your parent PLUS loans.
Switch to Income-Contingent Repayment only if you can't afford payments on the standard 10-year federal repayment plan. On Income-Contingent Repayment, you'll pay more in interest and you’ll be required to pay income tax on any amount forgiven.
» MORE: Can't pay parent PLUS loans? 4 ways to get back on track
Refinancing with a private lender
Parents and students often share responsibility for repaying parent PLUS loans. But legally, the parent owes the debt.
If you want to transfer parent PLUS loans into the student's name, refinancing with a private lender is your only option. Not all refinance lenders allow this, but several do. To qualify, the student must have good credit — a score in the mid-600s or higher — and a low debt-to-income ratio, meaning they have enough income to cover their expenses and debt payments.
Public Service Loan Forgiveness
Public Service Loan Forgiveness is a federal program that forgives nonprofit and government employees’ loans after they make 120 monthly payments, or 10 years' worth. Un with Income-Contingent Repayment, the forgiven amount won’t be taxed.
Make sure you fully understand how to get Public Service Loan Forgiveness before pursuing it, because the program has very specific rules and requirements. For instance, the parent must work for a qualifying employer to get forgiveness on parent PLUS loans; the student's employment doesn't matter.
If you want to pursue PSLF, consolidate your parent PLUS loans to switch to the Income-Contingent Repayment plan. Otherwise, you may not have a balance left after 120 payments to be forgiven.
Top 5 Lenders to Refinance Parent Plus Loans in 2021 [+ Cash Bonus]
To help your child when it came to paying for their college tuition, you took out a Parent PLUS Loan in your name which you’re solely responsible for repaying. But the reality is that you can’t transfer the loan to your child. And on top of that, interest rates on Parent PLUS Loans are at 5.30%, the highest all federal loan options.
If you want to catch a break from high interest rates, you might be wondering if refinancing would be a good idea.
Refinancing Parent PLUS Loans could be a smart move if it saves you money in interest charges or allows you to transfer the parent loans to your child.
But if you’re currently taking advantage of federal benefits with your parent loans, you might want to avoid refinancing them to a private lender.
In this guide, we’ll share which lenders allow you to refinance Parent PLUS Loans and how to do it.
A look at student loan refinancing
When you refinance your Parent PLUS Loan, you work with a private lender to score a refinancing loan at a better interest rate. The new loan would pay off your existing Parent PLUS Loan and you’d receive a new, lower interest rate.
Taking out private student loans at a better rate would lower your monthly payment. It could also mean saving thousands of dollars in interest over the life of the loan by allowing you to put more money toward your principal balance.
5 lenders offering Parent PLUS Loan refinancing
If you’re looking at refinancing Parent PLUS Loans, here are five student loan refinancing companies to check out. Many of them allow you to check your prospective interest rate before applying.
In our student loan refinancing survey, we found that many borrowers only apply with one private lender. To get the best rate, research interest rates from various lenders, and weigh the pros and cons of their terms.
We’d suggest focusing on options 1 and 2, below, since CommonBond and Laurel Road are the main lenders that let you transfer a Parent PLUS Loan to your child’s name. Other private lenders might only offer the ability to refinance Parent PLUS Loans in the parent’s name. Also, know that if you use our referral links you’ll be eligible for internet-leading cash-back bonuses.
One student loan refinancing company to consider is CommonBond. CommonBond allows Parent PLUS borrowers to refinance their student loans and get a lower interest rate. To qualify, you must meet the same eligibility requirements that are set for students.
For one, your child must have graduated from an eligible Title IV accredited university or graduate program. Additionally, you must meet certain credit score requirements to get approved.
If approved, CommonBond offers fixed-rate and variable-rate refinancing option, and even a “hybrid” (a combo of the two) interest rate option. On the low-end, rates start at 1.92%* and cap at 8.49%*.
The fixed-rate and variable options come with repayment terms of:
- 5 years
- 7 years
- 10 years
- 15 years
- 20 years
The hybrid option has a 10-year loan term. CommonBond’s loans refinancing program stands out by providing borrowers with up to 24 months of forbearance and upholds its “social promise” to fund a child’s education in a developing country with every loan that’s taken out. Plus, you can get up to $1,050 in cash back when you use our bonus link to apply for refinancing.
2. Laurel Road
Once your child graduates, you can apply to refinance your Parent PLUS Loan through Laurel Road. For borrowers with a good credit score, Laurel Road can offer fixed or variable rate loans as low as 1.89%*. But, your APR could be as high as 6.00%*, so you’ll want to make sure you actually could save money given your current interest rate.
Aside from various APR offerings, there are a few repayment term options to choose from:
- 5 years
- 7 years
- 10 years
- 15 years
- 20 years
Compare Laurel Road’s terms to the repayment terms on federal student loans which starts at 10 years on a Standard Repayment plan. A shorter repayment term means getting debt faster. But it also means having higher monthly payments.
Laurel Road will also allow you to refinance Parent PLUS Loans in your child’s name. Of course, you’d need their consent to transfer the student loans to their name. If your child is ready and willing to pay back this chunk of student loan debt, they’d still need to meet eligibility and income requirements to qualify.
Student Loan Planner readers can also get a cash bonus of up to $1,250 by refinancing through our Laurel Road link (for refinancing more than $250,000. You get $300 to $500 for refinancing $50,000 to $249,999).
Earnest offers Parent PLUS Loan refinancing with variable rates as low as 1.99%* for borrowers with a strong credit score. Fixed rates start at 2.89%* when you sign up for autopay.
It also offers some unique perks. For example, you can skip a payment and make it up later, adjust your payment date and set up a payment your budget. Essentially, you determine what you can afford and that amount Earnest offers you a corresponding rate and loan term.
This gives you ultimate flexibility in picking a repayment term and monthly payment that works for your budget. If you refinance with Earnest through Student Loan Planner, you’ll receive a cash bonus of up to $1,000 (for refinancing more than $100,000).
SoFi is another leader in the student loan refinancing space and also allows Parent PLUS borrowers to refinance their student loans.
You can apply to SoFi via Credible and get a large cash back bonus.
It offers a variable rate or fixed APR with rates as low as 2.25%* and high as 5.94%*. A 0.25% interest rate discount is applied if you sign-up for autopay. SoFi offers refinancing repayment terms of:
- 5 years
- 7 years
- 10 years
- 15 years
You can also transfer your parent loans to your child, with their consent. As an added benefit, if you apply for SoFi refinancing through our Sofi bonus link, you can get a cash bonus of up to $1,000 if you refinance more than $100,000 ($200 bonus if you refinance $50,000 to $99,999). Note that for the $1,000 bonus, Student Loan Planner would provide $500 of that directly if you qualify.
It’s not just student loan refinancing companies that could offer you a better rate on your Parent PLUS Loan. PenFed Credit Union offers refinancing on Parent PLUS Loans through Splash Financial. PenFed offers variable APRs as low as 2.25%* and fixed rates starting at 2.99%.
Un many of its competitors, PenFed doesn’t offer a 10-year repayment plan term. So you won’t be able to directly match the term of the Standard Repayment Plan with PenFed. However, it does offer repayment terms of:
- 5 years
- 8 years
- 12 years
- 15 years
You can also refinance your Parent PLUS Loans into your child’s name using PenFed if your child’s willing to take on the monthly payment. Get up to a $1,000 bonus when you apply using our Splash Financial link and refinancing at least $150,000.
*Rates may change and are determined, in part, by your credit history.
How to refinance Parent PLUS loans
Each of the five refinancing companies listed above have different eligibility requirements. The process on how to apply and refinance your Parent PLUS Loans varies as well. Here are a few general guidelines to follow when refinancing Parent PLUS Loans.
1. Check your interest rate. Look at how your Parent PLUS Loan rate differs from your prospective rate at each student loan refinancing company. Calculate how much you can save in interest to determine if refinancing makes sense.
2. Look at eligibility requirements. Read the fine print and check out the eligibility criteria (such as graduation or minimum credit score requirements) for each private lender.
3. Gather your information. To streamline the application process, gather the information you might need to provide to the lender, including your current loan amount, monthly payment, loan servicer, and income.
4. Apply. Once you’ve checked your rate, know the eligibility requirements, and gathered your information, it’s time to apply! Continue making payments on your Parent PLUS Loans until your refinancing application is approved and finalized.
5. Make payments on your new loan. Once your old student loans are paid off with the refinancing loan, start making payments on your new loan to stay in good standing and keep your credit score in good shape.
What to know before refinancing Parent PLUS Loans
The benefit of refinancing Parent PLUS Loans can be huge, but it also comes at a cost.
Refinancing takes your federal student loans and pays them off, leaving you with a private loan. In other words, you give up federal benefits various Income-Driven Repayment (IDR) plans, loan forgiveness programs, and the option to apply for federal loan consolidation.
Evaluate whether the savings from a lower interest rate are worth giving up those protections. It’s a personal decision that varies by situation.
If you have good credit and job stability, refinancing your Parent PLUS Loan with a private lender might be a good option.
However, if there’s a chance you might need to join an income-driven repayment plan down the road to lower your monthly payment, staying the course might be better.
Need more guidance? Get in touch with us!
Has the Parent PLUS Loan been a good experience for you and your child? Comment below!
Refinance student loans, get a bonus in 2021 $1,000 BONUS1For 100k or more. $200 for 50k to $99,999¹ VISIT EARNEST Variable 1.99% – 5.74% APR1 Fixed 2.98% – 5.89% APR1 $1,250 BONUS2For 250k+, tiered 300 to 500 bonus for 50k to 250k.2 VISIT LAUREL ROAD Variable 1.89% – 5.90% APR2 Fixed 2.80% – 6.00% APR2 $1,275 BONUS3For 150k+. Tiered 300 to 575 bonus for 50k to 149k.3 VISIT ELFI Variable 2.39% – 6.01% APR3 Fixed 2.79% – 5.99% APR3 $1,000 BONUS4For $100k or more. $200 for $50k to $99,9994 VISIT SOFI Variable 2.25% – 6.49% APR4 Fixed 2.99% – 6.94% APR4 $1,050 BONUS5For 100k+. $300 bonus for 50k to 99k.5 VISIT COMMONBOND Variable 1.99% – 6.84% APR5 Fixed 2.83% – 6.74% APR5 $1,250 BONUS6For 100k+ or $350 for 5k to 100k.6 VISIT CREDIBLE Variable 1.89% – 8.90% APR6 Fixed 2.79% – 9.15% APR6 $1,250 BONUS7For 150k+. Tiered 100 to 400 bonus for 25k to 149k.7 VISIT LENDKEY Variable 1.91% – 7.69% APR7 Fixed 2.95% – 8.49% APR7 Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation of whether you should pursue PSLF, IDR forgiveness, or refinancing (including the one lender we think could give you the best rate).
Take Our Quiz
1Earnest: $1,000 for $100K or more, $200 for $50K to $99.999.99. For Earnest, if you refinance $100,000 or more through this site, $500 of the $1,000 cash bonus is provided directly by Student Loan Planner. Rate range above includes optional 0.25% Auto Pay discountEarnest disclosures.
2Laurel Road: If you refinance more than $250,000 through our link and Student Loan Planner receives credit, a $500 cash bonus will be provided directly by Student Loan Planner.
If you are a member of a professional association, Laurel Road might offer you the choice of an interest rate discount or the $300, $500, or $750 cash bonus mentioned above. Offers from Laurel Road cannot be combined. Rate range above includes optional 0.25% Auto Pay discount. Laurel Road disclosures.
3Elfi: If you refinance over $150,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner. Elfi disclosure. 4Sofi: If you refinance $100,000 or more through this site, $500 of the $1,000 cash bonus is provided directly by Student Loan Planner. Rate range above includes optional 0.
25% Auto Pay discount. Sofi disclosures.5Commonbond: If you refinance over $100,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner. Commonbond disclosure.
6Credible: If you refinance over $100,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner. Credible disclosure. 7LendKey: If you refinance over $150,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner. Rate range above includes optional 0.25% Auto Pay discount.
6 Pros and Cons of Refinancing Parent PLUS Loans
As a parent, you want what’s best for your child. That often means a top-notch education, including a bachelor’s degree. However, the cost of college has skyrocketed in recent years, and few families can cover the expense with just their savings. According to a report from the Brookings Institute, 3.4 million borrowers owe over $87 billion in federal Parent PLUS Loans.
Carrying student loan debt as a parent can have significant consequences, affecting everything from your target retirement age to whether or not you can get approved for a mortgage.
If you need some relief, refinancing your parent student loans can make a lot of sense, but it’s not for everyone and you are still subject to credit qualification.
Here’s what you need to consider before refinancing your debt.
get your rate
Read more: How to Refinance Your Parent PLUS Loans
Benefits of Refinancing Parent PLUS Loans
One way to manage your debt is to refinance your Parent PLUS Loans. With this strategy, you take out a loan from a private lender and use it to pay off your current student loans. The new loan has completely different terms than your old ones, which can have many advantages.
If you’re thinking of refinancing your parent student loans, there are several benefits to keep in mind:
1. Refinancing could save you money
If you have good credit and a stable income, you could qualify for a refinancing loan with a much lower interest rate than you have with your current loans.
For example, let’s say you have $30,000 in Parent PLUS Loans at 7.08% interest and 10 years left of repayment. Over the course of your repayment, you’d repay a total of $41,948. Interest charges would cost you nearly $12,000.
But if you refinanced your loans and qualified for a 10-year loan at 3.45% interest, you’d repay a total of just $35,515. You’d save over $6,400 by refinancing your debt.
|Parent PLUS Loans at 7.08% Interest||Refinanced Loans at 3.45% Interest|
|Loan Term||10 years||10 years|
2. You’ll have one easy payment
If you took out multiple parent student loans for your child’s education, you ly have several due dates, minimum payments, and loan servicers to remember. It can be overwhelming, and can cause you to miss payments.
When you refinance your student loans, you can consolidate them all together. Even if you have a mix of federal Parent PLUS Loans and private parent student loans, you can combine them into one loan. Going forward, you could have just one payment to remember, one due date, and one student loan servicer, simplifying your repayment.
3. Refinancing could reduce your monthly payment
If you decide to refinance your loans, you can choose a new repayment term. For example, if you’re currently on a 10-year repayment plan, you may be able to opt for a 20-year repayment term, instead. By doing so, you’ll be able to dramatically reduce your monthly payment.
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Drawbacks to Refinancing Parent Loans
Although student loan refinancing can be a smart way to handle your loans, there are some serious drawbacks to consider before submitting your loan application:
4. You won’t be eligible for alternative payment plans
If you have federal Parent PLUS Loans and can’t afford your payments under a standard 10-year repayment plan, you have three options available to you:
- You can sign up for a Graduated Repayment Plan: With this approach, your payments start out low and increase every two years. You’ll still pay off your debt within 10 years, but you’ll have lower payments early on.
- You can sign up for an Extended Repayment Plan: Under an Extended Repayment Plan, your repayment term is extended to 25 years. You’ll pay more in interest than you would with a 10-year plan, but you could have a much lower payment.
- You can take out a Direct Consolidation Loan: You can consolidate your debt with a Direct Consolidation Loan. When you do so, your loan will be eligible for an income-contingent repayment plan, which extends your repayment term and caps your monthly payment at a percentage of your discretionary income.
Read more: Understanding Parent PLUS Loan Forgiveness Programs
If you decide to refinance your student loans, your loan becomes private instead of federal. Private student loans aren’t eligible for federal benefits, so you’ll lose out on the ability to sign up for an alternative payment plan.
5. You won’t qualify for Public Service Loan Forgiveness
If you have Parent PLUS Loans and work for a qualifying non-profit organization or government agency, you may qualify for Public Service Loan Forgiveness (PSLF). With PSLF, your loan balance is forgiven after you make 120 monthly payments while working for an eligible employer.
However, private loans aren’t eligible for PSLF. If you refinance your Parent PLUS Loans, you’ll no longer qualify for loan forgiveness.
6. You may end up paying more in interest
If you refinance your loans and are able to extend your repayment term, you may end up paying more in interest charges than you would if you kept to your current repayment schedule. However, that tradeoff may be worth it to get more breathing room in your monthly budget.
Tackling Your Debt
If you took out loans to pay for your child’s education, you may feel overwhelmed by your loan balance. Student loan refinancing can provide you with much-needed relief, but make sure you understand both the pros and cons before making a decision.
If you decide that refinancing your loans makes sense for you, you can get a rate estimate from Earnest in just two minutes without impacting your credit score.