2021 NerdWallet Best-of Awards Winner for Best Student Loan Refinancing Overall Read More
2021 NerdWallet Best-of Awards Winner for Best Student Loan Refinancing Overall Read More


How to Calculate Your Parent PLUS Refinancing Savings

Kat Tretina
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As a parent, you may have helped your child pay for some or all of their college expenses. According to a 2018 study, 56% of parents are saving for their children’s college education. But with rising education costs, you may have turned to student loans to help pay for your child’s tuition and fees.

While there are limits on how much undergraduate students can take out in federal student loans, parents aren’t subject to those same rules. With Parent PLUS Loans, families can borrow up to the total cost of attendance. While that can help you cover the remaining costs, the lack of restrictions has led to a steep increase in the number of parents with student loan debt.

As of the third quarter of 2020, approximately 3.5 million borrowers had taken out over $98.3 billion in outstanding Parent PLUS Loans. That’s a 31% increase in outstanding debt from just five years ago, when 3.3 million Parent PLUS Loan borrowers owed just $71.1 billion.

If you have education debt that you took out for your child’s schooling, you may be wondering how to pay them off faster. For many, Parent PLUS Loan refinancing can be a smart way to save money and accelerate your debt repayment. Here’s how it works.

How Parent PLUS Loan refinancing can save you money

While federal student loans typically have low interest rates, that’s not the case with Parent PLUS Loans. They have the highest interest rate of any federal student loan.

Loans disbursed after July 1, 2020 and before July 1, 2021 have an interest rate of 5.30% — nearly double the rate of undergraduate Direct loans. But if you took out loans prior to July 1, 2020, your interest rate is a whopping 7.08%.

With such a high rate, it can be difficult to make progress paying down your debt. Over the length of your repayment term, you could pay thousands in interest charges, and your parent loans can hurt your finances.

That’s why refinancing your loans can make so much sense. With Parent PLUS Loan refinancing, you may qualify for a lower interest rate, allowing you to save a significant amount of money over the life of your loan.

Is Student Loan Refinancing Right for You?

Find out how much you can save with these top lenders

Precision Pricing: Pick Any Term Between 5—20 Years

Fixed Rate:

2.98% - 5.79% APR

Variable Rate:

1.99% - 5.64% APR


5 - 20 years

Minimum Income:

No minimum

Loan Limits:

$5,000 - $500,000

Refinance Student Loans With Your Spouse

Fixed Rate:

2.99% - 5.15% APR​

Variable Rate:

2.16% - 4.46% APR​


5, 8, 12, or 15 years

Minimum Income:

No minimum

Loan Limits:

$7,500 - $300,000

Loans Available Nationwide — Not Just for Iowans

Fixed Rate:

2.55% - 6.42% APR​

Variable Rate:

Not offered


5, 7, 10, 15, or 20 years

Minimum Income:

No minimum

Loan Limits:

$5,000 - $300,000

How to calculate your Parent PLUS Loan refinancing savings

To show you how effective Parent PLUS Loan refinancing can be, consider these three examples.

1. Refinancing with a 10-year term

Lisa took out $30,000 in student loans for her daughter’s college education and has an interest rate of 7.08% with a 10-year term. She decides to refinance her loan, but wants to keep the same repayment term.

Lisa has good credit, and qualifies for a 10-year loan at 5.00% interest. By refinancing her Parent PLUS Loans, Lisa saves over $3,700.

 Original Loan Refinanced Loan
Loan Balance$30,000$30,000
Loan Term10 Years10 Years
Interest Rate7.08%5.00%
Total Interest$11,948$8,184
Total Repaid$41,948$38,184
Total Savings: $3,764

2. Refinancing six-figures of debt

If you have a high loan balance, you may be wondering, “Should I refinance Parent PLUS Loans?” While so much debt can be overwhelming, refinancing six-figures of student loans can help you save thousands.

For example, Jerry took out $100,000 in student loans with a 10-year repayment term at 7.08% interest. Like Lisa, he is able to refinance and qualify for a 10-year loan at just 5.00% interest. By refinancing his debt, he saves over $12,000.

 Original Loan Refinanced Loan
Loan Balance$100,000$100,000
Loan Term10 Years10 Years
Interest Rate7.08%5.00%
Total Interest$39,825$27,279
Total Repaid$139,825$127,279
Total Savings: $12,547

3. Refinancing with a shorter repayment term

The lowest-advertised student loan refinancing rates are reserved for applicants with excellent credit who opt for shorter loan terms. If you’re willing to shorten your repayment period to five to eight years, you can qualify for a lower rate and save even more money.

For example, Carl originally had $50,000 in student loans with a 10-year repayment term and a 7.08% interest rate. By refinancing his loans, he qualified for a five-year loan at 3.75%.

Though refinancing caused his payment to increase, the savings make it worth it. Because he selected a shorter term, he was able to save $15,000.

 Original Loan Refinanced Loan
Loan Balance$50,000$50,000
Loan Term10 Years5 Years
Interest Rate7.08%3.75%
Total Interest$19,913$4,912
Total Repaid$69,913$54,912
Total Savings: $15,001

Other Parent PLUS Loan refinancing benefits

While refinancing parent student loans can help you save money, refinancing offers other benefits, too.

1. You can reduce your monthly payment

When you refinance your loans, you can reduce your interest rate or decide to lengthen your repayment term. With either approach, you can lower your monthly payments, freeing up more money for your monthly expenses.

2. You can lower your debt-to-income ratio

When you apply for a loan or credit card, lenders look at your debt-to-income ratio (DTI) when evaluating your application. Your DTI is the amount of debt you have relative to your income. The higher your minimum monthly payments, the worse your DTI, making it difficult to qualify for mortgages, car loans, or even credit cards.

By refinancing your loans, you can lower your monthly payment and improve your DTI. If you’re looking to buy a new home or take out a loan for renovations, a lower DTI can help you qualify for a loan and get a better interest rate.

3. You can pay off your debt faster

If you’re researching how to pay off Parent PLUS Loans as quickly as possible, refinancing can be a useful tool. When you refinance, you can get a lower interest rate. With a lower rate, more of your extra payments go toward the loan principal rather than interest charges, helping you pay down the balance faster. Once the debt is eliminated, you’ll have money to pursue other financial goals, such as saving for retirement.

Compare parent loan refinancing rates

If you’re not sure how to refinance Parent PLUS Loans, you may be surprised at how easy it is. With most lenders, you can submit a loan application online and get approved within minutes. However, it’s a good idea to shop around and compare Parent PLUS Loan refinancing rates before choosing a lender.

You can use Purefy’s Compare Rates tool to get quotes from top refinancing lenders in minutes, without damaging your credit score.

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