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If you took out federal student loans to help your child pay for college, you might want to transfer those Parent PLUS Loans to your student after they graduate. While your child can always help you make payments, there’s no way to transfer Parent PLUS Loans directly into their name.
Even though federal student loans can’t be transferred, there’s another way your child can take over those loans: By refinancing student loans into a private loan that’s in their name — which could even get them a lower interest rate.
Here’s what you should know about transferring Parent PLUS Loans:
- Transfer Parent PLUS Loans to the student by refinancing
- What to consider before transferring Parent PLUS Loans
- Paying back your Parent PLUS Loans
- Parent PLUS Loan alternatives
Transfer Parent PLUS Loans to the student by refinancing
In order to refinance Parent PLUS Loans, your child will need a:
- History of earnings
- Good credit score (typically 670 or higher)
- Good debt-to-income ratio (typically under 50%)
- Bachelor’s degree (not all require this, but most do)
It could take your child a little while after graduating to build the credit history and income needed to qualify for refinancing. But many lenders will let borrowers apply with a cosigner, which could be you, another relative, a spouse, or a friend.
While many lenders offer student loan refinancing, not all of them will refinance Parent PLUS Loans into a child’s name. The table below shows which lenders refinance Parent PLUS Loans, including several who allow children to transfer Parent PLUS Loans into their own name when refinancing.
|Lender||Variable rates from (APR)||Fixed rates from (APR)||Can transfer into child's name?|
Citizens Bank Education Refinance Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of February 1, 2020, the one-month LIBOR rate is 1.66%. Variable interest rates range from 2.24%-8.76% (2.24%-8.76% APR) and will fluctuate over the term of the borrower's loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 3.27%-8.90% (3.27%-8.90% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
What to consider before transferring Parent PLUS Loans
- Your child will be responsible for the loans: Once your child has refinanced your Parent PLUS Loans into their own name, it’s their responsibility to repay them. Because they’ve converted your federal loan into a private loan, they won’t have access to federal benefits like income-driven repayment with the potential to qualify for loan forgiveness after 10, 20, or 25 years of payments.
- You might qualify for Public Service Loan Forgiveness (PSLF): If you work for the government or a qualified nonprofit, you could qualify for PSLF after 10 years of payments. If you think you might qualify for Public Service Loan Forgiveness, use the Department of Education’s repayment estimator to see what your monthly payment and total repayment costs would be before transferring your PLUS loans to your children.
Paying back your Parent PLUS Loans
When paying back PLUS Loans, there are a couple of things to remember, especially if you’re having trouble making payments:
- You can request a deferment: If your child isn’t ready to refinance and you’re having trouble making the monthly payments, you can request to defer payments while your child is in school. Then, you can choose a repayment plan that minimizes your monthly payments until your child is ready to take over your PLUS loans. Just remember that when you postpone or reduce your monthly payments, you’re typically extending your loan term, which means you’re likely to pay more in interest.
- You can be eligible for ICR: Parent PLUS Loans aren’t eligible for most income-driven repayment plans, but you can combine them in a federal Direct Consolidation Loan and then repay the new consolidation loan under an Income Contingent Repayment (ICR) plan.
Parent PLUS Loan alternatives
Rates on federal Parent PLUS Loans are so high that many families opt for parent student loans from private lenders instead. Credible makes it easy to compare private student loan rates, so you can find the right loan for you (plus, it doesn’t affect your credit).
If you’re still trying to decide, here’s what you need to know when it comes to Parent PLUS Loans vs. Private Student Loans.