[Expert Q&A] Should I Refinance My Parent Plus Loans? Pros, Cons, and Alternatives

Refinancing your Parent PLUS loans can serve several purposes: You can potentially lower your interest rate or monthly payment, consolidate numerous loans into one single monthly payment, or transfer the debt to your child.

As a Certified Financial Education Instructor (CFEI®)—and the son-in-law of a parent who successfully refinanced a Parent PLUS loan and transferred it to their child (my spouse)—I’ve become familiar with when it makes sense to refinance Parent PLUS loans and when it’s a better idea to stay the course. I’ll walk you through this decision below.

Table of Contents

1. How does Parent PLUS loan refinancing work?
2. How to refinance a Parent PLUS loan
   1. 1. Discuss options with your child/parent
   2. 2. Shop for lenders
   3. 3. Fill out the application
3. What happens when you refinance Parent PLUS loans?
4. Can Parent PLUS loans be refinanced into my child’s name?
5. When refinancing Parent PLUS loans is a good idea
   1. You want a lower interest rate
   2. You want to reduce your monthly payment
   3. You want to transfer the debt to your child
   4. You can consolidate various loans into one
6. When refinancing Parent PLUS loans is a bad idea
   1. You may be eligible for student loan forgiveness
   2. Your child cannot take on the debt
   3. You have poor credit
   4. You’re almost debt-free
7. Alternatives to refinancing Parent PLUS loans

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Best Student Loan Refinance Companies 

How does Parent PLUS loan refinancing work?

Parent PLUS student loan refinancing works much like any other type of student loan refinancing. You’ll apply with a private lender; if approved, that lender will pay off your current loan debt (from multiple loans, if applicable), and you’ll repay your remaining balance to the private lender, in monthly installments.

Parents often refinance a Parent PLUS loan to get a lower interest rate, reduce their monthly payments, or transfer the debt to their child. In that final case, the child needs to apply for refinancing, not the parent.

How to refinance a Parent PLUS loan

If refinancing a Parent PLUS loan is the right move for you, here’s what you need to do:

1. Discuss options with your child/parent

Refinancing a Parent PLUS loan often starts with a parent-child discussion:

• If you’re the student and feel you’re in strong enough financial standing to take the reins from your parent(s), let them know you’re ready to refinance.
• If you’re a parent and want to transfer the Parent Plus debt to your child, you’ll need to discuss it with them first—and get their buy-in. (You can’t move forward if your child refuses.)

But if you’re a parent and plan to keep the debt in your name, skip this step—you don’t need your child’s approval.

2. Shop for lenders

Use an online loan marketplace to search for private lenders that offer Parent PLUS loan refinancing. Only some lenders allow the student to apply so that the debt transfers to them; you may need to narrow your focus if that’s your goal.

When comparing lenders for a Parent PLUS loan refinance, consider factors like:

• Eligibility requirements: Do you have the credit score and income to qualify?
• Interest rates: Can you choose between fixed and variable, and what are the starting rates?
• Term lengths: What repayment timelines does the lender offer?
• Customer satisfaction: What’s the lender’s rating on Better Business Bureau and Trustpilot? Are there common customer complaints that make you uneasy?

3. Fill out the application

Most lenders allow you to apply online, and the process is usually fast. Ensure you have easy access to documents that might be required, such as:

• A loan payoff statement for the current Parent PLUS loan
• Proof of income and employment (W-2, paystubs, etc.)
• Identification and proof of citizenship

An application will also require a hard credit check. If your credit report is frozen, schedule a temporary thaw before applying.

What happens when you refinance Parent PLUS loans?

When you refinance Parent PLUS loans with a private lender, the lender will pay off your existing federal Parent PLUS debt(s). You’ll now have a new monthly payment with that private lender, likely at a different interest rate and with new loan terms.

The debt still remains with the parent, not the student, unless the child applies for the refinance.

Can Parent PLUS loans be refinanced into my child’s name?

A Parent Plus loan can be refinanced into your child’s name—if the lender allows it. Some lenders offering Parent PLUS loan refinancing don’t permit this; some of my favorites that do allow this include:

• SoFi: Fixed rates as low as 4.99%; variable rates as low as 5.99%
• Advantage Education Loan: Fixed rates as low as 5.95%
• Laurel Road: Fixed rates as low as 4.74%; variable rates as low as 5.04%

Just because a lender allows Parent PLUS loans to be refinanced into your child’s name doesn’t mean you’ll qualify. Because your child will take over the responsibility, they’ll be the ones to apply, meaning the lender will consider their credit and income. 

If your child is fresh out of college with an entry-level salary and no credit history, they might have trouble getting approved.

When refinancing Parent PLUS loans is a good idea

Any type of student loan refinance requires careful consideration before moving forward, but Parent PLUS loan refinances can be particularly tricky to navigate. As a parent, you must think about what’s best for your finances and your child’s.

Here are some scenarios in which I might advise parents to refinance their Parent PLUS loans:

You want a lower interest rate

If you’re locked into a high interest rate and you have the credit score and income to qualify for a more competitive rate with a private lender, it’s worth refinancing. Just make sure you’ll save on interest in the long run: A lower interest rate may sound good on paper, but if refinancing your loan extends it for several years, you still might pay more over the life of the loan.

You can use a student loan refinance calculator to see if you’ll come out ahead by refinancing—or if it will end up costing you more through the extended loan term.

You want to reduce your monthly payment

If you’re struggling to afford your monthly payment due to rising costs or a loss of income, refinancing the Parent PLUS loan could make a difference in your budget. By refinancing to a longer loan term, you’ll spread your remaining debt over more (and thus lower) payments.

This will likely make student loans more expensive in the long run. The longer the loan lasts, the more you’ll spend on interest over the life of the loan.

You want to transfer the debt to your child

One of the best reasons to refinance a Parent PLUS loan? Your child can handle the payments. After all, you took out the loan for them.

Not every Parent PLUS refinance lender allows you to transfer the debt to the student. Limit your search to lenders that permit the student to apply. And, of course, your child will have to agree to this—they’re the ones who have to apply for the refinance.

You can consolidate various loans into one

If you took out multiple Parent PLUS loans over the course of your child’s education, you likely have various monthly payment dates, perhaps with more than one lender, and at different interest rates. You may even have loans for multiple children.

This can become confusing to manage, making it easy to miss a payment—or overdraft your checking account if you’ve enabled autopay.

When you refinance these Parent PLUS loans with a private lender, they’ll all be rolled into a single loan with one interest rate and one monthly payment.

Refinancing Parent PLUS loans can make sense when there are significant savings in interest over the life of the loan, and the parent (or child) is in a good financial position to pay off the loans.

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Pros and Cons of Refinancing Student Loans

When refinancing Parent PLUS loans is a bad idea

That said, there are several scenarios in which refinancing Parent PLUS loans is not the best idea, including when:

You may be eligible for student loan forgiveness

Public service loan forgiveness is available to graduates who work in public service (U.S. federal, state, local, or tribal government office or a qualifying non-profit); students who qualify for the program must make 120 qualifying payments toward the debt before it can be forgiven.

But what if you’re the parent of a student in public service and you took out a Parent PLUS loan for them? The Parent PLUS loan is also eligible for forgiveness—kind of. To be eligible for loan forgiveness, you’ll need to consolidate the Parent PLUS debt into a Direct Consolidation Loan and then qualify for income-contingent repayments.

Why does this matter? If there’s a good chance your child will stay in public service for more than a decade—and you’ve consolidated and are now on income-contingent repayments that lower your monthly payment—you probably shouldn’t refinance. Refinancing to a private loan makes you ineligible for loan forgiveness.

Your child cannot take on the debt

If your main motivation for refinancing a Parent PLUS loan is to transfer the debt to your child, you must make sure your child is willing—and able—to manage the debt. Your child will have to be the one to apply for the refinancing if you hope to transfer the debt; if they say no, you can’t force it on them.

Even if your child is willing to take over the debt, they have to be able to qualify for the Parent PLUS loan refinance. That means they’ll need to have a credit score that is strong enough and enough income to be eligible for a refinance to a private student loan.

You have poor credit

Likewise, if you’re hoping to refinance but keep the loan in your own name—perhaps to lower your interest rate or reduce your monthly payment—you’ll need to qualify yourself. That means you need a strong credit score.

While eligibility requirements will vary by lender (and lenders consider more than just your credit score), the typical minimum credit score for a student loan refinance runs from 670 to 700. Scores in the 800s are the most likely to yield competitive interest rates; if you have a score in the high 600s or low 700s, you may not qualify for a better interest rate than the one you already have.

You’re almost debt-free

If your monthly payments are steep—or your Parent PLUS loan interest rate is higher than today’s industry average—it can be tempting to refinance. But if you’re close to paying off the loan, it may not be in your best interest to refinance, even if you can lower your payments or interest rates.

For instance, suppose you only have a year left on your Parent PLUS loan. Though it varies, student loan refinance term lengths generally range from five to 20 years. That means refinancing could add at least four years to your repayment term. Even at a lower interest rate, you’d likely spend more money since the loan is extended so dramatically.

Use a student loan calculator to determine if you’ll spend more or less money by refinancing.

With any federal student loans, it’s important to consider if you’re confident that you’re in a financial position to pay off the loan before refinancing. Once a loan is refinanced and removed from the federal system, you lose access to federal benefits, including forgiveness and temporary relief programs.

Alternatives to refinancing Parent PLUS loans

If refinancing isn’t the right fit, consider these alternatives:

• Consolidation: Federal Direct Consolidation Loans combine Parent PLUS loans into one, offering a single monthly payment. While it doesn’t lower interest rates, it simplifies repayment and may qualify you for income-contingent repayment (ICR).
• Income-contingent repayment (ICR): Parent PLUS borrowers can consolidate their loans and enroll in ICR, which caps payments at 20% of discretionary income and forgives remaining balances after 25 years.
• Parent repayment assistance programs: Some states, employers, and nonprofit organizations offer repayment assistance programs specifically for parents. These can provide grants or partial loan forgiveness.

Explore these options to maintain your federal benefits while managing debt.