Here’s How You Can Transfer Your Student Loans to Someone Else

There are several unique scenarios that might warrant transferring student loans to another person.

Maybe you took out student loans to finance your child’s education and are now ready to shift those loans to your child. Maybe you’ve hit the jackpot, and someone’s willing to take over your monthly payments as a generous gesture or gift.

Whatever the reason, you might be wondering, “Can I transfer student loans to another person?”

Yes, you can — just not via the U.S. Department of Education. To transfer student loans, you’ll need to find someone willing to refinance with a private lender under their own name.

Here’s what you need to know about transferring student loans to someone else.

Can you transfer student loans to another person?

If the existing loans are with the Department of Education, you can’t transfer the student loans within the federal system. This means you’ll have to transfer the federal loans to a private lender. In doing so, you’ll lose all federal benefits and protections in the process. For example, you won't have access to student loan forgiveness programs (e.g., Public Service Loan Forgiveness, or “PSLF”) and income-driven repayment plans.

Start by exploring private student loan refinancing lenders that allow transferring student loans to someone else’s name.

Each lender has its own eligibility criteria (e.g., good credit history, minimum income, etc.). If the person won’t qualify on their own, you or someone else might need to be added as a cosigner on the new loan.

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Reasons to consider transferring student loans

Why would someone want or need to transfer student loans to someone else? Here are some common scenarios.

• A parent wants to transfer a Parent PLUS loan to the student. This happens frequently when parents are nearing retirement and feel their child can support themselves after graduating.
• A spouse wants to take responsibility for student loans. In some cases, transferring student loans into the other spouse’s name might make sense. For example, the spouse with a higher credit score might have access to a better interest rate. In that case, maybe the other spouse could use the positive payment history from student loan payments to repair their bad credit. Alternatively, maybe one of the spouses needs to unload some of their pre-existing debt to qualify for a small business loan on their own.
• A person wants to move a relative’s student loans into their own name. This might be the case if a family member inherits some money. It might also be an option for a gift if the student has hit a major milestone, like getting married or graduating. It may benefit the person more to transfer the loans into their own name and pay it off rather than draining your bank account to pay for the loan balance. This is because any money that is given to someone directly or indirectly (e.g., making payments directly to the primary borrower’s account) might result in a gift tax. The annual gift tax exclusion for 2021 is $15,000, which means anything over that amount could be taxed.

It doesn’t always make sense to transfer student loans to another person, so it’s important for each party to weigh the pros and cons of refinancing.

Pros and cons of transferring student loans to someone else

Here are some potential advantages and disadvantages to consider when transferring student loans to another person.

Pros

• Access to lower interest rates. Student loan refinance lenders typically offer better interest rates than federal student loans. A lower interest rate might also be the primary factor for transferring student loans to a spouse with a better credit history.
• Ability to transfer legal and financial responsibility. Moving the loans into someone else’s name lets you focus on your own financial goals (e.g., retirement or entrepreneurship).
• Opportunity to build credit. Making regular, on-time payments will have a positive effect on your credit report. This strategy can be used to benefit a child or spouse that needs to repair or build their credit.

Cons

• Lose access to federal benefits. This is the biggest disadvantage to refinancing, so it deserves some serious consideration. Federal student loans have flexible repayment terms and protections in place if the borrower experiences hardship in the future, such as forbearance and deferment options.
• Strict eligibility requirements. Private lenders typically require strong credit scores and minimum income requirements that make it tough for recent graduates to qualify. Even if everyone involved wants to make the transfer, there might be a situation where a cosigner is still required.

How to transfer student loans

Start by having an honest conversation with the person you’re hoping to complete the transfer with. It’s important that you both understand the implications that come with refinancing a loan into someone else’s name. This upfront understanding can save you a huge headache and help preserve your relationship.

Once you’re both on board, follow these general steps to transfer the loans to the other person. Keep in mind that each lender has its own process and application steps.

1. Compare refinancing lenders to find the lowest interest rate. We recommend checking with at least three new lenders to find the best offer. Compare your repayment options for fixed interest rates and variable rates. Consider the lender’s reputation for customer service and explore any perks that might sweeten the deal, like a cash-back refinancing bonus.
2. Submit an online application that includes both parties’ information. Each of you will likely need to provide personal and financial information. It might be easier to fill out the application together.
3. Send in any requested supporting documentation and wait. The existing loan holder will need to continue making payments on the original loans until a final decision is made. Each lender has its own timeline for processing refinancing applications, but you can usually expect the process to take at least several weeks.
4. Sign paperwork. Review all final loan documents and make the transition official.

If your debt was transferred to someone else — say your child — consider helping establish a good student loan repayment plan to set them up for success.

Bankruptcy considerations for transferred student loans

If you’re transferring student loans to another person, they’ll become legally responsible for the loan amount. If their financial situation dramatically declines in the future, they might not have a clear path to wipe away the debt through bankruptcy in a last-ditch effort, like many other types of debt.

Student loans are significantly harder to get discharged in bankruptcy, but it’s not impossible. There have been some examples of legal cases in support of having student loans in bankruptcy proceedings.

But do bankruptcy limitations still apply to people who weren’t actually the student? For example, if a parent (i.e., a non-student) transferred their child’s student loans into their own name, would it still be considered a student loan?

There isn’t a clear answer to this question, considering how complex bankruptcy law is, especially when it comes to student loan discharge.

There might be some gray areas if you took out a personal loan to pay off the student loans. But this is rarely the better option for paying off student loans because personal loans usually have a much higher interest rate. Plus, it can be challenging to find a lender that allows personal loan funds to be used on student loan debt.

But if you’re transferring student loans by refinancing with a private lender, then your loan will likely be treated as a student loan under bankruptcy rules, regardless of whether you were a student.

This means you might not have bankruptcy as an option later down the line. So, make sure you’re confident in your job security and future earnings before taking on someone else’s student debt.

If you understand all implications and are ready to move forward with transferring student loans, check out some of the best student loan refinancing lenders.