Am I eligible to refinance my student loans?

Parent PLUS Loans: Repayment, Consolidation, and Refinancing Options

Parent Plus Loans: Repayment, Consolidation, and Refinancing Options

It’s no secret. The cost of attending college in America can be expensive. Even after a student has received grants, scholarships, and federal loans, there still may be a financial gap. That’s where Parent PLUS Loans come in. The current federal PLUS Loan program allows parents of undergraduate students to borrow up to the total cost of attendance for the student’s education, minus any financial aid they receive.

These generous borrowing programs allow many students to complete their education, however, the debt of these loans can overwhelm parents when it comes time for repayment.

Parent PLUS Loan Repayment Overview

A Parent PLUS loan enters repayment within 60 days after it is fully disbursed. There are deferment options parents can request, but deferment may not provide the relief borrowers are looking for. Luckily, there are options for those who want to explore Parent PLUS Loan consolidation or refinancing.

Parent PLUS Loan Consolidation

Parent PLUS Loans are issued by the Federal Direct Loan Program, which has its own Direct Consolidation Loan program. This program comes with certain benefits that private loan consolidation does not have. But there are pros and cons to each, depending on what you want to achieve with student loan consolidation. First, let’s look at what the Direct Consolidation Loan program offers.

A Direct Consolidation Loan combines all existing loans to create a single new loan with a fixed interest rate equal to the weighted average of all the loans, rounded up to the nearest 1/8 of one percent. This means you won’t be lowering your overall interest rate. However, receiving a Direct Consolidation Loan has the following benefits:

  • May reset your eligibility for deferment or forbearance, meaning you may be able to postpone making payments on the new Direct Consolidation Loan (even if you exhausted your deferment or forbearance benefits before consolidating the loans).
  • Provides Parent PLUS Loan borrowers access to the income contingent student loan repayment plan. Those enrolled in this plan may also be eligible for Public Service Loan Forgiveness.
  • Based on your total outstanding student loan debt, you may be able to extend your repayment term (up to as many as 30 years). This can lower your monthly payment, however, it may lead to an increase in the total amount of interest you pay if you don’t pay your loan off early.
  • If you have more than one servicer, combining your federal loans into one loan will make it easier for you to manage your loan repayment.

Private Student Loan Consolidation for Parents

Private student loan consolidation offers a single new loan with an interest rate determined by the lender based on the borrower’s credit history. PLUS or private parent loan borrowers who have strong credit can benefit from a private consolidation loan because:

  • It may lower the total monthly payment amount, since you won’t have to meet minimum payments on multiple loans.
  • It consolidates multiple loans into one payment, giving the borrower fewer bills to track each month.
  • The overall interest rate is likely to drop, perhaps significantly, through private student loan consolidation, because private lenders tend to offer competitive interest rates.

Consolidating federal loans into a private consolidation loan means your lender will no longer be the U.S. Department of Education. You’ll no longer be eligible for their generous student loan deferment or forbearance programs, and you won’t have access to the income-contingent repayment plan or the public service loan forgiveness program. Some private lenders offer their own programs to assist borrowers in times of financial hardship (for example, some private lenders offer short-term forbearance during times of unemployment, but the time frames are typically far shorter than what the government offers).

Compare loan benefits of Parent PLUS Loans and Private Parent Loans

Q&A: Consolidating or Refinancing Parent Loans

Can my child take over my Parent PLUS Loans through student loan refinancing?

A 2017 report from the Consumer Financial Protection Bureau outlines alarming new trends about older borrowers of student loans: not only has the number of borrowers aged 60 and above increased fourfold in the decade between 2005-2015, but the majority of this debt is on behalf of borrowers’ children and grandchildren – and according to Forbes, it’s hurting their chances of financial security in retirement.

The Federal Student Aid programs do not allow parent PLUS borrowers to transfer loans directly to their child. However, there are several private lenders that offer loans directly to adult children who have obtained a bachelor’s degree and who qualify based on their employment, debt-to-income ratio, and other factors. If the adult child qualifies to refinance their parents’ PLUS Loans, the parents are relieved of all responsibility on the loans – and as the new borrower, the adult child can build a strong credit history by staying on top of loan payments. Also, the interest rate on the new consolidation loan may be lower than the previous PLUS loan interest rates.

Adult children whose parents are struggling under the burden of PLUS loans may wish to pursue this private student loan refinancing option so their parents can free up funds for retirement savings, keeping in mind it will result in the loss of federal loan benefits.

Is the process the same for consolidating Parent PLUS Loans as it is for consolidating Direct Student Loans?

Yes; if you choose to stay within the federal loan program, whether you’re consolidating Parent PLUS Loans or Direct Student Loans, the result is a new Federal Direct Consolidation Loan. The U.S. Department of Education disburses Direct Consolidation Loans through college financial aid offices.

Will consolidating my Parent PLUS Loans with the Direct Consolidation Program affect my credit?

The U.S. Department of Education does not require a credit check to consolidate your federal student loans or Parent PLUS Loans through the Direct Consolidation Program. Read more about eligibility requirements for a Direct Consolidation Loan.

If you choose a private lender to refinance and consolidate your Parent PLUS Loans, you will need to meet that lender’s credit eligibility criteria.

What are the benefits of consolidating my Parent PLUS Loans with a private lender?

You can refinance your Parent PLUS Loans when you consolidate with a private lender, so you will likely receive an interest rate lower than you would with a Direct Consolidation Loan or with your loans’ current interest rate(s). You can also expect to have a lower overall monthly loan payment.

If you’re a Parent PLUS Loan borrower, some lenders will refinance your Parent PLUS Loans into your adult child’s name if they have completed their bachelor’s degree and meet eligibility requirements. That means the debt will no longer be the burden of the parents.

Additionally, private lenders may allow you to combine federal Parent PLUS loans and private parent student loans (as well as the parent’s own student loans) in a consolidation.

If I consolidate my Parent PLUS Loans, will I still be responsible for paying them, or will my child?

If you consolidate your Parent PLUS Loans through the federal Direct Consolidation Loan program, the loans will remain in your name. This program does not allow Parent PLUS Loans to be transferred to another borrower.

It is possible for your Parent PLUS Loans to be assumed by your adult child through a private loan consolidation; according to Forbes, this is a viable option for parent borrowers who need relief from the burden of Parent PLUS Loan repayment. Some private lenders will refinance and consolidate your Parent PLUS Loans, creating a new loan in the name of your adult child, provided he or she meets the lender’s credit eligibility requirements (which often include completion of a bachelor’s degree and steady employment).

Comparing Direct Consolidation Loans and Private Consolidation Loans

More Must Read Articles

Why Consolidate or Refinance Your Student Loans

Why Consolidate My Student Loans?

Learn the pros and cons of student loan consolidation and refinancing, like cutting interest rates and monthly payments, or losing federal loan benefits.

Benefits of Student Loan Consolidation and Refinancing

Benefits of Student Loan Consolidation and Refinancing

Student loan consolidation or refinancing has several key benefits. You might be able to cut your payments & get a better rate. See if it's right for you.

How Student Loan Consolidation Works

How Student Loan Consolidation Works

Wondering what the first steps are in consolidating or refinancing your student loans? Check out these step-by-step instructions on how to get started.

Basics of Student Loan Refinancing

The Basics of Student Loan Refinancing for 2018

Deciding if you should consolidate or refinance your student loans can get pretty confusing. Learn more about the benefits and drawbacks of refinancing.

5 Common Myths About Student Loan Refinancing

5 Common Myths About Student Loan Refinancing

When it comes to refinancing student loans, what's true, and what's not? We're clearing it up with five common myths and the facts behind them.

Should You Find a Student Loan Cosigner or Go It Alone

Student Loan Refinancing: Cosigner or No Cosigner?

Do the benefits of having a cosigner outweigh the drawbacks? Learn the pros and cons of sharing the weight of your debt with others.

Pros and Cons of Refinancing Parent Loans

The Pros and Cons of Refinancing Parent PLUS Loans

Many parents take out student loans to pay for a child's college education. Learn about the pros & cons of refinancing Parent PLUS Loans & private loans.

Private Student Loan Refinancing Interest Rates

Private Student Loan Refinancing Interest Rates

The interest rate on a private refinance loan is determined by the borrower's or cosigner's credit rating. See the impact of different rates on payments.

Get the answers to your questions about private student loan refinancing. Learn more about the benefits, which loans are eligible and how long it takes.

Federal Student Loan Consolidation

Federal Student Loan Consolidation

Learn about the benefits of federal student loan consolidation, what loans can be consolidated & how it can help you manage existing student loan debt.

Federal Student Loan Consolidation Interest Rates

Federal Student Loan Consolidation Interest Rates

When you consolidate your federal student loans, your interest rate will be roughly the same as your current loans. See an example of the rate calculation.

How do I combine multiple federal loans into one loan? How long does it take to consolidate student loans? Get the answers to these questions and more.

Lending Partners

Interest Rates
  • Fixed as low as 3.18% APR
  • Variable as low as 2.76% APR
  • Hybrid loan rates as low as 3.79% APR
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits Up to $500K
Min. Loan Amount $10,000 Degree Req. Required completion of one of the following degrees at a qualified school:
  • MBA
  • JD
  • MD
  • Engineering
Repayment Terms 5, 10, 15, 20 years
Interest Rates
  • Fixed as low as 3.37% APR
  • Variable as low as 2.35% APR
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits No Maximum
Min. Loan Amount $10,000 Degree Req. Required completion of degree Repayment Terms 5, 7, 10, 15, 20 years
Interest Rates
  • Fixed as low as 5.24% APR
  • Variable as low as 4.87% APR
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits
  • $150K - Undergraduate or Graduate degrees
  • Higher limits may apply for specific fields of study
Min. Loan Amount $5,000 Degree Req. Students from any school could be eligible for our consolidation loan. Repayment Terms 10 - 20 years
Interest Rates
  • Fixed as low as 3.25% APR
  • Variable as low as 2.72% APR
Max. Loan Limits Up to $300K
Min. Loan Amount $7,500 Degree Req. Must hold at least a bachelor's degree Repayment Terms 5, 8, 12, or 15  years.
Interest Rates
  • Fixed from 3.15% - 8.54%
  • Variable from 2.76% - 7.90%
  • Lowest APRs offered include an auto-pay discount
Max. Loan Limits
  • $125K - Undergraduate
  • $250K - Graduate
  • $300K - Medical, Dental, Veterinary
Min. Loan Amount $5,000 Degree Req. Graduated from a LendKey eligible school Repayment Terms 5, 10, 15, and 20 years
Interest Rates
  • Fixed as low as 3.74% APR
  • Variable as low as 3.88% APR
  • Rates above include 0.25% auto-debit discount
Max. Loan Limits
  • $120K
  • Minimum qualifying credit score is 660 with an eligible cosigner
Min. Loan Amount $10,000 Degree required. Must have graduated from an eligible school. Repayment Terms 5, 10, or 15 years
Interest Rates
  • Fixed rate range: 3.25% – 7.25% APR1
  • Variable as low as 2.88% – 6.98% APR1
  • No application or prepayment fees
Max. Loan Limits
  • Consolidate and refinance up to $250,0003
Min. Loan Amount $5,0003 Degree required. Must have graduated from a public or private, not-for-profit, degree granting institution. Repayment terms 5 – 15 years2
Am I eligible to refinance my student loans?