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While the Parent PLUS loan can be a useful way to help your child pay for college, it can be tough to pay back with its relatively high interest rate of 7.08%. If you’re looking to save money on your debt, it could make sense to refinance your Parent PLUS loan to a better rate. But Parent PLUS loan refinance comes with pros and cons, and it’s important to learn about them before you apply. If you’re wondering how to refinance Parent PLUS loans, read on for everything you need to know.
- Can you refinance Parent PLUS loans?
- Pros of Parent PLUS loan refinance
- Cons of refinancing Parent PLUS student loans
- How to refinance Parent PLUS loans: Best lenders
- Parent PLUS loan refinance: Final thoughts
Can you refinance Parent PLUS loans?
Yes. Just as with any other student loan, you can refinance Parent PLUS loans. Refinancing essentially means you give your loan to a private lender, who then issues a new loan in its place.
If you can meet requirements for credit and income, your new loan could have a better interest rate and more advantageous terms than your previous one. Lenders that offer student loan refinancing include banks, credit unions, and online lenders.
Student Loan Gal’s recommended lenders, such as Credible and CommonBond, offer rates as low as 1.76%, which is a lot lower than the 7.08% currently attached to Parent PLUS loans (your rate might be slightly higher or lower depending on when you borrowed).
If you’re able to lower your rate that much, you could save hundreds or even thousands of dollars on your Parent PLUS loan.
Pros of Parent PLUS loan refinance
Let’s take a closer look at the benefits of refinancing Parent PLUS loans. Here are the top three:
Save money with a lower interest rate
The best perk of refinancing is snagging a lower interest rate. Even a small reduction in your rate can save you a lot of money over the life of your loan.
Let’s say, for example, you have a $30,000 Parent PLUS loan at a 7.08% rate. Over 10 years, you’d pay $11,948 in total interest costs.
But if you’re able to lower that rate to 3.5%? You’ll pay just $5,599 in interest over 10 years, resulting in a savings of $6,349!
As you can see, refinancing Parent PLUS loans to a lower rate could save you a lot of money on your debt.
Change payments and loan terms
Lowering your interest rate could result in lower payments from month to month. Plus, you get to choose new repayment terms, which will also adjust your monthly payments.
Let’s say you can afford to pay more each month and want to get out of debt sooner. You could choose a relatively short repayment term of five years or so.
On the flip side, maybe your Parent PLUS loan payments are breaking the bank and you need to reduce your bills. In this case, you could choose a longer repayment term of 10, 15, or 20 years.
Just be careful about adding too many years to your debt if you don’t need to, as more time in debt equals higher interest costs over the years.
Potentially transfer to student’s name
If you’re ready to say goodbye to your parent loan, you could potentially refinance the Parent PLUS loan in the student’s name.
To refinance Parent PLUS loans to the student, the student would need to apply themselves. This means that the student would need to meet a lender’s requirements for credit and income on their own.
If your student is ready to take on the debt, refinancing could be the way to transfer it from you to your child.
Cons of refinancing Parent PLUS student loans
Although Parent PLUS loan refinance has the potential to save you money, it could also come with some potential downsides.
Could be hard to qualify
For one, it could be hard to qualify for refinancing. Unlike the federal government, private lenders check your credit and income before approving you for a loan.
They want reassurance that you’ll be able to pay the loan back, and they look at your credit and income to get it. Although few advertise a specific cutoff, most want to see a credit score of 650 or higher.
If you can’t qualify now, you’ll need to take steps to build your credit (or apply with a creditworthy cosigner).
Lose federal repayment plans
Another potential disadvantage of Parent PLUS loan refinance is the loss of federal repayment plans and protections. Since you refinance with a private lender, you basically turn your federal loan private.
As a result, your new loan is not eligible for federal repayment plans, such as Income-Contingent Repayment, or other programs, such as federal forbearance or deferment.
Most private lenders aren’t so flexible if you need to change your repayment terms, though some do let you pause payments temporarily if you lose your job or experience financial hardship.
But if you want to retain access to federal programs, refinancing with a private lender probably isn’t the right move.
Make loan ineligible for federal forgiveness
Since refinancing your federal parent loan turns it private, it will also become ineligible for federal forgiveness programs, such as Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness.
If you’re working towards a federal student loan forgiveness program, it wouldn’t be a good idea to refinance your Parent PLUS loan.
That said, there are some student loan repayment assistance programs that help you pay off both federal and private student loans. But private loans are not eligible for federal forgiveness programs like PSLF.
How to refinance Parent PLUS loans: Best lenders
If you’ve decided that refinancing your parent PLUS loan is the right move, you can start by checking your rates with some refinancing lenders. The best ones let you pre-qualify online with no impact on your credit. These include,
To pre-qualify, you’ll provide a few pieces of information, such as your name and total loan amount. Then, the lender will run a soft credit check and show you your refinancing offers.
If you see one you like, you can go ahead and submit a full application and consent to a hard credit inquiry. For this application, you’ll need to provide documentation of your loan and income.
The entire refinancing process often only takes a few weeks from start to finish. Once your refinanced loan is ready, your Parent PLUS loan will show a balance of $0 and you’ll begin paying back your new loan to your new lender.
Parent PLUS loan refinance: Final thoughts
Choosing to refinance a Parent PLUS loan is a big decision, so make sure to weigh the pros and cons before you make changes to your debt.
If you don’t have a problem turning your federal loan private, it could be a savvy move that results in major savings. Plus, it could be the strategy you’re looking for to transfer your Parent PLUS loan to the student.
Whatever you choose, keep learning about your choices for student loan repayment. By educating yourself on your options, you can make the best decision for your financial situation.
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 |