How to Refinance Parent PLUS Loans
It’s not uncommon for parents to take out Parent PLUS Loans to help pay for their child’s education. When it comes time to repay these loans, refinancing or consolidation may make the most sense. As loan forgiveness is not as likely as many hope it to be, it is vital to have a plan for repayment. You may be able to lower your interest rate, make your monthly payment more affordable, or transfer responsibility for the loan to your child if their credit score meets the lenders requirements.
These are all great reasons to refinance. Here are the details you need to know.
Can You Refinance Parent PLUS Loans?
Yes. Loan borrowers have the option of refinancing Parent PLUS Loans with a private lender. While you may consolidate Parent PLUS Loans with a Federal Direct Consolidation Loan, refinancing is the only way to lower your interest rate or transfer a Parent PLUS Loan to the student. This option comes with a variety of pros and cons that you will want to explore before you make a decision.
Best Companies for Parent Student Loan Refinance
SoFi Student Loans
- Rates as low as 3.24% variable and 3.99% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 3.24% APR to 8.24% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
You Put in the Work. Now Reap the Rewards.
- Variable Rates between 5.31% - 11.97% APR1
- Fixed Rates between 4.49% - 9.44% APR1
- No application or prepayment fees
- Cosigner release with 24 consecutive on-time payments2
1Interest Rates
Fixed interest rates range from 4.49% APR (with auto debit discount) to 9.44% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. The fixed interest rate will remain the same for the life of the loan.
Variable interest rates range from 5.31% APR (with auto debit discount) to 11.97% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. Variable rates may increase after consummation. Variable rates for Nelnet Bank Refinance Loans are calculated as the One-Month SOFR plus the applicable Margin percentage. Variable rates will be based on the highest One-Month SOFR as published by the Federal Reserve Bank of New York and/or the Wall Street Journal “Money Rates” table on the twenty-fifth day (or the next business day) of the immediately preceding calendar month. The variable rate may change on the first day of each month if the SOFR index changes. This may result in higher monthly payments. The current One-Month SOFR index is 3.04% as of October 1, 2022.
Auto Debit Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.
The lowest rate for each loan type requires automatically withdrawn (“auto debit”) payment. The lowest rate is available only to the most creditworthy applicants. Not all borrowers will receive the lowest rate. The interest rate and Annual Percentage Rate (APR) may be higher depending upon (1) the credit history of the borrower and, if applicable, the cosigner, (2) the repayment option and loan term selected, (3) the loan type selected, and (4) the highest level of education attained. If approved, applicants will be notified of the rate qualified for within the stated range.
2Cosigner Release. A request for the cosigner to be released can be made by either the borrower or cosigner when each of the following conditions has been met:
- The account must have been in full principal and interest repayment for at least 24 months.
- Twenty-four consecutive, on-time principal and interest payments, or lump sum equivalent, must have been made. NOTE: A lump sum payment does not replace the requirement to have been in full principal and interest repayment for at least 24 months. Interest-only or fixed-pay payments while enrolled in school do not qualify towards the 24 consecutive on-time payments.
- The loan must be current at the time of request.
- The loan must not have been in deferment, hardship forbearance, or other alternative payment assistance plan within the past 24 months.
- The loan must not have been permanently modified from its original terms in the credit agreement.
- The primary borrower must be a U.S. citizen or have permanent residency in the United States.
- The primary borrower must meet the age of majority requirement in their permanent state of residency.
Requirements are subject to change. If all of these conditions have been met, then an application for cosigner release may be submitted. The primary borrower is required to demonstrate they have the ability to assume sole responsibility for the loan(s) by providing proof of income, meeting debt-to-income requirements, and having a satisfactory credit history. (A credit report will be obtained during the review process).
3Refinance Loan Eligibility: You must be a U.S. citizen or permanent resident alien with a valid U.S. Social Security number, and be the legal age to enter into binding contracts in your state/territory of residency, or be at least 17 years of age and apply with a cosigner who is at least the age of majority in their state/territory. Non-residents can apply with an eligible cosigner who is a U.S. citizen or permanent resident alien with a valid U.S. Social Security number. The student loans you refinance must be in their grace or repayment period, and you can no longer be enrolled in school on a half-time or more basis. You must have at least $5,000 in student loans to refinance. You, or your eligible cosigner, must have an annual income of at least $36,000. Approval subject to credit review. Other credit criteria may apply.
Refinance Loan Limits:
Minimum loan amount: $5,000
Maximum student loan limits:
$125,000 for borrowers with an undergraduate degree.
$175,000 for borrowers with a graduate, MBA, or law degree.
$500,000 for borrowers with a graduate health professional degree.
Nelnet Bank, and any associated logos or design marks, are trademarks or service marks of Nelnet, Inc. All loan programs and terms are subject to change or may be discontinued at any time without notice. Certain restrictions and limitations may apply.
How to Refinance a Parent PLUS Loan
- Locate Loan Information
The first thing you will need to do if you want to refinance is locate all of your relevant loan information. To locate your loan servicer, log in to your student aid account with your FSA ID. There you will be able to view all of your government student loans, including Parent PLUS Loans and any federal student loans you may have for yourself.
Note: If you have your own federal student loans as well as Parent PLUS Loans, you may choose to refinance these federal loans together into one new loan.
Note: If you have private parent student loans as well as Parent PLUS Loans, you may choose to refinance those loans together into one new loan.
- Compare Lenders
Once you’ve gathered the contact information and balances for your existing loans you will want to compare lenders to find the right fit for you. Compare features such as:
- Interest rates
- Interest rate reduction for enrolling in auto-pay
- Repayment term options
- Cosigner release
- Maximum loan amount
- Minimum credit score (typically a soft credit pull)
- Deferment options
- Fees (if any), such as application or loan origination fees
- Apply
Once you’ve chosen a lender it’s time to apply as a loan borrower. Most lenders offer an easy online application to get you started. If you are transferring a Parent PLUS Loan to your child, your child will need to apply for the refinance loan.
Should You Refinance Parent PLUS Loans
Whether or not you should refinance Parent PLUS Loans depends on what you want to achieve. If you’re looking to lower your interest rate or transfer the loan to your child, you will only be able to achieve this through refinancing your Parent PLUS loan with a private student loan refinance lender.
It's important to note, when you refinance federal Parent PLUS loans, you will lose any benefits that come with the federal student loan program, such as federal repayment plans, as well as deferment and forbearance. If you are not eligible to take advantage of these programs nothing much is lost and federal loan refinancing with a private lender may be the right move.
How to Transfer a Parent PLUS Loan to Your Child
In order to transfer a Parent PLUS Loan to your child, your child will need to apply for the loan. This will require them to have a minimum credit score of 660 as well as stable employment. A soft credit pull will be made to check the child's credit score, and if the credit score is above the lenders minimum requirements, the loan transfer will likely be approved.
If your child needs a cosigner to refinance the loans into their name, look for a lender that offers cosigner release. This allows the cosigner to be released from responsibility for the loan after a series of consecutive on-time payments (typically 24 to 48 months), as well as meeting other requirements the lender—make sure to read those terms and conditions!
Your child should compare lenders and follow the application process outlined above.
Best Companies for Transferring a PLUS Loan to a Child
SoFi Student Loans
- Rates as low as 3.24% variable and 3.99% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 3.24% APR to 8.24% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
Variable: 1.74% APR - 7.99% APR
Fixed: 2.73% APR - 7.99% APR
5 to 20 years
Purefy Student Loan Refinancing
- Rates as low as 1.74% APR variable and 2.73% APR fixed.
- Check your rate in 2 minutes with no impact on credit.
- We search our network of top-rated lenders to ensure you get the best deal.
- Options available if you experience financial hardship.
- No origination fees or prepayment penalties.
Purefy Student Loan Refinancing Rate and Terms Disclosure: Annual Percentage Rates (APR) ranges and examples are based on information provided to Purefy by lenders participating in Purefy’s rate comparison platform. For student loan refinancing, the participating lenders offer fixed rates ranging from 2.73% – 7.99% APR, and variable rates ranging from 1.74% – 7.99% APR. The maximum variable rate is 25.00%. Your interest rate will be based on the lender’s requirements. In most cases, lenders determine the interest rates based on your credit score, degree type and other credit and financial criteria. Only borrowers with excellent credit and meeting other lender criteria will qualify for the lowest rate available. Rates and terms are subject to change at any time without notice. Terms and conditions apply.
When to Refinance Parent PLUS Loans
The best time to refinance Parent PLUS Loans is when interest rates are low. Current refinance rates start as low as 1.74%, making it a great time to refinance Parent PLUS loans.
If you’re looking to refinance Parent PLUS Loans into the student’s name, you will want to wait until the student has secured stable employment and has a credit score of at least 660 (however, some lenders may require a higher credit score). If their credit score is lower than 660, the best option typically is for them to build their credit score up over time and then refinance the loan later.
Pros and Cons of Refinancing Parent PLUS Loans
As with most things, refinancing Parent PLUS Loans has its pros and cons. Let’s look at the benefits of Parent PLUS loan refinancing you will want to consider before taking action.
Pros of Refinancing Parent PLUS Loans
Reduce your number of monthly payments
Refinancing student loans, including Parent PLUS Loans, allows you to roll multiple loans into one new loan, reducing the number of payments you need to make each month. You do not have to have multiple student loans or Parent PLUS loans to refinance. You may refinance a singular loan as well.
Transfer loan to child
Refinancing a Parent PLUS Loan is the only way to transfer the loan to your child. If this is your goal you will want to pursue private loan refinancing.
Lower your interest rate
If your main goal is to lower your interest rate Parent PLUS loan refinancing may be right for you. Refinancing your existing Parent PLUS Loans with a private student lender is the only way to pursue a lower your interest rate. Your lender will determine your interest rate based on your credit.
Lower your monthly payment amount
When you refinance your Parent PLUS Loans, you can select your new repayment term. If you’re looking to lower your monthly payment amount, you may choose to extend your repayment term out longer to make each monthly payment lower.
No origination fees
Many private student loan refinance lenders do not charge origination fees for disbursement of the loan.
Cons of Refinancing Parent PLUS Loans
Now it’s time to look at some of the drawbacks of refinancing Parent PLUS Loans with a private lender. Note that the cons to refinancing Parent PLUS Loans are primarily related to taking your loans out of the federal program.
Lose eligibility for federal repayment options
When you refinance student loans with a private lender you will lose eligibility for the federal repayment programs, such as, income-contingent repayment.
Lose eligibility for federal deferment and forbearance
Perhaps the most important federal loan benefits you need to weigh losing are the generous periods of deferment and forbearance offered with federal loans. Some private loan lenders may offer some sort of hardship forbearance, but these periods aren’t as lengthy as those offered by the federal program and are not a feature of all lenders.
Parent PLUS Loan Consolidation
An alternative to refinancing your parent PLUS loans with a private lender is to consolidate them through the federal Direct Consolidation Loan program. This is the federal student loan (which includes Parent PLUS loans) consolidation program, and is only available for federally held loans, meaning if you want to combine federal and private student loans together, you would not be able to do so with a Direct Consolidation Loan. You do not have to include all of your federal student loans in your consolidation loan if you don't want to. If the consolidation process becomes too complicated to undertake alone, you can always look into talking with a student loan advisor as well.
Let’s look at the pros and cons of Direct Consolidation Loans.
Pros of Parent PLUS Loan Consolidation with a Direct Consolidation Loan
Combine multiple loans into one
If you have several federal student loans with different loan servicers consolidating your loans will simplify your payments by combining multiple loans into one with a singular loan servicer.
Parent PLUS Loan may become eligible for Public Service Loan Forgiveness
When you consolidate your loans through the federal program your Parent PLUS loan may be eligible for Public Service Loan Forgiveness (PSLF). You would need to repay the Direct Consolidation Loan under an income-contingent repayment plan and meet all other eligibility criteria for Public Service Loan Forgiveness.
Retain deferment and forbearance
The federal student loan program comes with generous periods of deferment and forbearance to help borrowers who have encountered hardship or inability to pay.
Loans will be discharged if you or your child dies
With the federal student loan program if you or the child you borrowed the loan for passes away, loan forgiveness also applies.
Adjust your repayment term
When you consolidate Parent PLUS Loans, you may choose a new repayment term (up to 30 years). This will lower your monthly payments by extending the amount of time you have to repay the loan. You will continue to be charged interest over the life of the loan, meaning if you extend your repayment term, your parent or student loan debt will cost you more over time.
Cons of a Parent PLUS Loan Consolidation with a Direct Consolidation Loan
Cannot get a lower interest rate
When you consolidate Parent PLUS Loans with a Direct Consolidation Loan, your new interest rate will be the weighted average interest rate of your existing loans. Essentially, this means that your interest rate will not really change but will be an average of your existing interest rates, weighted by loan balance. Learn how the weighted average interest rate is calculated.
Cannot transfer loans to your child
When you consolidate your loans with a Direct Consolidation loan you have no opportunity to transfer the loan to your child. The loan remains in your name for the life of the loan or until you transfer the loan to your child with a private loan refinance.
Loss of repayment benefits
If you have been paying your loans under an income-driven repayment plan, you will lose any credit for payments made toward these programs.
Could student loan refinancing save you money?
Absolutely.
