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Refinancing Parent Plus Loans: Everything You Need to Know
You may have thought that taking out loans was the hard part, but now that you’re looking at paying them back, it can feel even more daunting than when you originally took them out. However, if you take the time to read this article and keep your loan information organized, you’ll be more confident paying back, refinancing, and doing anything else with your loans!
For today, let’s talk specifically about what refinancing your Parent Plus loans looks like!
What are Parent Plus loans?
Before we dive into anything too complex, let’s start with the very basics. What is a Parent Plus loan? Very simply put, Parent Plus loans, also known as Direct Plus Loans, are loans that parents can take out on behalf of their children to help pay for their education. Parent Plus loans carry higher interest rates than other types of federal student loans.
What is refinancing?
Refinancing is the process of changing the terms of your loans. This can mean either changing the terms of your loan with your current lender, or having your debt paid off by another lender and starting a new agreement with that lender.
Refinancing is not meant to change the total amount you owe; however, it may affect the rates of your loan, which may end up saving you money in the long run.
What is consolidation?
Okay, one more basic thing to go over before we move on. Although this article is not about loan consolidation, it can be important to understand the difference between consolidation and refinancing. Consolidation is the process of combining multiple federal loans, to make one loan. This means that Parent Plus loans can be consolidated with other federal loans. Consolidation isn’t meant to change the overall amount that is owed, but may make things simpler by requiring only one monthly payment instead of several.
Refinancing Parent Plus Loans
Putting the loan in a student’s name
One reason Parent Plus Loans may be refinanced is to take them out of the parents name and put them into their child’s name. However, while this loan is technically a federal loan, there is no way to refinance this loan in the child’s name and have it remain a federal loan. A parent will need to refinance the loan through a private lender in order to put it in their child’s name. When this happens, private lenders typically require that the child of the loan holder must meet in order to be approved. A parent can help them by co-signing on the new loan, but if the goal is to completely disassociate the parents name from the loan, this will only partially help.
Lower interest rates
The current interest rate for Parent Plus Loans disbursed on or after July 1, 2023 and before July 1, 2024 is 8.05%. This interest rate will remain fixed for the lifetime of the loan. While it’s not guaranteed that you will find a lower interest rate from a private lender, it can’t hurt to look. If you are able to find a lower interest rate with a private lender, then refinancing your loan may make sense for you.
What you’ll lose access to
While this is not meant to push you one way or the other, it’s important to keep in mind what you will become ineligible for if your loan moves from a federal status to a private status. Private loans are not eligible for programs like Public Service Loan Forgiveness, graduated, and extended repayment plans and loan deferment and forbearance plans. If these are things you are unaware you’ll lose access to, we recommend looking into them before agreeing to move forward with refinancing.
How to refinance a Parent Plus Loan
If you’ve already taken out Parent Plus Loans, then this isn’t your first rodeo with loans. You likely know that you should not refinance a loan with the first person to offer you a slightly lower interest rate. Take your time exploring the various options you have with lenders.
You’ll want to explore more than just interest rates when you are looking into new lenders. Make sure to also look at:
- Repayment plan options
- Maximum loan amount
- Credit score requirements
- Co-signer requirements
- Deferment options
Once you’ve gathered all your loan information and thoroughly checked out all the things listed above, you’ll be able to make an informed decision about what is best.
Should you refinance a Parent Plus Loan?
We can’t say definitively what you should do because every individual situation is different. However, we have put together some questions for you to ask yourself.
Questions To Consider
While these questions are by no means an exhaustive list, they should help you get the conversation moving. You can also use our student loan refinancing calculator to try to help you decide what your best option is.
Frequently asked questions about refinancing Parent Plus Loans
How do you lower the interest rate on a Parent Plus loan?
What happens to a Parent Plus Loan if my parent dies?
How long do you have to pay off a Parent Plus Loan?