Federal PLUS loans offer creditworthy parents the option to borrow money to help their children pay for college. The student can get cash for school while the parent bears responsibility for repaying the loans.
If you’re a borrower, you might wonder how to transfer a parent PLUS loan to the student or whether it’s possible. The federal government doesn’t offer any type of direct transfer program. Still, there are no restrictions on having students assume the debt by refinancing it into a new private student loan.
Transferring Parent PLUS loans can offer advantages and disadvantages for parents and students. Understanding how the process works can help you decide whether it makes sense.
In this guide:
- Why would borrowers transfer a Parent PLUS loan to the student?
- Can you transfer a Parent PLUS loan to your child?
Why would borrowers transfer a Parent PLUS loan to the student?
Parent PLUS loans are a way for 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.
Additional facts about Parent PLUS loans include:
- Like other federal student loans, Parent PLUS loans have low, fixed interest rates.
- Students must complete the Free Application for Federal Student Aid (FAFSA) before parents apply for PLUS loans.
- Parent PLUS loan repayment begins once loan funds are disbursed unless parents request a deferment while their child is enrolled in school at least half-time.
- The parent, not the student, is listed as the primary borrower and is responsible for the loan debt.
- Parents are subject to a credit check as part of the application process and may be denied loans if they have an adverse credit history.
- While not typical, it is possible for parents to have PLUS loans forgiven.
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.
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
When you refinance, you take out a new loan to pay off a debt. Students can apply for a new private student loan to pay off Parent PLUS loan debt. They’re responsible for payments to the new loan, and their parents no longer have any obligation to the debt.
Before you make a decision, consider the pros and cons of refinancing Parent PLUS loans. Here are the main advantages:
- Refinancing eliminates parents’ responsibility for the debt and shifts it to the student.
- Student borrowers may qualify for a lower interest rate on a refinance loan.
- Students can build positive credit history as they repay the loan.
However, refinancing Parent PLUS loans into a private student loan means losing federal loan protections and access to federal repayment options.
In addition, with the new income-driven repayment waiver in place, it may be prudent to keep the PLUS loan, depending on the forgiveness schedule. Many students work out an arrangement to take over the payments for the parent to not lose the benefits that come along with a federal loan.
Students with limited credit history may find it challenging to qualify for a private student loan without a cosigner. Lower rates aren’t guaranteed, so it’s essential to shop around.
Several private student loan lenders offer Parent PLUS loan refinancing. Here’s how four top refinancing options compare.
|Rates||Repayment terms||Minimum credit score||Other requirements|
|KHESLC Advantage||4.24% – 7.52%||10, 15, or 20 years||Not disclosed||Students may need a cosigner for approval.|
|Citizens Bank||5.39% – 10.78%||5, 7, 10, 15, or 20 years||Not disclosed||Must refinance at least $10,000 in loan debt.|
|Laurel Road||4.49% – 7.40%||5, 7, 10, 15, or 20 years||660||Must refinance at least $5,000 in loan debt.|
|SoFi||5.09% – 8.99%||5, 7, or 10 years||670||Borrowers must refinance at least $5,000 in loan debt.|
When comparing Parent PLUS loan refinancing options, getting rate quotes from multiple lenders is helpful. Also consider repayment terms and any fees, such as application fees, origination fees, or prepayment penalties. The higher the fees, the higher your overall cost of borrowing.
Keep a spreadsheet of each lender’s loan details so you can make an informed decision. Before applying for a quote, check whether it will affect your credit scores, and apply to multiple lenders at once to minimize the effect on your credit score.
Checking your scores can also give you an idea of 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.
Refinancing is the only way to transfer a Parent PLUS loan to a student’s name. If students can’t qualify for a refinance loan, they could work out a payment arrangement with their parents instead. The payments won’t count toward their credit history but can save parents from repaying the debt themselves.