Refinancing with Laurel Road
Refinancing rates from 1.89% APR. Checking your rates won’t affect your credit score.
Parent PLUS loans are a popular option for those who want to help their children pay for their higher education.
If parents don’t have certain blemishes on their credit, they can use these loans to borrow up to the full amount of their child’s annual cost of college attendance, minus other financial assistance their child receives.
However, there may come a time when they need to refinance their Parent PLUS loans.
While helping your children is a natural thing to do, it can come at a cost. A recent Student Loan Hero survey found that nearly 36% of parents are still paying off their own student loans while helping their child pay for college.
To make matters worse, interest rates for Parent PLUS loans are pretty high — 7.08% — which can cause your loan balance to swell over time.
So, if you’re struggling to get a handle on your debt, refinancing your Parent PLUS loan might be a smart option. Here are two methods you can use to take control.
1. Refinance in your child’s name
If your loans are keeping you from saving for retirement, paying down your mortgage or making ends meet each month, you could consider refinancing the Parent PLUS loan in your child’s name once they have graduated.
While the federal government does not allow you to transfer your Parent PLUS loans directly to your child, some private lenders may be able to help you refinance the debt into your child’s name.
If your child has sufficient income and a good credit score, they can apply with a private lender. Some lenders that offer this type of refinance include:
Depending on the lender’s terms and other factors, your child might get a lower interest rate, reduced monthly payment and/or a different repayment term.
Parents who still want to help can offer to cosign on the new private loan to help their child get the most competitive interest rate. Some lenders, including Laurel Road and CommonBond, offer a cosigner release that allows cosigners to bow out of their repayment obligation after their child makes a certain number of timely payments on the loan.
To refinance the debt in your child’s name, your child must apply for a loan with a private lender and include the Parent PLUS loan on the application. The lender will consider their creditworthiness and ability to repay the obligation before making a decision. If approved, your child would pay off your Parent PLUS loan with their new loan.
2. Refinance the loan yourself
If you don’t want your child take over the debt, you could consider refinancing the Parent PLUS loan yourself to save money, get out of debt faster or reduce your payments. With this approach, you are still responsible for the debt, but you’ll have a new loan with different repayment terms.
Depending on the interest rate you get and the length of repayment you choose, you might save money over the length of your loan.
However, before moving forward with refinancing, keep in mind that doing so will cause you to become ineligible for federal student loan benefits. You’ll lose out on access to:
But if you’re focused on getting out of debt quickly, refinancing can be a wise strategy.
To get started, check out the eligibility criteria from various lenders and get quotes. Many lenders will give you a quote through a soft credit check, which wouldn’t affect your credit score.
Once you’ve found the best lender for your situation, you can apply to try to get your new loan.
1. Explore income-contingent repayment plan
If you’re struggling with the monthly payments but don’t want to sacrifice federal protections on your loan, there are other options.
One way to make your payments more manageable is to sign up for an Income-Contingent Repayment (ICR) plan. Under an ICR plan, the government extends your repayment term to 25 years.
Your new monthly payment would be the lesser of the following:
- 20% of your discretionary income
- The amount you would pay on a fixed repayment plan during a 12-year span, adjusted based on your income
Here’s an example of how you might be able to reduce your monthly payments under the ICR plan. Let’s say your annual salary is $60,000 and you’ve borrowed $100,000 for your child’s education at a 7.08% interest rate (the current Parent PLUS interest rate). We’ll also assume a 3.5% annual income growth.
On the standard repayment plan, you’ll pay $1,165 every month for the next 10 years. On the ICR plan, your monthly payment would drop to $799, but you’d be paying the loan for almost 14 years. Despite your monthly budget looking better, you would ultimately pay $21,512 more under ICR due to interest, so you need to consider what’s most important to you.
To estimate how the ICR plan could fit into your financial situation, try our Income-Contingent Repayment Calculator.
If you still have a balance on your loans after 25 years of payments, the government will forgive the remaining amount. The discharged total may be considered taxable income, but this approach could help you afford your monthly payments.
Parent PLUS loans are eligible for ICR as long as you consolidate them into a direct consolidation loan first. The process to consolidate your loans is free and can be completed in as little as 30 minutes online.
2. Check into Public Service Loan Forgiveness
If you’re interested in pursuing Public Service Loan Forgiveness (PSLF), you must first consolidate your loans as well.
In addition, you must work for a nonprofit organization or government agency to qualify for PSLF. Under this program, the federal government could forgive your student loans after you make 10 years of qualifying payments while working for a qualified employer.
Unlike other forms of forgiveness, where the discharged amount is taxable as income, loans forgiven through PSLF are not taxable.
You can ultimately benefit from the reduced payments of the ICR plan and still qualify for PSLF after 10 years. Note with PSLF, though, that the acceptance rate has been less than 1%, so you’ll need to consider all your options.
3. Consider deferment or forbearance
If you can’t afford to make your Parent PLUS loan payments, you have a couple of options available. Depending on your child’s student status, you may be able to obtain student loan deferment or forbearance.
Typically, you’re required to start making payments on your Parent PLUS loans as soon as they’re disbursed. However, if your budget needs a little wiggle room while your child is still in school, you can defer payments until six months after they graduate or until they drop down below half-time enrollment.
Interest will still accrue during deferment, so it may be wise to make interest-only payments during that period.
If your child is no longer in school and you’re struggling to pay back the loan, contact your student loan servicer as soon as possible. You may be able to temporarily pause or reduce your monthly payments for up to 12 months at a time under a forbearance.
Getting the forbearance in place can help you avoid defaulting on the loan and give you some time to improve your financial situation. Again, interest will continue to accrue on your loan, which could result in you having to pay more over the life of the loan.
When deciding whether to refinance your Parent PLUS loans, consider your own and your child’s finances. If you’re nearing retirement or are planning on a big purchase, having Parent PLUS loans can hold you back. Refinancing the loans, either in your child’s name or your own, can help reduce the burden.
If you’re planning to refinance your loans, be sure to compare lenders and shop around for your best interest rate and terms. For more repayment strategies, including how to involve your child in the process, check out our complete repayment guide for Parent PLUS borrowers.
Laura Gariepy contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews! |
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.