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How to Refinance Parent PLUS Loans

It seemed like a good idea at the time. You wanted to help your kid go to college, but now you’re overwhelmed with budget-sucking Parent PLUS loans. Maybe you thought you’d have them paid off by now, but they just keep hanging around, like that dinner guest who just won’t leave.

You’re not alone. Around 3.4 million parents across America owe around $87 billion in Parent PLUS loans.1 And a growing percentage of parents owe more than $100,000.2 So, where exactly is the PLUS side again?

Now’s the time to do something about it! Don’t settle for high interest rates and a long payoff term.

Refinancing your Parent PLUS student loans is possible. It can save you money and speed up your payoff plans, bringing you closer to the day you can declare, No more student loans!

Here’s everything you need to know about how to refinance your Parent PLUS loan.

How to Refinance a Parent PLUS Loan

A Parent PLUS loan is money a parent borrows from the federal government for a child’s college education. (Learn more about how these types of loans work.) These loans are all part of the myth that you need to take on back-breaking levels of debt just to get an education. But this is a lie! Anyone can get a debt-free degree.

When it comes to refinancing your Parent PLUS loan, there are basically two options: 1) keep it in your name or 2) transfer it to your child.

Option 1 is just like any other refi. The benefits are:

  • A lower interest rate. Because Parent PLUS rates can climb to 7 or 8%, a lower rate gives some relief and allows for faster progress on the overall loan.
  • A more manageable budget. Combining multiple loans can make budgeting easier and give you more time and energy to focus on actually paying them off.

Refinancing does come with some warnings. Here are some other things to be aware of:

  • Not all lenders refinance Parent PLUS loans. Make sure to pick the right lender.
  • You may not qualify for a few reasons, just like when you apply for any line of credit. Things like credit scores and income will affect if you’re able to refi. Find out if you qualify.
  • You’ll lose access to government programs like income-based repayment plans or loan forgiveness since refinancing takes your loans from federal to private. But don’t be fooled. These programs aren’t all they’re cracked up to be. They usually just slow your progress down (by extending the loan payoff) or give you a false sense of hope. In fact, as of September 2020, out of 179,371 borrowers who submitted applications for student loan forgiveness, only 1.9% were actually forgiven.3 Remember, you’re looking for the quickest path to debt freedom. These programs usually don’t get you there.

If you do qualify for a refi, and you’re not concerned about the federal program “benefits,” you should definitely consider refinancing your loan, but only if you can find one that checks all our boxes:

  1. It should be completely free to refinance. Why buy something you could get without paying a dime?
  2. Only go with a fixed rate. Do not give your lender the power to pull your rate way up at some random future date.
  3. Go for a shorter loan repayment term than you currently have. We are trying to speed this process up!
  4. Get yourself a lower interest rate. The less interest you can pay the better!

Can I Transfer a Parent PLUS Loan to My Child?

While the government doesn’t allow you to simply transfer a Parent PLUS loan to your son or daughter, it can still be done through a private lender, if your kid qualifies. They’ll need a strong credit score, a history of on-time loan payments and solid income. If you go this route, they should apply for their own refinanced loan and include your Parent PLUS loan in the application.

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The question is, should you? In most cases, we do not recommend transferring a loan to your child. Remember, this is your loan. Even though it was to help them with college, your child doesn’t have a moral obligation to pay it. However, if you and your child agreed beforehand that they would eventually pay it back, go ahead and transfer it. Otherwise, it’s better to just tackle the debt yourself. Don’t burden your child with a loan you took out, no matter what it was originally for.

Some families also choose to work together to pay them off faster. In this case, there’s no need to officially transfer it.

Refinancing May Be Right for You

Parent PLUS loans get real complicated real fast. That’s why it’s always better to avoid them in the first place.

But don’t worry. You still have options that will help you get closer to student loan freedom. It is possible to refinance your Parent PLUS loans. You’ll save money in interest, pay it off faster, and simplify your life.

Guide to Getting Rid of Your Student Loans

Having trouble keeping up with your student loans? Learn how to budget for your monthly payment and pay off your loans once and for all with this helpful guide.

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Ramsey Solutions

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Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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