To help your child when it came to paying for their college tuition, you took out a Parent PLUS loan in your name which you’re solely responsible for repaying. But the reality is that you can’t transfer the loan to your child, and on top of that, interest rates on PLUS loans are at 7.6%, the highest out of all federal loan options.
If you want to catch a break from high interest rates, you might be considering refinancing. In this guide, we’ll share which lenders allow you to refinance Parent PLUS loans and how to do it.
A look at student loan refinancing
When you refinance your student loan, you work with a private lender to score a refinancing loan at a better interest rate. The new loan would pay off your existing Parent PLUS loan and you’d receive a new, lower interest rate on the new loan. Going this route could mean saving thousands of dollars in interest over the life of the loan and allow you to put more money toward your principal balance.
5 lenders offering Parent PLUS loan refinancing
If you’re looking at refinancing Parent PLUS loans, here are five student loan refinancing companies to check out. Many of them allow you to check your prospective rate before applying.
In our student loan refinancing survey, we found that many borrowers only apply with one refinancing company. To get the best rate, research interest rates from various companies and the pros and cons of their terms.
We would suggest you focus on options 1 and 2, since Commonbond and Laurel Road are the main lenders that allow you to transfer a Parent PLUS loan into the child’s name. Other lenders might only offer the ability to refi Parent PLUS loans with the parent’s name. If you use our referral links, you’ll be eligible for our internet leading cash back bonuses for refinancing if you get a better deal.
1. CommonBond
Another student loan refinancing company to consider is CommonBond. CommonBond allows Parent PLUS borrowers to refinance their student loans and get a better interest rate. In order to qualify, you must meet the same eligibility requirements that are set for students.
For one, your child must have graduated from an eligible Title IV accredited universities or graduate program. Additionally, you must meet certain credit requirements to get approved.
If approved, CommonBond offers variable, fixed and even “hybrid” (a combo of the two) interest rate options. On the low-end, rates start at 2.61%* and cap at 7.35%*.
Fixed and variable options come with repayment terms of:
- 5 years
- 7 years
- 10 years
- 15 years
- 20 years
The hybrid option has a repayment term of 10 years. CommonBond stands out in their refinancing offers for providing borrowers with up to 24 months of forbearance and also has a “social promise” to fund a child’s education in a developing country with every loan that is taken out.
2. Laurel Road
Once your child graduates, you can apply to refinance your Parent PLUS loan through Laurel Road. Laurel Road offers fixed or variable APR as low as 3.24%*. But, your APR could be as high as 7.02%*, so you want to make sure you’re actually saving money given your current rate.
Aside from various APR offerings, there are a few repayment term options to choose from:
- 5 years
- 7 years
- 10 years
- 15 years
- 20 years
Compare Laurel Road’s terms to federal student loan repayment terms, which starts at 10 years on a Standard Repayment plan. A shorter repayment term means getting out of debt faster, but it also means having higher monthly payments, too.
Another option Laurel Road offers allows you to refinance the loan in your child’s name. Of course, you’d need their consent to transfer the loan to their name. If your child is ready and willing to pay back this chunk of student loan debt, they’d still need to meet eligibility and income requirements to qualify.
3. Earnest
Earnest offers Parent PLUS refinancing with variable rates as low as 2.57%* and fixed rates as low as 3.89%*, when you sign up for autopay.
It also offers some unique perks. For example, you can skip a payment and make it up later, adjust your payment date and set up a payment based on your budget. Essentially, you determine what you can afford and based on that amount Earnest offers you a corresponding rate and term.
This makes payments more borrower-friendly and can make the repayment term fluctuate in a way that is advantageous for you.
4. SoFi
SoFi is another leader in the student loan refinancing space and also allows Parent PLUS borrowers to refinance their loans.
You can apply to Sofi via Credible currently and get a large cash back bonus.
You can opt for a variable or fixed APR, with rates as low as 2.47%* and high as 7.50%*. A 0.25% rate discount is applied if you sign-up for autopay. SoFi offers refinancing repayment terms of:
- 5 years
- 7 years
- 10 years
- 15 years
You can also transfer your Parent PLUS loan to your child, with their consent.
5. PenFed
It’s not just refinancing companies that offer Parent PLUS refinancing. PenFed credit union offers Parent PLUS refinancing that’s available through Splash Financial. PenFed offers fixed and variable rates starting as low as 3.14%* up to 7.88%*.
They offer repayment terms of:
- 5 years
- 8 years
- 12 years
- 15 years
You can also refinance your loans into your child’s name using PenFed as well if your child is willing to take on the repayment.
*Rates may change and are determined by your credit.
How to refinance Parent PLUS loans
Each of the five refinancing companies listed above have different eligibility requirements. The process on how to apply and refinance your Parent PLUS loans varies as well. Here’s a general guideline of how to refinance Parent PLUS loans:
1. Check your rate. Look at how your current rate differs from your prospective rate at each student loan refinancing company. Calculate how much you can save in interest to determine if refinancing makes sense.
2. Look at eligibility requirements. Read the fine print and check out the eligibility requirements for each student loan refinancing company.
3. Gather your information. To streamline the application process, gather the information you might need to provide to the lender, including your current loan amount, loan servicer, and income.
4. Apply. Once you’ve checked your rate, know the eligibility requirements, and gathered your information, it’s time to apply! Continue making payments on your student loans until your refinancing application is approved and finalized.
5. Make payments on your new loan. Once your old loans are paid off with the refinancing loan, start making payments on your new loan to stay in good standing and keep your credit in good shape.
What to know before you refinance Parent PLUS loans
The benefit of refinancing a Parent PLUS loan can be a huge, but it also comes at a cost.
Refinancing takes your federal student loans and pays them off, leaving you with a private loan. In other words, you give up federal protection, like the various repayment plans, deferment and forbearance, and the possibility to consolidate and pursue income-contingent repayment.
Evaluate whether the savings from a lower interest rate are worth giving up those protections. It’s a personal decision that varies by situation. If your credit is good and you have job and income stability, refinancing might be a good option. However, if you think there is a chance you would need to postpone or lower your payments, staying the course might be better.
Need more guidance? Get in touch with us!
Has the Parent Plus loan been a good experience for you and your child? Comment below!
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Earnest does not refinance parent plus loans. Speaking from experience.
I think that only applies if you’re trying to refinance the Parent PLUS loan into the name of your child. I think they’ll refinance the parent PLUS loan into the name of the parent. But correct me if I’m wrong