The Secret to Refinancing Student Loan Debt — Before Your Child Graduates

Andrew Zoeller
citizens bank refinance student loans
citizens bank refinance student loans

In most cases, the earlier student loan debt is refinanced to a lower rate, the more money that can be saved while paying it off.

So wouldn’t it be a smart idea to refinance as soon as possible — even before graduation?

If you took out federal Parent PLUS Loans or private parent loans to help your child attend college, you could refinance before they’re handed their diploma.

This is how parents are refinancing student loan debt before their child walks the stage.

Can you refinance Parent PLUS Loans or private loans while your child is still in school?

Luckily, if you’re a parent with federal Parent PLUS Loans or private parent loans, you can apply for a refinance at any time — even right after taking out your original loans.

That’s because you’re listed as the primary borrower on your parent student loans, not your child. As long as you qualify for a refinance with your credit history and income, your child’s degree isn’t needed, with most lenders that offer parent refinancing, such as PenFed Credit Union.

Considering a federal or private parent loan refinance? You could score some pretty great benefits.

For federal Parent PLUS Loans, you could get a much lower interest rate. That’s because Parent PLUS Loans often have the highest interest rate of any federal loan — meaning you could save significantly by pursing a refinance.

For private parent loans, you may also have gotten stuck with high interest rates. If that’s the case, comparing new rate offers from different lenders could be an excellent idea — especially if you recently improved your credit score, increased your income, or reduced your debt-to-income ratio. You may just be able to qualify for a substantially lower interest rate with the extra perks of choosing a new repayment term and having all your loans consolidated into one.

Refinancing Parent PLUS Loans to your child

Struggling to afford your Parent PLUS Loan payments, thanks to their high standardized interest rates?

Refinancing Parent PLUS Loans comes with an additional benefit: the option to transfer them from your name to your child’s.

Since Parent PLUS Loans are in your name, you’re entirely responsible for repaying them. And because they tend to have the highest rate of any federal loan, paying them off can be a real burden on your finances over the long term.

The ability to refinance them to your child’s name can help free up your finances for other goals, especially if money is tight.

The downside of this strategy? Your child would then be fully obligated to repay those loans, which can be difficult for a young person.

However, having a plan in place for your child to refinance all their student loan debt upon graduation — with a lower interest rate and more manageable repayment terms — can help mitigate that problem.

Your child may not be able to qualify for a refinance by themselves, especially right after graduating, based on their credit score and income. More than likely, you’d need to help by being a cosigner.

If you have good credit and a solid income, your child has a much better chance to get approved. And not only that, but your credit history could get them much lower interest rates than they could on their own.

Some lenders even offer a cosigner release after the borrower has made a certain number of on-time payments, which would take your name off the debt entirely.

What if your child is a graduate student?

If your child is pursuing a master’s or doctorate degree, they might be looking to refinance their undergraduate loans sooner than later.

After all, grad school can be very expensive. So paying off undergraduate loans with a lower rate — while finishing their next degree — can be very helpful in the long run.

This strategy may only work if your child is working while going to school and can afford the payments.

Your child’s bachelor’s degree will still qualify them to refinance with most lenders. But a high credit score and steady income will still be key factors for approval, so a cosigner might be needed.

How to discover your best refinancing option

Before your child is handed a diploma, it’s possible for:

  • You to refinance your federal Parent PLUS Loans or private parent loans to a lower rate and different repayment term, whenever you’re ready.
  • Your child to refinance undergraduate loans while they pursue a master’s or doctorate degree with most private lenders (although you may need to cosign).

And if your child is ready to take on the debt in their name, you can refinance Parent PLUS Loans from your name to your child’s.

Ready to check your refinance options? Our Compare Rates tool makes the process simple by showing you the best rates, terms, and lenders — all in one place with just one fast form. No credit check required.

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