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How to Get a Lower Parent PLUS Loan Payment

Kat Tretina
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how-to-lower-parent-plus-loan-payment

Federal student loan
Payments Return December 31

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Federal student loan
Payments Return December 31

We've got you covered.

Get Purefy’s free 20-page Ultimate Guide with just one click.

Over the past 25 years, the average annual borrowing amount for parents has more than tripled. According to the Brookings Institute, the average Parent PLUS Loan balance is $25,600, but is steadily rising.

Worse, Parent PLUS Loans have the highest interest rates of all federal loans. While rates were slashed this past year to 5.30%, the rates for previous years were much higher — some borrowers pay as much as 7.6%.

If you’re struggling to afford the payments on your Parent PLUS Loans, you’re likely looking for alternative strategies for managing your debt, like enrolling in an income-driven repayment plan or student loan refinancing.

Below, learn about different ways to reduce your payments and how to pay off Parent PLUS Loans more effectively.

3 Ways to lower your Parent PLUS Loan payments

If you have $25,600 in Parent PLUS Loans and a 7.6% interest rate with a 10-year repayment term, your monthly payment is $305 per month. That’s like a significant chunk of your income. And, you likely have an even higher balance if you borrowed more money for your child’s education.

Luckily, there are multiple ways to reduce your monthly payments:

1. Consolidate your debt

With federal Parent PLUS Loans, one option is to consolidate your debt with a Direct Consolidation Loan. While this approach won’t lower your interest rate, it can be used to extend your repayment term. Depending on your existing loan balance, your new loan term will be between 10 and 30 years. If you’re eligible for a longer loan term, you could significantly reduce your monthly payment.

Extending your loan terms means you’ll pay more in interest charges over time. But with this strategy, your loans remain federal loans, and you get more breathing room in your budget.

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2. Apply for an income-driven repayment plan

If you have federal Parent PLUS Loans, another way to lower your monthly payment is to apply for an income-driven repayment (IDR) plan. While there are four different IDR plans, Parent PLUS Loans aren’t directly eligible for any of them. However, there is a workaround.

If you consolidate your loans with a Direct Consolidation Loan, your loans will then be eligible for one of the IDR plans: Income-Contingent Repayment (ICR). Under ICR, your monthly payment will be the lesser of 20% of your discretionary income or what you’d pay with a fixed payment over the course of 12 years, adjusted for your income.

You’ll make payments for 25 years under ICR. If you still have a remaining loan balance at the end of your repayment term, the rest of your balance will be discharged. You may have to pay taxes on the forgiven amount, but the savings can still be substantial.

While ICR can help you lower your monthly payment, keep in mind that you’ll likely still pay more in interest charges with the longer repayment term than if you remained on a 10-year repayment plan.

3. Refinance your Parent PLUS loans

If you want to reduce your payments and are willing to transfer your debt to private loans, refinancing your Parent PLUS Loans can be effective. With refinancing, you apply for a loan from a private lender for the amount of your outstanding Parent PLUS Loans. Your new private loan will have different terms.

Depending on your credit and which repayment term you choose, you could significantly reduce your current interest rate. With a lower rate, you can lower your monthly payments and even save money over the life of your loans.

For example, if you had $26,500 in Parent PLUS Loans at 7.6% interest and a 10-year repayment term, your monthly payment would be $305 and you’d pay $36,626 in total over the course of your repayment. The high interest rate would cause you to pay over $11,000 in interest charges.

If you refinanced and qualified for a 10-year loan at 4% interest, your monthly payment would drop to $258 — a savings of $46 — and you’d repay just $31,103 in total. By refinancing your loans, you’d save over $5,500 in interest charges.

 Parent PLUS LoanRefinanced Loan
Starting Balance$25,600$25,600
Loan Term$25,60010 Years
Interest Rate7.6%4%
Monthly Payment$305$259
Total Interest$11,026$5,503
Total Repaid$36,626$31,103
Savings: $5,523

If you’re wondering, “Should I refinance Parent PLUS Loans?” — keep in mind that you’ll lose federal benefits like access to IDR plans and eligibility for loan forgiveness. If you aren’t eligible for those programs, there isn’t a downside to refinancing, but make sure you weigh the pros and cons carefully before submitting a loan application.

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How to refinance Parent PLUS Loans

If you decide to refinance Parent PLUS Loans, get rate quotes from multiple lenders. Rates can vary widely from lender to lender, so it’s important to comparison shop so you get the best terms.

You can use Purefy’s Compare Rates tool to get quotes from multiple top refinancing lenders that work with parent borrowers, without affecting your credit score.

Once you find loan terms that work for you, you can complete the full application. At that time, the lender will perform a hard credit inquiry, which can impact your credit.

When you apply, the lender will prompt you to enter your personal information, including your Social Security number and your income. You also need to provide your current loan balance and lender information.

The entire application process only takes about 15 minutes to complete. By taking just a few minutes to refinance your loans, you can reduce your monthly payments and make your loans more manageable.

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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 09-01-2022. 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 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 2.24% APR to 7.99% 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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2 Earnest Rate Disclosure:

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.99% APR to 8.74% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.74% APR to 8.24% 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.

ISL Rate Disclosure

5 Iowa Student Loan Rate Disclosure:

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 3.94% to 8.48% 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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