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Parent PLUS Loans: The Ins and Outs of Refinancing Yours Today

Parent PLUS Loans: The Ins and Outs of Refinancing Yours Today
Rebecca Safier

Rebecca Safier

Updated June 29, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you borrowed Parent PLUS Loans to help your child pay for school, you might be looking for ways to make that debt more affordable. Refinancing Parent PLUS Loans with a private lender has the potential to lower your interest rate, thereby saving you money over the life of your loan. At the same time, there could be downsides to refinancing Parent PLUS Loans, so it’s important to understand both the pros and cons before you apply. 

Can You Refinance Parent PLUS Loans?

If you meet a lender’s criteria for credit and income, you can refinance your Parent PLUS Loans. When you refinance, you pay off an existing loan with a new loan. That new loan may have a better interest rate than what you currently have if you have stronger credit now compared to when you first took out the loan. Plus, you can choose new repayment terms, perhaps opting for a shorter term to get out of debt faster or a longer term to reduce your monthly bills. If you owe multiple student loans, you can combine them into one through consolidation and refinancing, thereby simplifying repayment. Another option is to have your child refinance the loans in their own name. By transferring your parent PLUS loan to your child through refinancing, you’ll be off the hook for that debt. If your child can't meet a lender’s underwriting requirements, you could help them qualify by cosigning. You’ll still be responsible for the loan, but some lenders offer cosigner release after a certain period of on-time repayment. Either way, you or your child will need to have strong credit to qualify for the lowest student loan refinance rates. 

How to Refinance Parent PLUS Loans in 2022

Here’s how to refinance your student loans with a private lender.. 

1. Locate Your Loan Information

Your first step is to track down all of your loan information. You can find the details of your Parent PLUS Loan by logging into your account on the Federal Student Aid website with your FSA ID.Your account should reveal the details of your loan, including your remaining balance and interest rate. You’ll also see any federal student loans you might have taken out for your own education. If you have other federal loans, you can choose to refinance them along with your Parent PLUS Loan. The same goes for any private student loans you might have. 

2. Compare Multiple Lenders

Once you have all your loan information, you can start shopping for a refinancing lender. Many lenders let you prequalify online, so you can compare offers with no impact on your credit score. By taking time to compare lenders, you can find an offer with the best interest rate. Along with looking for a low interest rate, consider other important features. They include:
  • Interest rate discounts for autopay or on-time payments 
  • Options for repayment terms 
  • Possibility of cosigner release 
  • Deferment or unemployment protection 
  • Minimum and maximum loan amount 
  • Fees, such as an origination or application fee 
  • Credit requirements 
Keep an eye out for any lender benefits that could be helpful, such as the ability to modify payments temporarily if you lose your job. 

3. Apply for Refinancing

Once you’ve found an offer you like, you can go ahead and submit a full application. Unlike prequalifying, applying for refinancing will involve a hard credit inquiry and affect your credit. Many lenders let you fill out an application online. You’ll provide personal and financial details, as well as upload any supporting documentation, such as loan statements or pay stubs. If your child is refinancing the Parent PLUS Loan in their own name, they will need to apply. 

Pros of Refinancing Parent PLUS Loans

There are several compelling benefits to refinance Parent PLUS Loans with a bank, credit union, or online lender. 

Lower Your Interest Rate

One of the biggest benefits of refinancing student loans is lowering your interest rate, should you qualify for it. By reducing your rate, you can potentially save money over the life of your loan. Let’s say, for example, that you owe $30,000 in Parent PLUS Loans at a 6.28% rate. Over 10 years, you’d pay $10,475 in interest. But if you could lower that rate to 4.0% through refinancing, you’d pay just $6,448 in interest over 10 years. 

Simplify Repayment 

You might also decide it’s worth refinancing your student loan if you want to streamline repayment. If you owe multiple loans, it might be confusing to keep track of different payments and due dates. Through refinancing, you can combine several loans into one, so you’ll only have a single monthly payment to deal with. You can refinance both federal and private loans together. Note that refinancing multiple loans at once is not required — you can also refinance a single loan to get a better rate.

Adjust Your Monthly Payment  

When you refinance, you also have the option of choosing new repayment terms, which in turn will adjust your monthly payment. You could choose a shorter term of five years or so, which could help you get out of debt faster. Alternatively, if your payments are burdensome, you often have the option of a longer term of 15 or 20 years. Your monthly payment will be lower, but you will pay more interest charges over the years. Note that lowering your interest rate can also reduce your monthly payments. 

Transfer Ownership of the Loan to Your Child 

Finally, refinancing may allow you to transfer ownership of the Parent PLUS Loan to your child if they can qualify on their own. If your child can meet a lender’s requirements for credit and income, they can refinance the loan in their own name, thereby removing you from responsibility for the debt. The account will be paid off on your credit report, which could boost your credit score and reduce your debt-to-income ratio.

Cons of Refinancing Parent PLUS Loans

While refinancing offers a variety of potential benefits, there are also some possible downsides to keep in mind before you refinance your Parent PLUS Loans. 

Lose Access to Federal Repayment Plans 

When you refinance Parent PLUS Loans, you exchange them for a private student loan. Because you’ll no longer hold a federal student loan, you’ll lose access to federal repayment plans, such as Income-Contingent Repayment, Extended Repayment, and Graduated Repayment. If you’d like to retain access to these plans, it might not be a good idea to refinance. 

Become Ineligible for Federal Loan Forgiveness 

Refinancing Parent PLUS Loans also means forfeiting access to federal forgiveness programs, such as Public Service Loan Forgiveness (PSLF). If you’re interested in pursuing a loan forgiveness program, refinancing probably wouldn’t be the right move. 

Potentially Be Required to Cosign 

While it’s possible to refinance Parent PLUS Loans in your child’s name, your child will need to meet a lender’s underwriting requirements. If they don’t have strong enough credit to qualify on their own, you could help by adding yourself as a cosigner. However, cosigning means you’re still responsible for the loan, so you won’t be free from the debt yet. Some lenders offer cosigner release after a certain period of on-time payments, but getting removed from the loan is not guaranteed. 

 Can You Transfer a Parent PLUS Loan to Your Child?

It is possible to transfer Parent PLUS Loans to your child through refinancing. In this case, your child would need to apply to refinance the loans in their own name. If they qualify, they will be responsible for paying back the new loan. Your Parent PLUS Loan will be marked as paid off in full, and you’ll no longer be responsible for it. If your child can’t qualify on their own, you could help by cosigning the application. Adding a cosigner reassures a lender that the loan will be paid back on time. But cosigners are equally responsible for the loan, so the loan will show up on your credit report and impact your debt-to-income ratio. As mentioned, some lenders will release a cosigner from a loan after a certain period of on-time payments. Cosigner release isn’t automatic, though — you’ll need to apply and be approved. 

The Takeaway

While financial aid can help students pay for school, it doesn’t always go far enough. That’s why many parents step in to help foot the bill. If you took out loans to help pay for your child’s education and are now feeling overwhelmed by the debt, refinancing has the potential to offer relief. Through refinancing, you might qualify for a lower interest rate than you have now. Plus, you can choose new repayment terms that fit your budget.At the same time, refinancing Parent PLUS Loans has some potential downsides, with perhaps the most important being loss of eligibility for federal repayment plans and forgiveness programs. Before you apply, make sure you understand both the pros and cons of student loan refinancingIf you decide to move forward, Lantern by SoFi can help you find and compare student loan refinancing offers.
Photo credit: iStock/Charday Penn
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCSL0322003

Frequently Asked Questions

Do Parent PLUS Loans get forgiven?
Is consolidating Parent PLUS Loans a good idea?
Do Parent PLUS Loans qualify for PSLF?

About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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