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Paying for higher education can be a challenge for students, but parents can help in a few ways. One option 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. 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 over time. If you have a parent PLUS loan and you’re looking for ways to make your payments more manageable, refinancing may help.
Best lenders for refinancing a parent PLUS loan
The lenders below are selected based on 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 3.99 percent to 9.99 percent for a fixed APR or 6.24 percent to 9.99 percent for a variable APR.
- 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 required: Borrowers aren’t required to pay application fees, origination fees or late fees.
- Membership discounts: Borrowers who have a personal loan, checking account or other financial product with SoFi may qualify for a 0.125 percent discount on their refinance loan.
- 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 for parent PLUS refinancing range from 5.28 to 8.49 percent, while fixed rates range from 5.48 to 8.54 percent. When you apply, ELFI will pair you with a student loan advisor who can walk you through the application process and answer any questions along the way.
- Strong customer service: Borrowers are assigned a student loan advisor to answer questions.
- No upfront fees: Borrowers won’t pay application fees or origination fees.
- 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 $10,000, 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 several repayment options and have access to generous forbearance programs if they hit financial trouble while in repayment. Variable rates range from 5.99 percent APR to 9.74 percent APR with autopay, while fixed rates range from 5.19 percent APR to 9.74 percent APR with autopay.
- Low minimum loan amount: You can refinance as little as $5,000.
- Flexible repayment: The lender has repayment terms from five to 20 years, so you can choose the plan that works best for your budget.
- Forbearance programs: Borrowers with financial difficulties can choose to skip a payment once a year or access Earnest’s other forbearance options.
- You can’t transfer the loan to your child: Parents must refinance their parent PLUS loan in their own name.
- High minimum credit score requirement: Applicants must have a minimum credit score of 700 to qualify for a refinance loan.
- Must be in good financial standing: To qualify, all student loans must be in good standing, borrowers must be current on their rent or mortgage payments and borrowers can’t have a bankruptcy or an account recently in collections.
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.
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 Public Service 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.
The bottom line
A Parent PLUS loan is one tool that parents can utilize to help pay for the cost of their child’s education costs. If the repayment terms are no longer working for you, it is possible to refinance or consolidate the loan. Shop around different lenders to determine which option is best for you, and consider a Direct Consolidation Loan if you would like to extend your repayment schedule and protect your child from having the debt transferred to them.