Parent PLUS Loans are different than other forms of federal student loans since they’re not eligible for most types of income-driven repayment plans or loan forgiveness programs. They also have the highest interest rate of any federal loan; as of July 2018, the interest rate is 7.6%. With such high interest rates, dealing with these loans can be difficult.
Student loan refinancing is one way to get some much-needed relief, helping you save money or even eliminating the responsibility of repaying the debt altogether.
When to refinance Parent PLUS Loans
With Parent PLUS Loan refinancing, you work with a private lender to take out a new loan for the amount of your current student loans. The new loan will have entirely different loan terms, including interest rate, monthly payment, and length of repayment. Going forward, you’ll have one loan and one easy payment to remember.
Refinancing your Parent PLUS Loans can make a lot of sense, especially in the following three situations.
1. You want to save money overall
Student loan refinancing can be a great way to save money on your Parent PLUS Loans. When you refinance, your new loan will have a different interest rate than your old ones. If you have good credit and a stable income, you might qualify for a much lower rate. That means more of your payments will go toward the principal rather than interest, helping you save money and pay off your student loan debt faster.
The interest savings can be significant. For example, say you had $35,000 in Parent PLUS Loans at 7.6% interest and had 10 years left on your repayment term. With that plan, your monthly payment would be $417. Over the life of the loan, you’d pay a total of $50,074. That means you’d pay over $15,000 just in interest charges.
But if you refinanced, you could reduce how much you pay in interest. If you qualified for a 10-year loan at just 4% interest, you’d repay just $42,523, and your monthly payment would drop by $63 (to $354). Taking just a few minutes to refinance your Parent PLUS Loans would help you save over $7,500.
To find out how much you can save by refinancing your Parent PLUS Loans, check out our student loan refinancing calculator.
2. You want to lower your monthly payment
Alternatively, refinancing can also help you reduce your monthly payment, helping you get more wiggle room in your budget. With a lower interest rate or a longer repayment term, you can cut your payment down to something more manageable.
For example, say you had $35,000 in Parent PLUS Loans at 7.6% interest and had 10 years left in your repayment. Under a standard 10-year repayment plan, your monthly payment would be $417.
But if you refinanced and qualified for a 4% interest rate and opted for a 15-year repayment term, you could drop your payment to just $259. Refinancing would help free up over $150 each month, which is money you can use to pursue your other financial goals.
3. You want your child to take over the loan
As you near retirement age, your Parent PLUS Loans may be too much of a burden for you to bear on your own. As your child graduates and finds a job, they may be in a better financial situation to handle the debt.
Luckily, some lenders allow you to refinance Parent PLUS Loans into your child’s name, removing you from any responsibility for the loan and placing them completely into your child’s care.
By refinancing your Parent PLUS Loans into your child’s name, you can free up more money each month in your budget and lower your debt-to-income ratio, improving your credit score.
What to consider before refinancing your Parent PLUS Loans
While refinancing can help you save money, get you a lower monthly payment, and even remove your obligation to repay the loan, there are some drawbacks to keep in mind.
When you refinance, your federal Parent PLUS Loans will be replaced by a private loan, instead. Private student loans have fewer protections and benefits than federal loans, so you’ll lose out on those perks.
That means you’ll no longer have access to things like the ability to place your loans into deferment or forbearance in the case of financial hardship, so it’s important to weigh the pros and cons before moving forward with your loans.
In the case of refinancing Parent PLUS Loans into your child’s name, you should know that the process is not reversible and cannot be undone. Moving forward, the loans will be completely under your child’s name and the loans will be their responsibility.
How to refinance your Parent PLUS Loans
Not all lenders will work with Parent PLUS Loan borrowers, but there are several that do. If you’re thinking of refinancing your Parent PLUS Loans, you should know that Credible makes the process quick and easy. Just follow these three simple steps:
- Fill out the form. Click on “Find My Rate.” You’ll be prompted to enter your email address and you’ll be asked several questions about your refinancing goals, education, and outstanding loans.
- Compare offers. Once you’ve submitted your information, if eligible, Credible will provide you with a list of prequalified options from several different lenders. You can use Credible’s tools to adjust your repayment options like the term, monthly payment, and choose between a fixed and variable interest rate to find the loan that best suits your needs. You’ll get actual quotes based on your credit score and credit history (without a hard credit check) so you can make an informed decision.
- Provide your loan information. Once you’ve found a refinancing loan that works for you, you just need to import your current Parent PLUS Loan information and provide a few additional details about yourself. You can get a finalized offer within one to two business days.
That’s it! You can finish the refinancing process in just a few minutes. You can quickly and easily refinance your Parent PLUS Loans and be on your way to enjoy savings.
Managing your Parent PLUS Loans
When it comes to handling your Parent PLUS Loans, high debt loans and high interest rates can be overwhelming. Thankfully, refinancing your debt can provide you with relief, helping you save money or even removing the debt from your name.
If you’re struggling to keep up with your loan payments or if you want to pay off your debt ahead of schedule, student loan refinancing can be a smart choice. If you’re ready to refinance your Parent PLUS Loans, compare offers from multiple lenders to get the best rate.
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