If you took out a parent PLUS loan, you might be curious as to whether you can transfer the debt to your child. Although a direct transfer via the federal loan system isn’t possible, some private lenders allow you to refinance the loan into your child’s name.
You can remove yourself completely from the new loan. Or you can cosign it, which shifts the primary responsibility for monthly payments to your child.
But before you do this, you should consider the pros and cons associated with parent PLUS loan transfers, as they aren’t the right move for every family.
- Can you refinance parent PLUS loans into the student’s name?
- What is a parent PLUS loan transfer?
- Pros and cons of transferring parent PLUS loans
- What if my child can’t qualify for a student loan refinance?
Can you refinance parent PLUS loans into the student’s name?
Yes, some lenders allow your child to refinance the loan into their name through refinancing, and you can compare rates from lenders without impacting your credit score (if the lender offers pre-qualification).
Can you transfer private parent student loans, too?
Yes, some lenders allow you to transfer a private parent loan. Similar to parent PLUS loan transfers, this requires your child to refinance the loan into their name.
What is a parent PLUS loan transfer?
When you transfer a parent PLUS loan, your child refinances the loan into their name. Put simply, they take out a new student loan with a private lender to pay off the parent PLUS loan. This makes them responsible for repaying the debt.
To refinance a parent PLUS loan into your child’s name, you should take the following steps:
- Comparison shop. To find the best deal, compare rates, terms, fees, and eligibility requirements from multiple lenders. While you’re shopping around, make sure to ask directly or research if the lender allows you to refinance the parent PLUS loan into your child’s name.
- Choose a lender and apply. Next, select the loan option that best matches you and your child’s needs.
- Submit a refinance application. After you’ve selected a lender, you and your child will have to submit a loan application and provide any information the lender requests, like pay stubs, W-2s, and current loan information.
- Manage the new loan. If the application is approved, your child will now be responsible for making payments. They should enroll in autopay, if possible, to avoid missing payments.
Based on your child’s credit, they may qualify for a lower rate with a private loan, possibly saving them hundreds of dollars. To see how much they could save, use a student loan refinance calculator.
Below is a list of Credible’s partner lenders that allow you to refinance a parent PLUS loan into your child’s name:
| Lender | Loan terms (years) | Loan amounts |
|---|---|---|
| Brazos | 5, 7, 10, 15, 20 | $10,000 to $150,000 if you have a bachelor’s degree (up to $400,000 if you have a graduate degree) |
| ELFI | 5, 7, 10 | $10,000 and up |
Here’s a list of non-partner lenders that allow you to refinance a parent PLUS loan into your child’s name:
| Lender | Loan terms (years) | Loan amounts |
|---|---|---|
| Laurel Road | 5, 7, 10, 15, 20 | $5,000+ |
| SoFi | 5, 7, 10, 15, 20 | $5,000 to total balance of loan |
Pros and cons of transferring parent PLUS loans
Refinancing a parent PLUS loan into your child’s name has some benefits, but there are some drawbacks to keep in mind.
Pros
- No longer responsible for the loan: Since the loan is refinanced into your child’s name, you won’t be responsible for making payments. This can free up money to put toward your other financial goals, like retirement or building onto your savings. Plus, it can lower your debt-to-income (DTI) ratio, which could help you qualify for better rates on other financial products.
- Potential lower interest rate: Depending on your child’s credit and financial situation, they might qualify for a lower interest rate, which could save them thousands of dollars over the life of the loan.
- Could help your child build credit: If your child repays the new loan on time, it could help them add positive payment history to their credit reports, which can boost their credit score.
Cons
- Loss of access to federal benefits: When you refinance a parent PLUS loan, you’ll no longer qualify for federal benefits, such as income-driven repayment (IDR) plans and student loan forgiveness programs.
- Might be difficult for your child to qualify: To qualify for student loan refinancing, you generally need good credit (around 700 or higher) and a stable income. If your child lacks these qualifications, they will likely have a hard time finding a lender that’ll approve them for a loan without a cosigner. In this scenario, you might have to be a cosigner on the new loan.
- Can increase your child’s DTI ratio: Refinancing the loan into your child’s name can increase their DTI ratio, which can make it difficult for them to qualify for the best rates on financial products, such as mortgages and auto loans.
What if my child can’t qualify for a student loan refinance?
If your child can’t qualify for student loan refinancing on their own, they have other options. You can take steps to reduce your financial burden with these alternatives:
Consider government forgiveness and employee student loan repayment assistance
You can qualify for parent student loan forgiveness — but some options require you to consolidate your parent PLUS loan into a Direct Consolidation Loan first.
For instance, if you work for a government or nonprofit organization, you may qualify for the Public Student Loan Forgiveness program (PSLF). Under this program, once you make 120 qualifying payments, your remaining student loan balance is forgiven.
Another way to possibly get some relief is to ask your employer if they offer student loan repayment assistance. Some employers offer this as an incentive to retain top talent.
Look into an Income-Contingent Repayment Plan via the federal repayment system
Parent PLUS loans under any of the four income-driven repayment plans are offered by the U.S. Department of Education, but a workaround can help you qualify for the Income-Contingent (ICR) Repayment Plan. To qualify, you have to consolidate your parent PLUS loans into a Direct Consolidation Loan.
Under this plan, your monthly payments are based on your income and family size, and the repayment term lasts 25 years. Once the plan ends, any remaining balance you have is forgiven.Â