How To Transfer A Parent Plus Loan To A Student
Are you wondering how to transfer your Parent PLUS Loan to a student? There are a variety of reasons why a parent who borrowed a PLUS loan for their child may want to transfer the debt to them. It is possible to do this, but not through a federal program. To put the debt in the students name, the loan must be refinanced through a private company. Continue reading to learn more about how to transfer your parent loan to a student!
Parent Plus Loan Repayment Options
Unlike other federal student loans, Parent PLUS Loans start repayment immediately after the student graduates or drops below half-time enrollment. Here are your repayment options:
- 10- Year Standard Repayment Plan – typically gives parent loan borrowers the highest monthly payment amount and pays the least interest over time.
- Extended Repayment Plan – allows borrowers with loan amounts of $30 thousand or more to get a fixed or graduated payment over a 25 year repayment period.
- Graduated Repayment Plan – starts your monthly payments off low and then increases the payment every two years until paid in full. Your repayment term can be 10-30 years, depending on your loan balance and whether you consolidated.
- Income-Contingent Repayment – allows parent borrowers to get a payment amount thatâs based on their discretionary income. To qualify, youâll need to have a consolidation loan made under the Direct Loan Program. Given the high fixed interest rate of parent loans and the minimum payments under the ICR plan, your loan balance will increase more under this plan than the other plans.
If you canât pay your Parent PLUS Loans in the short term, contact your student loan servicer and request a deferment or forbearance.
You Put In The Work Now Reap The Rewards
- Variable Rates between 1.87% – 6.52% APR1
- Fixed Rates between 2.30% – 5.96% APR1
- No application or prepayment fees
- Cosigner release with 24 consecutive on-time payments2
Fixed interest rates range from 2.30% APR to 5.96% APR . Your interest rate will depend on your credit qualifications. The fixed interest rate will remain the same for the life of the loan.
Variable interest rates range from 1.87% APR to 6.52% APR . Your interest rate will depend on your credit qualifications. Variable rates may increase after consummation. Variable rates for Nelnet Bank Refinance Loans are calculated as the One-Month SOFR plus the applicable Margin percentage. Variable rates will be based on the highest One-Month SOFR as published by the Federal Reserve Bank of New York and/or the Wall Street Journal Money Rates table on the twenty-fifth day of the immediately preceding calendar month. The variable rate may change on the first day of each month if the SOFR index changes. This may result in higher monthly payments. The current One-Month SOFR index is 0.05% as of January 1, 2022.
2Cosigner Release. A request for the cosigner to be released can be made by either the borrower or cosigner when each of the following conditions has been met:
Refinance Loan Limits:
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This Was The Plan From The Beginning
Because undergraduate students can qualify for cheaper student loans than parents, the hope is that you only borrowed Parent PLUS Loans to bridge the gap between what they could qualify for with federal loans and what they needed to attend school.
If you made a plan at that point to transfer the debt to them once they graduate, there wont be any surprises. But if you were planning on paying off the debt then changed your mind, springing tens of thousands of dollars in student loans on your child could damage your relationship with them.
Keep in mind, too, that in order for you to transfer the debt to your child, they need to agree to accept it.
Choose Loans To Consolidate
You can consolidate some or all of your federal student loans, including the loans you borrowed for your own college education. However, if you combine parent PLUS Loans with other federal student loans, youâll lose access to the Revised Pay As You Earn , Pay As You Earn , and Income-Based Repayment Plans.
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Lender And Bonus Disclosure
All rates listed represent APR range. Commonbond: If you refinance over $100,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner.
CommonBond Disclosures: Refinancing
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC , 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. If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates 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 0.15% effective Jan 1, 2021 and may increase after consummation.
CommonBond Disclosures: Private, In-School Loans
Student Loan Planner® Disclosures
Penfed Student Loans Powered By Purefy
- Refinance federal and/or private student loans at lower rates with no fees.
- Choose a 5, 8, 12, or 15 year term to best fit your needs.
- Each applicant receives a personal loan advisor to help them through every step in the process.
- Spouses can refinance their loans together. Parents can refinance their loans too.
- Show more info »
1Rates and offers current as of April 1, 2021. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99% APR to 5.15% APR and Variable Rates range from 2.15% APR to 4.45% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans . Minimum variable rate will be 2.00%.
Can You Refinance Parent Plus Loans
Yes. Loan borrowers have the option of refinancing Parent PLUS Loans with a private lender. While you may consolidate Parent PLUS Loans with a Federal Direct Consolidation Loan, refinancing is the only way to lower your interest rate or transfer a Parent PLUS Loan to the student. This option comes with a variety of and that you will want to explore before you make a decision.
Parent Plus Loan Consolidation
If youve borrowed more than one parent PLUS loan for your child over the years, or if youve taken out loans for multiple children, loan consolidation might be a useful option. This free repayment strategy streamlines your repayment plan by combining multiple parent PLUS loans into a new Direct Consolidation Loan. After you consolidate Parent PLUS Loans, youll have one student loan bill and payment due each month, and your fixed interest rate will be averaged based on your loans original rates.
This option can also help if youre struggling with your current monthly payments. A Direct Consolidation Loan has repayment terms of up to 30 years, so stretching out your repayment term will lower your monthly payments though you will end up paying more in interest overall.
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How Does Refinancing A Parent Plus Loan Affect Credit
If you manage to transfer the Parent PLUS Loans to your student, the loans will be marked as paid in full on your credit reports. Because youll no longer be making payments, you may see your credit score dip slightly. But as long as you continue to use credit responsibly, it shouldnt be a concern.
If you decide to refinance on your own for the foreseeable future, though, its also important to know how that can affect your credit score.
Just about any time you apply for credit, the lender will run a hard inquiry on one or more of your credit reports. According to FICO, though, the impact of a hard inquiry is low and temporary each additional inquiry knocks fewer than five points off your score.
The good news is that you dont have to submit applications to a bunch of refinancing lenders to find out which one will give you the best offer. Instead, they typically offer a prequalification process, which requires a soft credit check that doesnt impact your credit score and allows you to view rate offers based on the information the lender finds.
Of course, this isnt a final offer. Youll get that once you submit an official application and the lender runs a hard credit check. But the rate quote is still a valuable piece of information that you can use to compare lenders without commitment or impact to your credit score.
How Will I Receive My Loan Money
Your loan money will usually be paid out after the first week of attendance. Your childs school will generally credit the loan money to your childs account to pay tuition, fees, and other authorized charges. Any remaining loan funds will be paid to you directly, unless you authorize the school to pay this money to your child.
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When To Refinance Parent Plus Loans
The best time to refinance Parent PLUS Loans is when interest rates are low. Current refinance rates start as low as 1.74%, making it a great time to refinance Parent PLUS loans.
If youre looking to refinance Parent PLUS Loans into the students name, you will want to wait until the student has secured stable employment and has a credit score of at least 660 . If their credit score is lower than 660, the best option typically is for them to build their credit score up over time and then refinance the loan later.
Are Parent Plus Loans Worth It
Parent PLUS loans can be useful if your child has maxed out their student aid and has no other alternative to lower the cost of their education . However, parent PLUS loans can derail your own life goals, like saving for retirement, paying off your mortgage or living the lifestyle youve always imagined for yourself. Before taking out a loan, understand the extra cost youll pay in interest and make a plan for repayment so youre not taken by surprise.
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Refinance Parent Plus Loans
Though a PLUS loan cant be transferred to a student as a federal loan, there are private lenders that will allow a PLUS loan to be refinanced in the students name. For example, SoFi allows parent PLUS loans to be refinanced in the students name. Each private lender has its own rules regarding refinancing PLUS loans. Be sure to do your research to confirm that it can be done.
For the student to take out a refinanced loan, theyll have to meet the requirements of the lender. One of these requirements will be a high credit score. If a student doesnt meet the requirements, the parent could cosign the loan to help the student become eligible. As a cosigner, the parents name will still be associated with the loan, and their credit could be impacted if the student fails to make payments.
See also: How do student loans affect credit?
Public Service Loan Forgiveness
Parents who work in the public sector might be eligible for Public Service Loan Forgiveness . The PSLF program requires borrowers with eligible Direct Loans to work full time at a government or nonprofit organization during repayment.
Borrowers must make 120 payments on an income-driven repayment plan in order to complete Public Service Loan Forgiveness, so parents will need to consolidate their parent PLUS loans into a Direct Consolidation Loan and enroll in the Income-Contingent Repayment Plan to qualify. After 120 qualifying payments toward your loan, the remaining student loan balance can be forgiven.
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Downsides Of Transferring Parent Loans To A Student
There are also some disadvantages to think about before considering how to transfer a private or Parent PLUS loan to the student. Here are some of the downsides:
- You could lose access to federal student loan benefits if Parent PLUS Loans are refinanced into private loans.
- Not all students can qualify for a refinance loan.
- There are limited choices of lenders that allow students to refinance their parents’ loans into their own name. Splash, for example, does offer the ability to transfer loans from the parent’s name to the student.
Cons Of Transferring The Loan To Your Child
When you refinance your Parent PLUS Loan, you cant reverse the process. That means that once the loan is transferred the student, the debt is theirs to pay off.
For that reason, its important that your child is able to keep up with the payments. Help them understand the transfers financial and legal implications. Your child should know the total loan balance and calculate how much they would be able to afford as a monthly payment.
Then, when they apply for the refinance, you should work together to compare lenders and determine which interest rates and terms, borrower perks, and eligibility requirements are the best fit. Most lenders will conduct soft credit pulls to check your childs eligibility and calculate interest rates, so it wont affect his or her credit score.
Check our picks for the best banks for refinancing student loans.
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Can More Than One Parent Borrow A Plus Loan
If a students parents are divorced, both the custodial and non-custodial parent may borrow a PLUS Loan for their dependent, undergraduate student. A step-parent may only borrow a PLUS Loan if they are married to the custodial parent and their financial information was reported on the FAFSA of record.
How Do I Transfer My Parent Plus Loan To My Child
Have your child fill out the application as if they were refinancing their own loan. Even though the Parent PLUS loan is in your name, they should fill out the refinance application with their information including income, school, and degree. Later on in the application, we’ll ask for a copy of the current loan statement. At that point your child can indicate that the current loan is in your name and they will be taking it over.
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Learn How To Transfer Parent Plus Loans To A Child
When it comes to helping Neela Hummel’s mother-in-law repay the parent PLUS loans she borrowed years ago for her son’s schooling, the family has an informal arrangement.
Neela and her husband Tom regularly log into his mother’s account and make payments with their own funds, tackling the nearly $30,000 in PLUS loans remaining after Tom’s 2007 graduation from California State Polytechnic University–Pomona.
The couple feel responsible for the debt since the money paid for Tom’s education and would like to formally take over repayment. “We’re both set in our careers and we’re trying to clean this up as much as we can,” says Neela, who works as a financial advisor.
But they won’t get far with the federal government, which doesn’t allow parents to hand off PLUS loans to their children. “A direct PLUS loan made to a parent cannot be transferred to the child. You, the parent, are responsible for repaying the loan,” says the Department of Education’s student loan website. The workaround: Using a private loan refinancing company to bypass the feds.
With this strategy, the child refinances the parent PLUS loan into a private student loan, transferring the debt into the student’s name in the process. The PLUS loan goes away, repaid by the child’s new private loan, with new terms and conditions.
Of the six lenders U.S. News reached out to, just two — DRB and SoFi — allow students to take responsibility for a parent’s PLUS loan this way.
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Pros And Cons Of Refinancing Parent Plus Loans To A Child
Once your Parent PLUS loan is paid off, your child is solely responsible for making payments on their new loan. If they have good credit, theres a chance that the interest rate for the loan will be lower than whats charged for the Parent PLUS loan. On the other hand, if your child isnt ready for the responsibility, it could end up impacting their credit.
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Should You Refinance Parent Plus Loans
Whether or not you should refinance Parent PLUS Loans depends on what you want to achieve. If youre looking to lower your interest rate or transfer the loan to your child, you will only be able to achieve this through refinancing your Parent PLUS loan with a private student loan refinance lender.
It’s important to note, when you refinance federal Parent PLUS loans, you will lose any benefits that come with the federal student loan program, such as federal repayment plans, as well as deferment and forbearance. If you are not eligible to take advantage of these programs nothing much is lost and federal loan refinancing with a private lender may be the right move.