How to Refinance Parent PLUS Loans in Your Child’s Name

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As a parent, you may have taken out Parent PLUS Loans to help your child with their education. But as you’re getting closer to retirement age and managing multiple financial priorities, you may start to wonder how you can lessen some of the burden associated with repayment.

Parent PLUS Loans currently have a 7.02% interest rate, which is on the higher end for federal student loans and can make it difficult to get ahead on principal payments.

To alleviate some of the immediate financial burden, Parent PLUS borrowers might consider income-contingent repayment plans or public service loan forgiveness.

Another option? Transfer your Parent Plus Loans to your child’s name. If you and your child mutually agree on this move, you could pass on the responsibility of paying back these loans to your child.

Keep reading to learn more about how to transfer Parent PLUS loans to your child’s name and if it’s right for you.

How to Transfer Parent PLUS Loan to Student

Parent PLUS loans are made directly to parents for their child’s education. The way things are set up now through the Department of Education, parents cannot transfer loans to a child and parents are solely responsible for paying back the loan.

But there’s a way to get around this: refinancing Parent PLUS loans in your child’s name. In order to refinance Parent PLUS loans, your child must apply.

“Even though the current loan is in the parent’s name, the child must fill out the application with his or her information including income, school, and degree,” said Phil DeGisi, Chief Marketing Officer at CommonBond.

Laurel Road is one of a handful of student loan refinancing companies that allows parents to transfer Parent PLUS loans to students. SoFi and CommonBond offer this option as well.

Each lender will have their own eligibility requirements, but typically, lenders want the child to prove they have the financial means to pay back the loan themselves.

SoFi, Laurel Road, and CommonBond consider information such as income, school, and type of degree. Additionally, in order to qualify, your child must have earned a Bachelor’s degree or higher.

Dan Macklin, co-founder of student loan refinancing company SoFi, noted similar eligibility requirements.

According to Macklin, “SoFi will take into account several factors, such as the graduate’s (the applicant’s) eligibility, education, career experience, monthly income relative to expenses, and financial history in determining whether to refinance a Parent PLUS into a loan in the graduate’s name.”

To transfer the Parent PLUS loans to your child, follow the below steps:

  1. Ask your child to apply for a refinancing loan in his or her own name with a lender like SoFi, Laurel Road, or CommonBond. You can help your child complete the application, but the lender will approve or deny it based on his/her information alone.
  2. Include the Parent PLUS loan, and note that it is under your name, on the refinancing application
  3. If approved, the lender will issue your child a new loan, which can be used to pay off your Parent PLUS loans.

The new loan will have its own terms and conditions, and potentially a lower interest rate as well. Unlike the Parent PLUS loan, the new loan will be entirely in your child’s name.

“Transferring a loan from parent to child absolves parents from the debt obligation and enables the child to select the appropriate loan terms, and the child may be able to reduce monthly payments on the outstanding debt, as some Parent PLUS loans have rates as high as 8.5 percent,” said Macklin. “It also enables the parent to refocus on their own goals, such as saving for retirement.”

Benefits of Refinancing Parent Plus Loans

There are many benefits to refinancing Parent PLUS loans:

  • Your child could get a lower interest rate on the Parent PLUS loan.
  • The parent is released from the loan.
  • The child can build credit by making on-time payments.

If you want to refinance Parent PLUS loans and pass on the responsibility to your child, they could stand to save thousands of dollars in interest. In addition, they could take advantage of unique benefits offered by the lender, such as unemployment protection, career service, and networking events.

Drawbacks of Refinancing Parent PLUS Loans

Before you decide to refinance your Parent PLUS loans, there are some things you should know first:

  • By refinancing, you’ll lose federal student loan protections such as income-contingent repayment options and Public Service Loan Forgiveness.
  • The legal liability for the loans will be transferred to the child, as the Parent PLUS loans will be paid off, and your child will now repay the new loan.
  • The process is not reversible.

If you want to refinance Parent PLUS Loans, you and your child should be 100 percent on the same page. Both you and your child should understand the financial and legal implications of doing so and also have a firm grasp of what you may be giving up.

Wondering if refinancing is a good idea for you? Answer a few questions below and we’ll help you find the right solution! Otherwise, scroll down to read on.

Parents should share the details of the loan, including the total balance, with the child and help pick a repayment term that offer affordable monthly payments and fits their lifestyle.

In many cases, borrowers can check their potential rate without it affecting their credit score (often known as a “soft pull” on credit).

Before you and your child transfer Parent PLUS loans, check out each lender’s eligibility requirements and borrower perks to see if refinancing is right for you.

Interested in refinancing your Parent PLUS loans into your child's name?

Here are the top lenders of 2018!
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Check out the testimonials and our in-depth reviews!

1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 8.179% APR (with AutoPay). Variable rates from 2.570% APR to 6.980% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. SoFi rate ranges are current as of September 14, 2018 and are subject to change without notice. See APR examples and terms. Lowest variable rate of 2.570% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.740% margin minus 0.25% AutoPay discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
2.57% – 6.98%3Visit SoFi
2.80% – 6.22%1Visit Laurel Road
2.48% – 6.25%2Visit CommonBond
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.