How to Transfer Parent PLUS Loan to Student

Every good parent wants to help their child achieve their education dreams. That’s why many families take out a Direct PLUS loan for parents. However, these loans don’t have as many benefits as Direct Loans made to students, and they can be more difficult to repay.

That’s why you might wonder how to transfer a parent PLUS loan to a student. Once it’s in your name, you can’t simply transfer it to your child. Your child can refinance it as a private loan in their own name, but there are some important things to remember.

Lender	Rates (APR)	LendEDU rating
SoFi	5.24% – 9.99%	5/5
Laurel Road	4.99% – 10.99%	4.2/5
Citizens Bank	6.49% – 12.42%	4.1/5

Best lenders to transfer Parent PLUS loan to student

Transferring a Parent PLUS Loan to a student can help alleviate parents’ financial burden and allow students to take responsibility for their own educational debt. This process involves refinancing the Parent PLUS Loan into the student’s name through a private lender. 

Here are the top student loan refinance lenders suitable for transferring Parent PLUS loans.

SoFi

Laurel Road

Citizens Bank

Can you transfer a Parent PLUS loan to your child?

The federal government doesn’t allow parent borrowers to transfer PLUS loans to their children. Once the loan is approved, it becomes the parent’s responsibility until the balance is paid. Refinancing is the only option to transfer a parent PLUS loan to student borrowers.

How to transfer a Parent PLUS loan to the student

Accepting responsibility for repaying the debt with a new refinance loan is a big deal, especially if you’re moving it from the federal student loan space to a private lender. 

It’ll require a lot of open communication between the parent and the student. Here’s a good way to do it:

1. Consider alternatives: Your child might have a hard time qualifying for a refinance loan, particularly if they’re just starting out. Make sure to have a backup plan, such as working out a payment arrangement with their parents instead. 
2. Assemble your financial picture: Collect documents showing the student’s income, bank accounts, and other details. Lenders need to review them when you apply, and it’ll help you understand your own ability to repay the loan.
3. Check your credit score: This can show you whether you need a cosigner for approval. If a cosigner is necessary, many lenders allow you to remove the cosigner after a couple of years of positive payment history.
4. Check your rates: Keep a spreadsheet of each lender’s loan details so you can make an informed decision. Before getting preapproved, check that it does a soft credit check so it won’t damage your credit. 
5. Submit an application: Pick the best lender and send in a full loan application. They may need additional documents or details, especially regarding the parent PLUS loans that’ll soon be paid off.  
6. Sign the agreement: Each private lender sets its own policies. Take note of things like forbearance limitations, cosigner releases, loan discharge options, and other borrower protections. 
7. Continue making payments on the PLUS loan: It can take some time to go through underwriting and loan dispersal, so keep making regular payments on the existing debt until you see it’s been paid off. 

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Tip

Find out more about refinancing Parent PLUS loans.

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Pros and cons of transferring a Parent PLUS loan to a student

Pros

• Student can build credit

  Refinancing in your child’s name means those payments will be recorded on their credit report. That can be particularly helpful if they’re not repaying any other debts.

• Parents don’t need to repay the debt

  The biggest advantage for you as a parent is that you are released from the legal liability and obligation to repay the loan entirely.

• Student may qualify for a lower interest rate

  If your child is very creditworthy, they might be able to save money with a lower interest rate than what you’d pay on a parent PLUS loan.

Cons

• Harder to qualify for

  Unless your child has good credit and income, you may still need to help them by cosigning for the loan, which has its own drawbacks.

• Fewer repayment options

  Federal student loans offer programs to help make your payments more affordable, which most private student lenders don’t.

• Fewer borrower protections

  Federal student loans offer more forbearance and loan discharge options, while private student loans are less generous.

• Potential for higher interest rates

  If your child doesn’t have good credit or income, they may be charged rates even higher than what you’re paying now.

Why would borrowers transfer a Parent PLUS loan to the student?

Parent PLUS loans allow parents to borrow money on behalf of an eligible undergraduate student. The Department of Education allows parents to borrow up to the student’s cost of attendance, less any other financial aid received. These loans are separate from graduate or professional PLUS loans, which the student can borrow. 

From a parent’s perspective, transferring PLUS loans to the student means they’re no longer responsible for repaying the loan. That might be attractive for parents who want to eliminate a debt payment from their budget to focus on other goals, such as funding their retirement or paying off their mortgage. 

Students may prefer to transfer PLUS loans if they’d rather not burden their parents with the debt. As a secondary benefit, repaying student loans in their name can help students build a positive credit history. That could help when they’re ready to borrow money for a significant purchase, such as a car or home. 

FAQ

Can I transfer a Parent PLUS loan to my child’s name directly?

No, you cannot transfer a Parent PLUS loan to your child’s name. The only way to effectively transfer the loan is by having your child refinance the Parent PLUS loan into a private loan in their own name. This process involves the child taking on a new loan to pay off the Parent PLUS loan, thus transferring the responsibility of repayment from the parent to the child.

Will transferring a Parent PLUS loan to my child affect my credit score?

After you and your child refinance the loan, the original Parent PLUS loan is paid off, and you, the parent, are no longer responsible for it. This can have a positive impact on your credit score by reducing your overall debt load. However, the process of refinancing might involve a hard credit inquiry, which could lower your credit score by a few points. Over time, the positive effects of having less debt should outweigh this temporary dip.

Are there any tax implications for transferring Parent PLUS loans to my child?

Generally, there are no direct tax implications for refinancing a Parent PLUS loan into your child’s name. The process of refinancing is considered a debt restructuring rather than a transfer of assets, so it doesn’t trigger any taxable events.

However, it’s always wise to consult with a tax professional to understand your specific situation and ensure there are no unexpected tax consequences. They can provide advice tailored to your circumstances and keep you informed about any relevant tax laws or changes that might affect you.

How we chose the best lenders to transfer Parent PLUS loans to students

LendEDU evaluates student loan companies to help readers find the best options for refinancing student loans. Our latest analysis reviewed 696 data points from 24 lenders and financial institutions, with 29 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.

Recap of the best lenders to transfer Parent PLUS loans to students

Lender	Rates (APR)	LendEDU rating
SoFi	5.24% – 9.99%	5/5
Laurel Road	4.99% – 10.99%	4.2/5
Citizens Bank	6.49% – 12.42%	4.1/5