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Hey, moms and dads! Even though you borrowed a Parent PLUS loan to help your child pay for school, you might not have been planning to pay off the whole loan yourself — especially if your child has graduated and started earning an income. If you’re looking to transfer responsibility for the loan, you can refinance the Parent PLUS loan in the student’s name with certain lenders. Here’s how to refinance Parent PLUS loans to the student to transfer ownership of the debt from you to your child.
- How to refinance Parent PLUS loans in the student’s name
- Requirements to refinance Parent PLUS loans
- Pros of refinancing Parent PLUS loans to the student
- Cons of choosing to refinance Parent PLUS loans
- Best Parent PLUS loan refinance companies
Parent PLUS loans are federal student loans provided by the Education Department for parents who want to help their child pay for college. Parents can borrow up to the cost of attendance of their kid’s school, minus any other financial aid the student has already received.
Since there are virtually no limits to Parent PLUS loans — and they come with relatively high interest rates of 7.08% and an origination fee of 4.236% (or higher depending on when you borrowed) — they can be tough to pay back.
Plus, all that debt sitting on your credit report can hike up your debt-to-income (DTI) ratio, making it harder to qualify for loans, such as a mortgage. Fortunately, it is possible to wipe your hands clean of the debt completely — by refinancing your Parent PLUS loan in the student’s name.
Basically, your child can apply to refinance student loans with a private lender, such as a bank, credit union or online lender, such as SoFi or Laurel Road. You can include the Parent PLUS loan in the application, noting that it’s currently in your name but you want to transfer it to your child.
If the student qualifies, they’ll be solely responsible for paying back the new refinanced student loan. Your Parent PLUS loan balance will go down to zero, and you’ll no longer have that student loan inflating your DTI on your credit report.
Although the best Parent PLUS loan refinance companies let you refinance your loan in the student’s name, they might have some lofty criteria your child has to meet first. Before transferring ownership of the debt, refinancing companies want to see that your child has the means to pay the loan back on their own.
In particular, banks want to see a strong credit score — typically 650 or higher — and a steady income that’s high enough to manage repayment of the loan. If your child has good credit and a high income, they could qualify to refinance your parent loan in their own name.
If not, they might have to take steps to build their credit before they can qualify on their own. Another workaround is to have you act as a cosigner on the loan, but this wouldn’t remove the loan from your credit report.
By cosigning, you’d still be responsible for repayment in the event your child can’t pay. So while cosigning could make the student the primary borrower, it wouldn’t remove you from the debt completely.
So, what are some benefits of refinancing Parent PLUS loans to the student? Here are some potential perks:
- Remove yourself from responsibility for the loan. Your child will become solely responsible for paying it back.
- Close the account on your credit report, thereby decreasing your debt-to-income ratio.
- Potentially get a lower interest rate on the loan, resulting in savings of hundreds or even thousands of dollars.
- Give your child the option to combine multiple student loans into one to simplify repayment.
- Restructure the debt with new repayment terms and an adjusted monthly payment.
- Earn a welcome bonus of up to $200 when your child qualifies for refinancing (some of the best Parent PLUS refinance companies offer this incentive. Check out our recommendations here).
Before applying to refinance your Parent PLUS loan in your child’s name, consider some of these potential downsides:
- Your child might not qualify on their own. Even the best Parent PLUS refinance companies have eligibility requirements for credit and income.
- You could lose certain borrower protections. Refinancing a federal parent loan turns it private, meaning you’ll no longer have access to federal programs. For example, you’ll no longer be able to apply for Income-Contingent Repayment or Public Service Loan Forgiveness. Learn more about what it means to turn federal student loans private in this guide.
- Your child might struggle to pay back the debt. If your child isn’t ready to assume responsibility for the loan, it might be better to wait until they can keep up with payments.
If you’ve decided that refinancing Parent PLUS loans makes sense for you and your family, you can start the process by having your child check their rates with a refinancing provider.
Here are the best Parent PLUS loan refinance companies, all of which make it easy to “pre-qualify” with an instant online rate quote that won’t impact your credit.
For more details on rates and terms, head to the complete list here.
If you want a deeper dive into the pros and cons of refinancing student loans, head to this guide for all the details.
And if you want a preview of what the process will look like, head here to learn about how to refinance student loans, step by step.
Want better rates? Here are the best banks to refinance student loans:
|Variable rates start at...||Fixed rates start at...||Repayment terms||Welcome bonus||Check your rates|
|4.54%||4.49%||5 - 20 years||$200||Visit LendKey|
|4.99%||4.47%||5 - 20 years||$200||Visit Earnest|
|4.22%||3.97%||5, 7, 10, 15, and 20 years||$120||Visit Laurel Road|
|4.53%||4.40%||5 - 20 years||$100 or $200, depending on the amount you refinance||Visit Credible|
|5.09%||4.74%||5, 7, 10, 15, and 20 years||$100||Visit SoFi|
|4.53%||4.83%||5, 7, 10, 15, and 20 years||$100||Visit ELFI|