In the past few years, student loan refinancing has become common among Americans looking to save money or consolidate their debt.
It’s a method that allows consumers to refinance one or more student loans with a new lender at lower interest rates and terms.
But what if you have Parent PLUS loans? Can they be refinanced as well?
What is a Parent PLUS Loan?
A Parent PLUS Loan is a federal student loan for parents of dependent undergraduate students to help pay for the cost of college.
Parents must be creditworthy, meaning they have a good history of paying their bills on time and avoiding delinquency or default. They also need to be the primary borrower—if you’re married, your spouse can’t take out this loan in their name.
According to the Student Aid Report, parents make up about 35% of all PLUS Loan borrowers, so there’s quite a bit of information about how it works and what options you have if you want to refinance your Parent PLUS loans.
SoFi advisors say, “You could save a lot and pay off your Parent PLUS loans at the earliest.”
How Much Can Parents Borrow?
Parents can borrow up to the cost of attendance minus any other financial aid. The amount you borrow will be based on your child’s needs.
If you’re married, both your Parent’s income and assets are considered when determining eligibility for a PLUS loan.
Suppose your child has received a full-ride scholarship or is attending an expensive private college or university.
In that case, it may be unlikely that the government will approve another loan on their behalf. In this case, there is no harm in applying and seeing what happens but expect little success.
Parent PLUS borrowers can apply for repayment plans.
For Parent PLUS borrowers struggling to pay their loans, it may be time to consider refinancing.
Refinancing your Parent PLUS loan allows you to consolidate all of your student loans into one lower monthly payment.
This can help reduce the stress of paying back multiple loans and give you more flexibility to pay down the debt faster than before.
In addition to a lower monthly payment, refinancing also gives parents access to repayment plans and options previously unavailable with their original loans.
These include:
* Repayment plans like Income-Based Repayment (IBR) or Pay As You Earn (PAYE) cap payments at 10% – 20% of discretionary income while forgiving remaining balances after 20-25 years.
* Loan rehabilitation allows parents whose federal student loans are in default or delinquent on payments for more than 270 days due (or 120 days for Perkins Loans).
* Consolidation with federal consolidation benefits such as reduced interest rates, no fees on new balance transfers within six months from the account opening date and forgiveness after 25 years.
Parent PLUS loans can be refinanced for lower interest rates, which may make payments more affordable
If you have a Parent PLUS loan, refinancing can help you lower your interest rate and make payments more affordable.
Refinancing can also provide other benefits, such as a longer repayment period and a better repayment plan. It’s important to weigh the pros and cons of refinancing before making any decisions.
If you’re a Parent PLUS loan borrower, refinancing may help you get your payments down to a manageable level.
