Are Parent PLUS Loans Hurting My Finances?

Ben Luthi

If you took out student loans to help put your child through college, you’re not alone. More than 3.6 million borrowers have $89.8 billion in Parent PLUS Loans from the federal government, and that’s not even including parents who choose to borrow additional loans from a private lender.

That’s an average Parent PLUS Loan balance of $24,944 per borrower.

That balance can be financially crippling for some parents, especially if you’re simultaneously trying to pay off other debts and save for your fast approaching retirement.

If you’re struggling, here are some answers to some of the questions you may have including how to pay off Parent PLUS Loans more quickly and how to refinance Parent PLUS Loans to save money.

Why do Parent PLUS Loans have such high interest rates?

For Parent PLUS Loans disbursed for the 2020-2021 school year, the interest rate is 5.3%, which is a sharp decline from 7.08% the previous year. Depending on when you borrowed money, your rates may vary.

Interest rates on Parent PLUS Loans are generally higher than what your student would qualify for with undergraduate federal student loans. Congress sets federal loan interest rates on an annual basis, but doesn’t provide exact details about how it determines the figures.

The good news is that having a high interest rate may open up opportunities to refinance your debt at a lower interest rate than what you’re currently paying.

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How does Parent PLUS debt impact my finances?

Helping your child get through college is an admirable gesture, and there’s no right or wrong answer as to whether or not you should do it.

But if you’re not careful, borrowing money via Parent PLUS Loans or private student loans can have a significant impact on your financial well-being.

For starters, adding another monthly debt payment can make it difficult to keep up with your other debt payments. It also takes that cash flow away from other important financial goals, especially retirement.

You’ll also end up paying more interest on Parent PLUS Loans than you would if you were to agree to make payments on your child’s undergraduate student loans.

Finally, adding another debt payment to your credit report may make it challenging to get approved for credit in the future when you need it. Your debt-to-income ratio — the percentage of your gross monthly income that goes toward debt payments — is especially important when you’re trying to buy a house and need to take on a mortgage loan.

How to pay off Parent PLUS Loans more quickly

If you’re overwhelmed by your Parent PLUS Loans or private student loan debt, here are a few ways you can get rid of it more quickly.

Transfer Parent PLUS Loans to the student

While taking out parent loans can help get your child through school, it may be wise to transfer the debt to them once they’ve finished school and have the means to repay. You can refinance Parent PLUS Loans to your student (private parent loans, too) with a private student loan refinancing company.

Of course, you’ll both need to be on board to make this work, so have a conversation with your child about the arrangement before you start the application process. Also, keep in mind that refinancing student loan debt generally requires a great credit score and a solid income, so you may not be able to transfer the debt to your child until they achieve both.

If you can make it work, though, it’ll free up that monthly cash flow for other important financial goals.

Refinance your parent loans on your own

If you’re wondering how to refinance Parent PLUS Loans on your own, the process is similar to refinancing the debt in your child’s name. You’ll work with a private lender to replace your existing loans with a new one.

The primary benefit of refinancing parent loans is the potential for reducing your interest rate and monthly payment. However, you may also have the chance to shorten your repayment term. This will result in a higher monthly payment, but if you can afford it, you’ll wave goodbye to your Parent PLUS Loans faster while saving both time and money on accrued interest.

Remember, though, that you’ll need to meet relatively high credit and income standards to qualify for the best rates.

See How Much You Can Save

Parent PLUS Loan Refinance Calculator

View Details


Parent PLUS Loan rates are often the highest of any federal student loan. Calculate your savings with lower rate and see the impact of paying off PLUS loans faster.

Step 1: Enter Current Loan Information

Loan Balance
Your remaining student loan debt to be repaid.
Interest Rate
The amount that the lender charges in interest, expressed as a percentage.
Current Monthly Payment
The total amount of your monthly student loan bill.
Add Multiple Loans to Calculate

Step 2: Enter New Loan Information

New Interest Rate
Your updated interest rate after refinancing student loans.
The length of time you have to repay your student loan debt in full.

Add Multiple Loans

Insert additional loan

Step 3: See How Much You Can Save


Lifetime Interest


New Monthly



Current Loan New Loan Savings
Rate 6.7% 4.2% 2.5%
Lifetime Interest $37,520 $22,210 $15,310
Monthly Payment $1,146 $1,018 $128

Like what you see? Check your actual prequalified rates from the industry’s top lenders in just 2 minutes or less.

Make extra Parent PLUS Loan payments

If refinancing your parent loans isn’t an option for you or your child, look for opportunities to accelerate your debt payment through additional monthly payments.

If you have loans with different interest rates, consider using the debt snowball or debt avalanche method to speed up the payoff process.

With the debt snowball method, you’ll make your regular monthly payments on all of your loans except for the one with the lowest balance. Apply your extra payments to that loan until it’s paid in full. Then, tackle the loan with the next-lowest balance by applying what you were paying on the recently paid off loan in addition to its regular monthly payment until it’s paid off, too.

You’ll continue this process with each loan until you’re completely debt-free.

The debt avalanche method works similarly to the debt snowball method, but instead of targeting the loans with the lowest balances first, you’ll focus on the ones with the highest interest rates.

Neither option is inherently better, so consider your goals and preferences to make the right choice for you.

How to refinance Parent PLUS Loans: The process

Before you apply for refinancing, it’s important to remember that replacing your Parent PLUS Loans with a private loan will cause you to lose access to federal loan benefits. That includes loan forgiveness programs, the income-contingent repayment plan and generous forbearance options if you’re experiencing financial hardship.

But if you don’t anticipate needing those benefits, here are the steps for refinancing your Parent PLUS Loans, private parent loans, or both:

  • Check your credit: View your credit score and report to get an idea of where you stand. If your credit score is less than stellar, you may need to take time to improve your credit before you submit an application to refinance.
  • Shop around: It’s crucial that you compare at least three to five lenders to maximize your chances of getting a low interest rate. Use the Purefy Compare Rates Tool to view loan offers from multiple lenders in one place so you can easily find your best option.
  • Run the numbers: Depending on the interest rate and repayment term you’re considering, compare what you’ll pay each month to what you’re paying now. Also, compare the total interest charges between your current arrangement and the new one to get an idea of how much you might save.
  • Submit your application: You can get pre-qualified with student loan refinancing lenders with just a soft credit check. But to get a final rate offer, you’ll need to undergo a hard inquiry on your credit report. Try to avoid doing this with multiple lenders, as each hard inquiry can harm your credit score.

Remember: If you’re planning to refinance Parent PLUS Loans to your student, you’ll need to do this process with them to make sure it’s a good fit and they’re eligible for the transfer.

As you take steps to address your parent loans, you’ll be in a better position to tackle them in the right way and set yourself up for a better financial future.

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ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 01/01/2023. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

SoFi Rate Disclosure

3 SoFi Rate Disclosure:

Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR 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. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

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Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.72% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.39% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 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%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

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Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 6.94% to 11.58% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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