Like a lot of parents, you may be working to pay off Parent PLUS loans that you took out when one or more of your children was in college. It was a great idea at the time — the U.S. Department of Education offers loans at a fair rate allowing you to fund up to 100% of your child’s annual education costs less any financial aid they may receive. Looking back, it was a great solution and the right thing to do as a parent. But now that they are out on their own, you are still saddled with monthly payments at a time when you would rather be looking at cutting back on work or retiring early. Whether it’s a single loan or multiple loans, it’s time to look at your options when it comes to making your Parent PLUS loan payments more manageable. Unless you’re tied to one of the federal repayment solutions, refinancing with a private lender allows you to customize your overall loan program to best suit your lifestyle. How Parent PLUS loan refinancing saves you money When you first took out Parent PLUS loans through the Federal Direct PLUS Loan Program, they were probably a terrific way to fund shortfalls in your child’s education expenses. Looking back, the interest rates may have seemed reasonable based on the country’s economic situation and prevailing rates at the time. However, now when you take a look at the interest rate you are paying for those Parent PLUS loans, they probably seem high — and they are. Over the last 20 years, interest rates have been as high as 7.9%. Even during the 2019 – 2020 academic year, interest rates were 7.079%. Combine the high interest with the moderate ease of qualifying for Parent PLUS loans and the unlimited amount available to be financed and it’s understandable why many parents ended up with a high debt burden from Parent PLUS loans. Luckily, refinancing Parent PLUS loans with a private lender allows you to consolidate numerous loans with a better interest rate that saves you monthly as well as over the life of the loan. Interest has never been lower for refinancing Parent PLUS loans and that may not last. Recently, the Federal Reserve has signaled an end to much of the economic stimulus that has been in place in one form or another for over 12 years which means interest rates will start to climb on new and refinanced loans. How refinancing can lower your parent loan payments There are several options on how to lower student loan payments, but short of having your child take over the payments on your current loan, each entails refinancing your current loan with a private lender. Refinancing your student loans allows you to customize your new terms to better meet your current needs. And unlike mortgage refinances, there are usually not any application or origination fees and no pre-payment penalties with private refinancing options. In fact, with no fees, it may be worth exploring the refinance option for as little as a 1% savings in interest rates. Consider the following possibilities: Lower Interest Rate As we’ve said, interest rates have never been this low and it may not last much longer. By refinancing your current Parent PLUS loans into one simple consolidated package with a single interest rate, your payments will be less expensive and much easier to manage. Whether you have one loan or several, refinancing allows you to bundle the total amount together into one easy payment. Longer Terms to Spread Out Payments Maybe you want to spread out your payments beyond the typical 10-year loans issued by the Direct Plus Program. Many private lenders have terms up to 20 years or more. By taking advantage of a longer repayment term, you could reduce your monthly payments significantly and use that money to focus on other things like funding a retirement account. For example, if you had $60,000 in loans with a 10-year repayment term at an interest rate of 6.7%, and refinanced to a 15 year term at a rate of 3%, your payment would go from $687 to $413 — a monthly savings of $274. Keep in mind that the longer the repayment terms, the less your monthly payments will be. The flip side is you will pay more in interest over the entire life of the loan. However, it’s also important to weigh the specifics since the current lower interest rates may make that difference inconsequential. Shorter Terms to Pay Off the Loan More Quickly If your lifestyle permits, another option would be to choose a shorter loan term which has the effect of increasing the dollar amount of monthly payments but retires the debt sooner. This may be a good option if you are nearing retirement and anticipate a notable change in future monthly income or want to put that money to work in your 401(k) as soon as possible. Again, as discussed above, the lower interest rates we are currently enjoying may offset all or most of the increase to your monthly payments while saving you substantially over the entire loan period. Transfer the Loan into a Child’s Name Now that your child has graduated and has a great new career, they may be ready to take on the responsibilities of paying their student loan debt. If they have good credit and a strong income, they may want to know how to refinance parent plus loans into their own names. Private lenders are happy to discuss refinancing existing Parent PLUS loans into the student’s name and this would relieve you completely of any further obligation to pay for the debt. Co-Sign Loan for a Child to Assume Debt If your child wants to assume responsibility for the loan or that was part of a previous agreement, refinancing is a great alternative. But what if your child has questionable credit and still wants to know how to pay off parent plus loans? You can consider co-signing a refinanced loan for the debt in your child’s name. This option still leaves you financially obligated if the child defaults on the loan, but you no longer have to make the monthly payments. Another pretty big downside to consider — your buying power is hampered due to the extra amount from the co-signed loan showing on your credit report. The good news is some private lenders will accept a co-signer release once the main debt holder has shown a good payment history, usually 12 months or more. How refinancing helps parents with multiple loans No one knows your financial situation better than you. If you count one or more Parent PLUS loans among your monthly obligations, it can complicate things and cause you a monthly headache. Instead of keeping track of different due dates and payment amounts, refinancing simplifies the entire process by consolidating everything into one simple loan. No more confusing statements or email notifications from multiple lenders. Just one simple transaction that can be made as an auto payment (which can also save you up to 0.25% on your interest rate). How to calculate your new Parent PLUS student loan payments after refinancing You know what you are paying now but what will your new payments look like after a refinance? A quick search online and you can find the mathematical formula that gives you the answer you're looking for — or you can use the Purefy Parent PLUS Loan Refinance Calculator. Purefy understands refinancing student loans and Parent PLUS loans, so we developed a calculator engine to provide you with the details needed to plan your possible refinance. Purefy's Parent PLUS Loan Refinance Calculator uses a couple of pieces of your current loan, plus future rates, to help you calculate refinance savings so you can envision future possibilities. First, all you have to do is plug in your total current loan balance, interest rate, and monthly payment. Then include your new interest rate and loan terms in number of years (an estimate will work fine here) and the engine gives you these pieces of information to compare with your current terms: Total Interest Savings Over the Life of the LoanYour New Monthly PaymentYour Monthly Savings How to determine your total Parent PLUS loan refinance savings Since you can use the calculator repeatedly, it’s a fantastic way to collect and compare different interest rates and loan terms. It can also be a great guide to see the difference between fixed and variable rate loan options. Just be cautious — variable rate loans can change annually, so there’s no guarantee on the exact savings you land on, but it gives you a great jumping-off point for the initial year. If you want more detail, the calculator has a ‘View More Details’ button that allows you to see a comparison table that outlines details of your current loan, your new loan, and any cost savings you would recognize. Don’t expect to start the process without the information that you need — with the Purefy calculator, you have access to your Parent PLUS refinance savings both monthly and in total. Examples of how much money parents can save by refinancing When it comes to these types of financial dealings, sometimes examples best illustrate the impact when you refinance student loans and calculate refinance savings. Example A Parents A took out $25,000 in student loans for their child who graduated from a public college with a bachelor’s degree. The combined interest rate for the loans totaled 7.9% and they have a total of 9 years left on the loans. Their monthly payment is $324. With a good credit history and excellent earning potential, Parents A want to retire in the next 5-8 years so retiring this debt is important for their long-term plans. Parents A find a lender and qualify for an interest rate of 2.7% for a term of five years. In this example, Parents A will pay a new monthly payment of $445, which is an increase of $121 per month. However, they will pay off the debt in five years as opposed to 9 years and save a total of $8,623 in overall interest. Example B Parents B have helped with education expenses for multiple children over the years and are left with loans totaling $164,000. Their average interest rate is 7.6% and they have 7 more years to pay off the loans. This gives them monthly payments totaling $2,523. Two of their children can pay their own student loans, so $126,000 is refinanced into their names leaving their parents with $38,000. Parents B finds a lender who offers an interest rate of 3.1% with a 10-year term. This gives them a new monthly payment of $368 and a lifetime interest savings on the $38,000 of $5,511, plus relief from the additional debt. Example C Parents C had several loans for various children that total $43,000. They have already refinanced once several years ago and have an interest rate of 8.1% to be paid over a period of 6 years. Their monthly payment on the old, refinanced loan is $756. They have decided that they would like to save as much as they possibly can each month so they can make contributions to their retirement account. They opt for a 15-year term at $2.9% interest. This reduces Parent C’s monthly payment to $294, a savings of $462 each month that can be redeployed to their retirement savings. Even with these terms, they will save $2,236 over their entire loan period. As you can see, it’s extremely helpful to be able to calculate your projected financial impact before entering the refinance process. Try the Purefy calculator to see just where you would land in a refinance scenario. Other ways to lower your Parent PLUS loan payments There may be some other opportunities to save on your interest rate. When you are looking at new lenders, see if they offer any of these programs: Automatic Payment Discount Setting up automatic payments is a lender’s dream. So much so that many lenders will offer a 0.25% rate decrease when you sign up. Lenders are in the business of lending money, and they want the assurance that their money will be repaid on time and in full. By having borrowers commit to an automatic payment schedule, it allows them to make commitments based on the knowledge that they will have the capital resources available. For you, the customer, there are benefits as well, including: It’s easy!!! No more logging into your computer to pay your bill or writing a check and finding a stamp.No late fees – you can avoid those unnecessary fees that add up.You might improve your credit score (especially if you have had overdue payments in the past).Each auto pay carries encryption which makes them safer than dropping a check in a mailbox. The one drawback to automatic payments is when there is a chance your payment amount or due date would change causing you to not pay enough or miss a deadline impacting your credit history. The most common example for student loans is when you have a variable interest rate, and the annual interest rate adjusts to a new payment amount. So be careful with any auto payments to ensure you are paying the correct amount by the appropriate due date. Relationship Discount Banks and lenders learned a long time ago that repeat business and long-term relationships are a big key to their success. And with most large banks and credit unions that offer private refinancing for Parent PLUS loans, they do more than just loan money for education loans. Check to see if your potential new lender has additional services that you might want to try, such as checking or savings accounts, auto loans, mortgage or home improvement loans, or investment services. Using one or more of their other services could get you 0.25% off your interest rate. The easiest way to compare prequalified Parent PLUS loan refinance rates As with any major financial decision, it’s always a great idea to compare the amount of money you are going to pay for a financial service. That potentially means contacting private lenders and finding out their prevailing interest rates, the terms that they carry, and any special programs they have or discounts they offer. It would be a cumbersome and time-intensive task if you had to do it one at a time. However, there is a better way. Along with the new calculator, Purefy also offers a Comparison Rate Tool where you supply several pieces of personal information (all handled securing through state-of-the-art encryption) and industry-leading private lenders vie for your business by presenting their best offers to include: Their best interest rates for both fixed and variable loansThe loan terms that they offer which are usually between 5 and 25 yearsAny exclusive offers or exclusive programs, like cosigned loans or financial hardship deferments (if needed) The best part is there are no fees and no impact on your credit report. You receive actual prequalified rates in under two minutes. Now you have prequalified offers that include interest rates, term options, and lender-specific offers at your fingertips to compare and evaluate. Once you decide on a deal that makes sense, you only need about 15 minutes to fill out and submit an application directly to the lender. Why compare Parent PLUS loan refinance rates and terms? While you hear about interest rates being tied to the Federal Funds Rate, the Overnight Lending Rate, or the Prime Rate — in reality, there can be a wide margin between one lender and another in terms of rates charged. Additionally, each lender follows their own criteria when it comes to evaluating your particular circumstances, e.g., your credit report, your debt-to-income ratio, etc. That can leave a lot open to interpretation. By using a comparison rate tool like the one offered at Purefy, you can have the confidence that each lender has been thoroughly vetted. Only financial options that are transparent and above board are presented to you, the potential borrower. Is Parent PLUS loan refinancing an effective way for me to lower my bill? Yes, interest rates are at historic lows, but that can change at any time. Unless you are taking advantage of one of the few federal repayment programs available for Parent PLUS loans, then private refinancing presents the opportunity to save the most money. For Parent PLUS loan borrowers looking to lower and consolidate their monthly payments, refinancing is a fast and effective solution. Be sure to gather all the facts. And don’t hesitate to talk with a refinance specialist at your private lender of choice or you can meet virtually with one of Purefy’s refinance experts. They are expert at helping you educate yourself on the refinance process. Wrapping Up If you have Parent PLUS loans and want to look at refinancing them to a lower interest rate, Purefy offers several tools that provide the information you need to make a sound business decision. First, the Parent PLUS Loan Calculator gives you a platform where you can research and estimate the impact different interest rates and terms would have on your existing debt. All you need is your total debt amount, your current and anticipated interest rates, your current monthly payment, and your preferred terms and you get a real-time saving run-down. Second, Purefy’s Comparison Rate Tool will help you gather prequalified rates from top-shelf private lenders who are eager to compete for your business. When you share your information, the rate tool generates real quotes for interest rates (fixed and variable, if available), terms, and other specifics, to help you make a decision on the best lender for your circumstances. Try Purefy’s industry-leading suite of tools to help you find out how to calculate refinance savings and the best lending options for you and for your future.