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Is Refinancing the Best Way to Pay Off Parent PLUS Loans?

Andrew Zoeller
Is Refinancing the Best Way to Pay Off Parent PLUS Loan
Is Refinancing the Best Way to Pay Off Parent PLUS Loan

Before You Read, Lower Your Student Loan Payment

It’s that quick & easy — really. Our free tool checks a network of top refinance lenders and shows you options in one easy chart.
Checking rates takes 2 minutes with no impact on your credit
Federal & private loans are eligible
No maximum loan amount

Before You Read, Lower Your Student Payment

It’s that quick & easy — really. Our free tool checks a network of top refinance lenders and shows you options in one easy chart.

Checking rates takes 2 minutes with no impact on your credit
Federal & private loans are eligible
No maximum loan amount

If you helped your child pay for college with Parent PLUS Loans, you’re probably looking for solutions to get rid of them for good.

With such high interest rates, lingering Parent PLUS Loan debt can severely limit your ability to achieve life’s big financial goals — from serious ones like taking care of your mortgage or planning for retirement to fun ones like going on a trip or making home improvements.

But how do you pay off your Parent PLUS Loans — more easily and quickly — to finally free yourself up financially?

Did you know? Parent PLUS Loans often have the highest rate of any federal loan.

Over 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%.

Takes 2 minutes • No impact on credit

The answer could be as simple as refinancing.

First, what is a Parent PLUS Loan refinance?

Refinancing means that you take out a new loan from the private lender of your choosing — after qualifying, of course — who then pays off the total balance of your current parent loan(s). Student loan refinancing consolidates all your Parent PLUS Loan debt into one loan with a new:

  • Interest rate
  • Monthly payment
  • Repayment term
  • Loan servicer

benefits-of-refinancing-parent-plus-loans

The importance of paying off Parent PLUS Loans efficiently

Parent PLUS Loans historically have the highest interest of any federal student loan. That’s because each year, the federal government sets the same fixed interest rate for all Parent PLUS Loans — regardless of your credit score.

parent-plus-loan-rates-by-year

This high interest makes them essential to pay off efficiently, either by finding a way to lower your interest rate, setting a shorter repayment term, or increasing the amount you pay each month.

Benefits of refinancing Parent PLUS Loans

The federal government’s fixed interest rate on Parent PLUS Loans means there’s initially no opportunity to qualify for a lower rate, even with excellent credit history.

That’s where refinancing comes in.

If you choose to refinance and you have good credit, you may be able to get a substantially lower interest rate than what you have now. This can be a big deal for your finances and a smart decision for your family — allowing you to save a large amount of money in the process of paying off your new refinanced loan.

costs-of-parent-loan-options

Outside of saving money over the life of your loan, refinancing can have other major benefits as well including:

  • Paying off your loans faster by shortening your repayment term — with a lower interest rate and likely a higher monthly payment.
  • Getting a smaller, more management monthly payment by lengthening your repayment term — also with a lower interest rate.
  • Merging all your loans into one new loan — giving you just one monthly payment to worry about with one lender.
  • Transferring your loan payments into your child’s name — allowing them to take over the debt incurred on their behalf.

The 2 Best Companies to Refinance Student Loans

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Fixed Rate

5.48% – 8.94% APR 4

Variable Rate

5.28% – 8.99% APR 4

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Fixed Rate

5.19% – 9.74% APR 2

Variable Rate

5.72% – 9.74% APR 2

When refinancing can work for you

To be able to refinance your Parent PLUS Loans, you’ll need:

  • A strong credit history
  • At least one outstanding education loan
  • A steady income

If you meet these criteria, refinancing can be a great tool for repaying your loans with much lower interest costs. Qualified applicants can be offered significantly better rates and terms based on overall creditworthiness including credit score, income, debt-to-income ratio, and other factors.

Refinancing Parent PLUS Loans is one of the easiest ways to save money!

If you’re looking to save on high-interest Parent PLUS Loans, refinancing can be the fastest and simplest strategy to secure a lower rate.

Takes 2 minutes • No impact on credit

If your credit is not so great, do you have someone — a family member or close friend — who would be willing to cosign the loan with you?

By adding a cosigner with good credit, you may still be able to qualify for excellent refinancing options.

Is your child willing to take over your Parent PLUS Loan debt, now that they are more established in their careers?

Refinancing is a simple way to transfer your loan into your child’s name — allowing them to take control of your debt and monthly payments.

When refinancing may not be the right choice

For some, refinancing can be a powerful solution to pay back Parent PLUS Loans. But it’s not for everyone and there are drawbacks to think about.

Refinancing through a private lender means that you’ll lose federal student loan benefits like:

  • Deferment or Forbearance
  • Income-Driven Repayment Plans
  • Public Service Loan Forgiveness

pros-cons-refinancing-parent-plus-loans

If hanging on to one or more of these benefits outweighs the lower interest rate you’re offered, it may be worth forgoing a refinance.

Parent PLUS Loan repayment alternatives

Parent PLUS Loan debt can create immense strain on your monthly budget — but refinancing may not be the right option for your needs. If that’s the case, there still may be ways to repay your loans more easily.

Parent PLUS Loan Consolidation

student-loan-consolidation-vs-refinancing

Consolidating your loans with the federal government through a Direct Consolidation Loan allows you to maintain your federal benefits. Plus, the program consolidates all your federal loans into one — with a rate based on the weighted average of your current loans combined.

Because of this, you’re unlikely to save much on interest costs, but your monthly payment will be easier to keep track of.

Income-Contingent Repayment (ICR)

Parent PLUS Loans aren’t eligible for an ICR plan on their own; they need to be consolidated first with a Direct Consolidation Loan.

By entering an ICR plan, your loan payments are capped at 20% of your total discretionary income or what you’d pay with a fixed repayment period of 12 years — whichever is less. With ICR, you’re also eligible for Parent PLUS Loan forgiveness after 25 years of payments. Once your 25 years is complete, the remaining balance on your loans is discharged, and the amount that is forgiven may be subject to taxation.

ICR is a longer-term approach to repayment, but it can be helpful for those really struggling to make their current monthly payments.

Public Service Loan Forgiveness (PSLF)

Do you work for a non-profit, government agency, or other public service organization?

public-service-loan-forgiveness-eligibity

After making 10 years of qualifying payments while working for an eligible employer, PSLF discharges your remaining loan balance. However, like ICR, Parent PLUS Loans are not eligible for PSLF until they are consolidated. You must get a Direct Consolidation Loan first, and then enroll in PSLF.

Even though it’s a lot of steps, it can be worth it for those with careers in public service to have their debt forgiven after only 10 years. Unlike ICR, loan forgiveness under PSLF is not subject to taxation.

Find your best Parent PLUS Loan refinance rate

Think refinancing could be the perfect repayment solution for you? Ready to quickly find your best refinancing option?

After completing one simple form, you can instantly compare your available refinancing options from a variety of top lenders — with no credit check needed.

It’s convenient. It’s fast. It’s easy.

And with an at-a-glance look at multiple interest rates and repayment terms, you’ll know which is the best for you without having to check a bunch of different websites.

Use Purefy’s Compare Rates tool to find your lowest Parent PLUS Loan refinancing rate — and start saving money now.

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Ascent Rate Disclosure

Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills or DR Bank, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentStudentLoans.com/Ts&Cs.

Rates are effective as of 12/1/2023 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized back account each month. For Ascent rates and repayment examples please visit: www.AscentStudentLoans.com/Rates.

1% Cash Back Graduation Reward subject to terms and conditions. Click here for details.

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.

ISL Rate Disclosure

Earnest Rate Disclosure

2 Earnest Rate Disclosure:


Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.44% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.97% APR to 9.99% 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.

Advertiser Disclosure:

THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.

Earnest Rate Disclosure

Rates displayed include the 0.25% Auto Pay discount. You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.67% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.64% APR to 16.45% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination 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. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. 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. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.

Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.

Responsible borrowing tip: Explore all scholarship, grant and federal options before applying for a private loan.

Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

Advertiser Disclosure:

THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.

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 10/13/2023. 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.

ELFI Rate Disclosure

Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 12/11/2023. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

College Ave Rate Disclosure

College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
Minimum loan amount $1,000, as certified by your school and less any other financial aid you might receive.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 1/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

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