Paying for college tuition, housing, and other expenses can be hard for a young student. This is why many parents step in to help cover some of the costs associated with a college education. If you are a parent who has taken out Parent PLUS loans to help fund your child’s tuition, you may be wondering what your options to make repayment easier such as lowering your interest rate or paying off your debt faster. “Should I refinance Parent PLUS loans?” is a popular question among parent student loan borrowers. Whether your financial circumstances have changed or you are simply hoping to streamline your finances and eliminate some of your monthly payments, there are a wide variety of reasons to consider refinancing your Parent PLUS loans. Let’s take a look at student loan refinancing and how you can refinance Parent PLUS loans in order to save money over the course of your loan. Why do Parent PLUS loans have such high interest? While Parent PLUS loans are often necessary to help fund tuition, they do come with some caveats. One of these is high interest rates which may put some parents off of federal Parent PLUS loans altogether. So, what kind of interest rates are we talking, anyway? According to recent figures, the interest rate for federal direct PLUS loans is 5.30% for 2020-2021. Parents must also pay an origination fee of 4.228%, which is an amount deducted from each loan disbursement. If you are a parent on a fixed income or have recently undergone a period of unemployment or a reduction of hours, these additional fees can really ad up and become a burden. It’s also possible that these loans may become too much to afford on your own. But this is where refinancing Parent PLUS loans can help. \t\t \t\t\tDid you know? Parent PLUS Loans often have the highest rate of any federal loan.\t\t \t\tOver the past 5 years, Parent PLUS Loans have had an average rate of 6.7% — but refinance rates currently start at a historic low 1.88%.Check Your Lower Rate Options Takes 2 minutes • No impact on credit What are the benefits of a lower Parent PLUS loan rate? “Can I refinance Parent PLUS loans?” is a common question parents ask when evaluating their finances both before and during retirement. The truth is, there are plenty of benefits associated with a lower Parent PLUS loan rate. For one, securing a lower rate means you pay less money over the course of your loan than when you initially signed on. This is reason enough for many parents to explore the option of parent loan refinancing. Getting clear about your reasoning for refinancing can help make the process that much smoother. What are the primary reasons to refinance Parent PLUS loans? Refinancing Parent PLUS Loans is made easy with Purefy and it’s a process that may prove well worth it if you are really hoping to save some money on your debt. You may be considering refinancing your Parent PLUS loans for a variety of reasons. Some of the most popular reasons for refinancing Parent PLUS loans include: Lowering your interest rate Securing a lower interest rate is a big perk of refinancing. Parent PLUS loans are notoriously associated with high interest rates and fees through the federal government, which can easily snowball and become problematic to your financial goals. This can spell danger for parents who aren’t prepared or haven’t thought about what these loans could mean for their long-term plans. In fact, a high interest rate may be what is standing between you and paying off your loan as soon as you’d anticipated, which is why it’s important that you refinance…and fast. Refinancing your Parent PLUS loan can help you secure a lower interest rate through a new lender, allowing you to pay off your loan more quickly while saving the most money possible. Taking this one step alone can help you get back on track when it comes to paying off your parent loans. Consolidating your Parent PLUS loans Another big reason parents might consider refinancing their Parent PLUS loans is to simplify their finances entirely. Whether due to preference or necessity, you may have taken out several different loans in order to help pay for your child’s college education. If this is the case, you likely know what a headache it can be to juggle multiple monthly payments to multiple lenders. Not only can this eat away at your income, but also your time. The ability to streamline your student loan payments and consolidate under one lender is a major reason why so many parents turn to refinancing. And while many parents enjoy the fresh start refinancing can afford them, it’s the peace of mind that comes with one single monthly loan payment that entices many to take the plunge. If you find yourself often overwhelmed by the sheer amount of payments you are responsible for paying each month, consolidating your loans through refinancing may very well ease some of that burden. New repayment terms Financial circumstances change over time due to a wide variety of reasons. You may have agreed to a particular set of loan terms when first taking out your Parent PLUS loans, but you may be far from where you were then on the financial front. This is why the ability to refinance to an updated repayment term is so valuable for some borrowers. For instance, over the past couple of years, you may have undergone a massive career change, went through a period of unemployment, or become a one-parent household instead of two. These can all factor into your ability to repay your loans on-time with money to spare for other expenses. Whatever the circumstances may be for your financial situation, the ability to reset your loan terms and start fresh is one of the biggest benefits you’ll find with refinancing. A clean slate can help you make better decisions when it comes to your Parent PLUS loan payments. New repayment terms can mean different things to different borrowers, depending on your unique financial situation. For example, borrowers that are looking to save more money each month may choose to extend their repayment term by a number of years. This is a great move if you are hoping to lower your monthly payment, have more expendable cash, and begin building a nest egg. On the other hand, Parent PLUS loan borrowers may choose to shorten their repayment terms in order to pay off their debt faster. This is often the case for borrowers who are earning more money than expected and can therefore afford to pay more money each month toward their loans. This is a good thing as it allows you to clear debt faster while paying much less in total lifetime interest. It can also be a benefit if you are hoping to increase your credit score and lower your debt-to-income ratio. Whether you choose to extend your repayment term or shorten it, refinancing your Parent PLUS loans is like pressing the reset button on your previous loans. This is reason enough for many borrowers to take this route and begin a path to more intentional spending. Who can qualify for a Parent PLUS loan refinance? Unfortunately, while most borrowers would benefit from the financial opportunities afforded by student loan refinancing, not everyone will qualify. Your credit score, income, employment situation, and a variety of other financial factors come into play when lenders decide whether or not you are eligible for low rates on refinancing. Lenders tend to look for borrowers with a good credit history and repayment record that demonstrate trustworthiness. If these things are standing in your way, it may be time to hunker down and consider how these may be limiting you on the financial front. Some factors that lenders might take into account when determining eligibility for refinancing include: Credit score: Your credit score is perhaps the single most important factor lenders will consider when evaluating your creditworthiness. Unsurprisingly, when it comes to loans and refinancing, the highest credit holders are more likely to secure the best rates. And if your credit score is low, lenders may reject your refinancing application altogether. This is not a good place to find yourself if you are already drowning in debt. If you find yourself here, remember that you can reapply for refinancing at a later time, allowing you to take steps to improve your credit score in the meantime. Alternatively, you can apply for a refinance with a creditworthy cosigner – such as a spouse or other family member – to have a better chance at being eligible for a loan. Income and employment record: It makes sense that lenders want to work with borrowers they can trust. Do you have a strong employment record or are you constantly changing companies and positions in search of the next best thing? Lenders look for borrowers who have steady jobs and a consistent history of employment. This shows that you are earning a reasonable income and can afford to keep up with your loan payments. If you don’t have a solid employment record, you may have a difficult time with refinancing. Debt-to-income ratio: A borrower’s debt-to-income ratio can tell lenders a lot about their spending habits. But what is a debt-to-income ratio, anyway? A debt-to-income ratio signifies the amount of money you owe in relation to how much income you make. The higher it is, the less trustworthy you may appear to lenders. Debt-to-income ratio comes down to spending. If you frequently make big purchases on credit cards and only pay the minimum amount due each month, you are racking up debt without increasing your income. If your debt-to-income ratio is high, lenders may reject your refinancing application or refuse to offer you the lowest rates on refinancing. Not to mention, you may be doing yourself a big disservice by carrying debt with high-interest rates. Repayment history: Again, the importance of trustworthiness when it comes to borrowing can’t be underestimated. A solid repayment history is one of the most important things you can have as a borrower. Lenders will look closely at your past record with payments to ensure you can keep up with payments responsibly. While it isn’t technically wrong to only pay the monthly minimum due at the end of each billing cycle, doing this on high-interest credit cards isn’t doing you any favors. \t\t \t\t\tRefinancing Parent PLUS Loans is one of the easiest ways to save money!\t\t \t\tIf you’re looking to save on high-interest Parent PLUS Loans, refinancing can be the fastest and simplest strategy to secure a lower rate.See If You Qualify Takes 2 minutes • No impact on credit Step-by-step: How to refinance Parent PLUS Loans If you’re not quite sure where to begin on your path to Parent PLUS Loan savings, not to worry. It’s best to approach student loan refinancing with a clear direction so you really get the most out of refinancing. This means sitting down and evaluating what you hope to achieve through refinancing. During this time, you should also get a firm grip over your current finances. Think about what your expenses are, how much money you are bringing in each month, and what type of payment will help you pay down your debt while still working toward your financial goals. Gathering this information can help you see refinancing through a fresh perspective and a distinct purpose. There is a certain process you should follow in order to reap the full benefits of refinancing your Parent PLUS Loans. You can start with estimating your savings. This can help you determine how much you’d save by refinancing and through different lenders. Determining beforehand what type of interest rate you are looking for can help make the process of comparing lender much simpler. Next, you’ll do a thorough comparison of what different lenders have to offer you. How can each of these impact your financial goals now and in the future? Are these lenders willing to let you renegotiate your loan terms and either extend or shorten your repayment window? Are they willing to offer you an industry-low interest rate that will make savings easier for you and your family? These are all things to consider when deciding which lender to go through for your refinancing. You can also take into account things like customer service experience and ease of use for banking platforms to determine which lender and deal is right for you. Evaluating all aspects of your potential lender will ensure you make an educated decision and end up with a lender capable of helping you meet your long-term financial goals. Once you’ve found a suitable lender, you can apply for refinancing. Your chosen lender will conduct a hard credit check and determine which rate you qualify for. You will then accept the offer and begin payments to your new lender. The process is really that simple! Why refinance Parent PLUS loans with private lenders? When it comes to refinancing, remember that not all lenders are created equal, especially where the federal government is concerned. And while federal student loans have helped students attend college, there are benefits to doing business with private lenders, too. For example, the federal government may not give parents the option to transfer their Parent PLUS loans to their children, but this isn’t the case with private lenders. With a private lender, you can shift the responsibility of your loan onto your child, much as if they had refinanced the loan themselves. In order to qualify, you will need to demonstrate that your child has things like good credit, a solid loan repayment history, and a reliable income to help them make on-time payments. If they don’t meet these qualifications on their own, they may enlist the help of a cosigner. Parents seek to shift their loans to their children for a variety of reasons. For one, your child may be carrying a high credit score that makes them qualified for lower rates. Or you may wish to transfer responsibility of repayment to your child because you can no longer afford it while they can. If you find yourself in either of these situations, refinancing your Parent PLUS loans and transferring them to your child may be just what you need to get back on track with your own finances. But keep in mind that not everyone will get the most out of refinancing. For example, if you currently have federal parent loans, you may lose some benefits by refinancing through a private lender. This is something you will definitely need to consider or else you risk the consequences of losing these benefits for good. The benefits of federal parent loans come in many forms. For example, borrowers of federal Parent PLUS Loans who can’t afford payments under a standard 10-year repayment plan have the option of signing up for: A graduated repayment plan: With this, your payments will start out low and gradually increase every two years. Although your loan will still be paid off within ten years, lower payments early on can help make things more manageable. An Extended Repayment Plan: This type of repayment plan can extend your repayment period by a lot. Instead of a traditional 10-year term, you’ll have the option of a 25-year term. Yes, you will pay more in interest, but your payments will be much lower, leaving you more wiggle room each month when it comes to your spending. Direct Consolidation Loan: Direct Consolidation Loans are a good option for some borrowers. Doing so makes your loan eligible for a convenient income-contingent repayment plan. This will leave you with a longer repayment term and cap your monthly payment to a reasonable percentage of your discretionary income. This type of arrangement ensures you are never paying more than you can truly afford. Save money with a lower rate One of the biggest reasons why parents explore how to pay off parent plus loans is to save money. But before you can really begin saving, you’ll need to secure a low interest rate. Doing this isn’t always easy, but it can certainly pay off in the grand scheme of things. Lenders consider a variety of factors when deciding what type of interest rates to offer on refinancing. Your chances of securing a low interest rate will depend on things like your current income, your debt-to-income ratio, and your credit history, for example. But despite your best efforts, lenders still may reject your application for refinancing. So, what can you do when you’re declined for a refinance?? You can always explore other options like adding a cosigner. A cosigner with a strong credit score can help balance out a less-than-stellar score and perhaps help you qualify for lower interest rates that carry the potential for bigger savings. Compare Parent PLUS loan refinance rates One of the best things you can do to ensure your refinancing journey is worthwhile is to do your research. Purefy has a Compare Rates tool ideal for comparing rates between lenders. By doing this, you’ll have all the information at your disposal to make an educated decision about your loan options and which meshes best with your overall financial goals. In fact, Purefy’s Compare Rates tool can help you compare lenders in just two minutes or less. Loan refinancing isn’t something to be taken lightly. This, like most other financial decisions, should be carefully considered before coming up with a final solution. The process can vary greatly from borrower to borrower, depending on their unique financial circumstances. Unfortunately, while some parents are able to refinance loans and easily secure low rates that help them save, some borrowers may not qualify for this type of deal. This can prevent some borrowers from reaping the full benefits of refinancing. If you find yourself in this situation, it’s important that you don’t lose hope. You can instead take action and begin improving your financial situation and credit worthiness. Some steps you might want to take to improve your financial situation include paying off some of your current debt, continuing to make on-time payments, and generate more income, if possible. There are a wide variety of reasons why refinancing Parent PLUS loans might make sense for you and your family. Whether you are hoping to simplify your finances, pass the responsibility of your parent loans onto your child, or simply save same money through a lower interest rate, refinancing can do all that and more.