Refinancing with Earnest
Refinancing rates from 2.54% APR. Checking your rates won’t affect your credit score.
Each year, millions of parents take out private loans for their children’s college education or cosign a student loan with their children. In fact, approximately 90 percent of private student loans have a cosigner. Though a parent may be able to qualify for a loan more easily, making payments can be a real burden on them.
Student Loan Hero employee Mackenzie Kreitler left college with over $60,000 in private student loans, all under her mother’s name. Mackenzie realized the risk her mom faced, so she looked into taking over the loans. But like others before her, she found out that the process to refinance a parent’s loan is not so easy.
Below, find out how Mackenzie handled her student loans and the lessons she learned along the way.
Managing her student debt
When Mackenzie went to school, her mother took out the loans in her own name through the Massachusetts Educational Financing Authority. Though Mackenzie was responsible for making payments and her mom didn’t have a problem with having the loans under her name, it made Mackenzie uncomfortable.
“My mom would laugh at me when I would say it, but I worried that if something happened to me, my mom would have to pay the loans herself. If I couldn’t keep up with the payments, she’s responsible,” says Mackenzie. “I always felt weird about it. I even took out life insurance so she’d have money to pay the loans if I died.”
Mackenzie started looking into refinancing the loans into her name only. Several lenders will refinance federal Parent PLUS loans to the child’s name, but she found it challenging to find a lender that would work with private loans in a parent’s name.
“A friend of mine refinanced his loans and saved a lot of money, so it seemed like a good idea,” says Mackenzie. “But when I applied with a lender, they denied my application because the loans weren’t in my name.”
Finding a lender
Mackenzie researched lender options and reached out to others for recommendations. She stresses that you should comparison shop before submitting your application, instead of just looking at one lender.
“Ask tons of questions, and don’t be afraid to use the lender’s customer service,” says Mackenzie. “Different lenders have different rules and fees, which can affect your loan’s cost. Finding a lender who doesn’t charge an application or origination fee can save you hundreds.”
Mackenzie eventually chose CommonBond, one of the few lenders out there that will refinance a parent’s loan in your name.
CommonBond made the process easy for Mackenzie. “I was able to do everything online, without having to spend time on the phone,” she says. “I could upload screenshots and documents, and never had to mail anything in.”
Being able to do everything electronically streamlined things for her, and she says that CommonBond was extremely responsive to her questions through chat and email.
It took about a week before CommonBond approved Mackenzie’s application
Saving money with new terms
When Mackenzie received the approval, she was pleased with the loan terms.
“My old loans had very high interest rates: 8.89% and 7.69%,” says Mackenzie. “With CommonBond and the autopay discount, my new interest rate is 5.3%, so I’m very happy.”
That change will make a huge difference. With her outstanding balance of nearly $10,300 at 7.69% and $33,300 at 8.89%, she would have paid back thousands more in interest. The lower rate dramatically reduces how much she’ll pay over time, saving her over $15,000.
Mackenzie says it took a bit longer than she expected for CommonBond to pay off her old loans; it was about 10 days from the time they approved her application to when they paid off her loans. But once it happened, it was a seamless transition.
Paying off debt faster
Another advantage to refinancing is that Mackenzie will pay off her loans years ahead of schedule. She deliberately lowered her repayment term. She had 10 years to repay her loans with the old lender, but she reduced her new loan to just five years.
With the new loan terms, she pays more each month but much more of her payment goes towards the principal.
“Before, I was putting so much extra money towards the loans but it felt like I wasn’t making a dent,” says Mackenzie. “Now, I’ll be debt-free within five years.”
What to know before you refinance your parent’s loan
Be aware that refinancing in your name may cause a bump in the interest rate if your credit score and income are lower than your parent’s.
Make sure your credit is in good shape before applying so you get the best interest rates available.
For more information about refinancing or to submit your application to refinance your parent’s loan, check out these lenders.
Interested in refinancing your Parent PLUS loans into your child's name?Here are the top lenders of 2019!
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1 Important Disclosures for SoFi.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 2.5% effective February 10, 2019.
|2.54% – 7.12%3|
|3.23% – 6.65%1|
|2.69% – 7.43%2|