Transferring student loans to another person means shifting the responsibility of a student loan from one individual to another.
The idea might arise for various reasons. Maybe you’re a parent who took out a loan for a child and now wants to shift responsibility. Perhaps you’re looking into options to lower interest rates through refinancing and need a cosigner.
Whatever the reason, keep reading to find out when you can transfer student loans to another person.
In this guide:
- Understand student loan transfers
- Can you transfer student loans to another person?
- Methods to transfer student loans
- What lenders allow the transfer of student loans?
- Pros and cons
- Steps to transfer student loans
Understand student loan transfers
While transferring student loans may not be a common practice, understanding how it works can be beneficial if you’re in one of the following situations.
|Parent to child||Child to parent||Spouse to spouse|
|What this means||Transferring a federal Parent PLUS loan to a child’s name||Transferring student loans from a child’s name to a parent||One spouse transfers their student loans to the other spouse’s name|
|Why?||Child is now financially independent and equipped to assume responsibility||Parent is in a better financial position to manage payments and is willing to take over||Family strategy to take advantage of better interest rates or other benefits|
|How common is it?||Most common of the three scenarios: SoFi, ELFI, and PenFed Credit Union allow it, among others||Least common (we could not find any lenders that state they allow it)||Less common, but PenFed Credit Union allows spouses to consolidate student loans into both names|
You might see the appeal of transferring student loans in these scenarios, but it isn’t always straightforward or even possible. Keep reading to shed light on the process, limitations, and alternatives.
Can you transfer student loans to another person?
The short answer to whether you can transfer student loans to another person is that it’s complicated, and the possibilities depend largely on the type of student loan.
Let’s delve into the details:
|Federal student loans||Private student loans|
|Allowed?||Not with the federal government. The loans are issued to a specific borrower, and the government rarely permits shifting the responsibility to someone else.||Private lenders have more flexibility than the U.S. government, but many private lenders still won’t allow it.|
|What it might look like||Exceptions to the government’s policy might exist in specific cases, such as permanent disability discharge.||Lenders might be willing to allow you to refinance to modify the loan agreement to include a new responsible party, but often in specific cases (e.g., transferring Parent PLUS loans to the child).|
|Alternatives||To transfer federal student loans to another person’s name, you might need to refinance with a private lender and give up federal benefits.||Many student loan companies exist, so with persistence, you might find one that will consider your request.|
If you’re exploring the transfer of student loans, talking to your lender or a financial professional can guide you on what’s possible in your situation.
Remember, the rules governing student loan transfers can be intricate, and it’s essential to understand the legalities and potential risks before proceeding.
Methods to transfer student loans
Transferring student loans isn’t a straightforward process, but these methods that might work depending on the situation:
- Cosigner release: This method involves removing a cosigner from the loan, transferring responsibility. It works by demonstrating that the primary borrower can handle the loan on their own. For a cosigner release, the primary borrower must show a strong credit history and stable income. It’s mostly applicable to private student loans where a cosigner is listed. (Federal loans rarely require cosigners, aka endorsers.)
- Refinance into another person’s name: Refinancing allows you to replace a loan with a new one under different terms—and in this case, in another person’s name. Refinancing requires a solid credit score and stable income from the new borrower. The implications include changes in interest rates, terms, and losing federal loan benefits if refinancing federal student loans with a private lender.
Understanding these methods and discussing them with a financial professional can help you determine the best approach.
What lenders allow the transfer of student loans?
Transferring student loans is a specialized option, and not all lenders permit this practice. Here’s a look at three lenders that have specific policies regarding student loan transfers in the form of refinancing:
Best online lender
- Allows transfer of Parent PLUS loans to the child: Parents with federal Parent PLUS loans can refinance them into their child’s name, transferring the debt responsibility.
- Editorial rating: 4.9.
- SoFi offers unique benefits, such as unemployment protection, free career coaching, and various discounts.
SoFi allows parents to refinance Parent PLUS loans into their child’s name. The lender stands out with its unemployment protection feature, providing an essential safety net if you lose your job. SoFi’s free career coaching makes it a comprehensive financial partner.
Member benefits, such as referral programs and exclusive events, further enhance the SoFi experience. A 0.125% discount on additional SoFi loans makes it an attractive choice for borrowers considering multiple financial products.
- Autopay discount: 0.25% off for setting automatic payments.
- Unemployment protection: Pause payments if unemployed, with help finding new opportunities.
- Eligibility: Must have earned a degree.
- Rates (APR): 4.75% – 9.19%.
- Loan amounts: $5,000+.
- Fees: None.
- Repayment terms: 5, 7, 10, 15, or 20 years.
Best personalized support
- Editorial rating: 4.8 out of 5.
- Assigns a Student Loan Advisor to assist borrowers throughout the process.
- Like SoFi, ELFI enables parents to refinance Parent PLUS loans into the child’s name.
ELFI stands out for its personalized support, assigning applicants a dedicated Student Loan Advisor. This one-on-one guidance ensures a smooth process, particularly when transferring Parent PLUS loans to a child’s name.
ELFI doesn’t charge application, origination, or prepayment fees. Prequalifying allows borrowers to see personalized savings without harming their credit.
ELFI’s parent loan refinance option can streamline multiple loans into one payment, often at a more favorable rate. This product helps parents ease financial strain and align with their financial objectives.
- Loan amounts: From $10,000.
- Parent qualification: Must have earned a bachelor’s degree or higher from a Title IV U.S.-domiciled not-for-profit college or university.
- Minimum credit score: 680.
- Minimum annual income: $35,000.
- Rates (APR): 5.08% – 8.49%.
- Fees: Late fee of 5% or $50, whichever is less.
- Repayment terms: 5, 7, or 10 years.
- No editorial rating
- No best-for designation
- Allows spouses to consolidate student loans into both names and the transfer of Parent PLUS loans into child’s name
PenFed, a credit union, offers fixed rates starting at 7.74% APR, with no hidden fees or prepayment penalties.
Its distinctive policies, such as allowing spouses to consolidate student loans into both names, provide borrowers with unique opportunities for financial management.
- Fixed rates (APR): Starting at 7.74%.
- Fees: None.
- Special features: Spouse consolidation and Parent PLUS loan transfer.
Other private lenders may allow these options or others. However, we couldn’t find a lender in our research that allows a child to refinance student loans in their parents’ name. Always consult individual lenders to be sure, and consider exploring our article on the best student loan refinance options for a starting point.
Pros and cons of transferring student loans
Transferring student loans can be a viable option for some but may also present risks and challenges. Here are the potential advantages and disadvantages for the transferor and transferee:
For the borrower transferring the loan:
Relief from financial responsibility
Transferring the loan allows the transferor to shed the monthly payment obligation.
Potential credit score improvement
Without the debt, the transferor’s credit utilization may decrease, which might improve their credit score.
Loss of benefits
Federal loans offer certain protections and benefits you could lose when transferring to another person.
Depending on the method, transferring loans might involve legal complexities that require careful consideration.
For the borrower the loan is transferred to:
The transferee may consolidate the loan with their own student loans, potentially simplifying their financial management.
Potential lower interest rate
The transferee might secure a lower interest rate if refinancing, depending on their creditworthiness.
Increased financial responsibility
Assuming someone else’s debt adds to the transferee’s financial responsibilities and might affect their credit score.
Potential legal responsibilities
Accepting the transferred loan may entail legal obligations and requires caution and understanding.
We asked Erin Kinkade, CFP®, for advice on how can both parties minimize the risks. Here’s what she told us:
Based on the refinancing or transfer of loan the borrower is interested in, they should take these actions:
- Make sure the transfer can be done.
- Discuss the changes with the cosigner or person the loan would be transferred to to make sure they’re on the same page and there are no surprises.
- Research the viable options to determine what they can afford.
- Consult with a financial professional if they need additional guidance. Try not to make an emotional decision. Working with a financial professional can help a borrower by addressing the emotional and financial reasons one wants to refinance or transfer their loan and work them into a well-thought-out plan by weighing the pros and cons, the actual numbers, and how the decision affects their current financial condition and financial goals.
Alternatives to transferring student loans
Transferring student loans isn’t the only way to manage the financial burden. Here are two alternative strategies borrowers and cosigners might consider.
Various programs can help you with your student loan repayment, especially if you have federal loans:
- Income-driven repayment plans: Federal loans offer repayment plans based on your income, potentially reducing monthly payments.
- Loan forgiveness programs: Some professions qualify for forgiveness programs, where part or all of your loan may be forgiven.
- Deferment or forbearance: Pausing payments through deferment or forbearance can provide short-term relief, but interest might continue to accrue.
Refinancing your student loans can lead to more manageable payments:
- Lower interest rate: By refinancing with a private lender, you might secure a lower interest rate, reducing the total interest paid over the life of the loan.
- Altering loan terms: Extending the loan term can lower monthly payments but may increase total interest. A shorter term can save on interest but increase monthly payments.
- Potential loss of federal benefits: Refinancing federal loans with a private lender will cause you to lose federal protections and benefits, so weigh this decision carefully.
Steps to transfer student loans
Transferring student loans is a complex process that involves several steps. Here’s a detailed look at what you need to do if considering this option:
Review loan agreements
- Understand current terms: Know your current loan’s interest rates, terms, and benefits, so you can compare them to the new loan’s terms.
- Check for penalties: Ensure no penalties or fees are associated with transferring the loan to another person.
Consult a financial expert
- Get professional guidance: Speak with a financial expert to understand all the legal and financial implications of transferring a student loan.
- Seek customized advice: Every individual’s financial situation is unique, and professional guidance can tailor advice to your needs.
Follow lender guidelines
- Read lender policies: Each lender will have specific rules and requirements for transferring a loan.
- Complete necessary paperwork: Gather all required documents, and fill out the necessary forms accurately.
Transferring student loans may seem feasible, but it requires careful consideration. The methods of transfer vary and are associated with specific risks and alternatives. Weighing these factors and consulting with a financial professional is vital to make an informed decision.
Transferring student loans to another person is possible in some cases, but it’s not always the best solution. Understanding the methods, pros and cons, and alternatives—and seeking professional guidance—will help you make the best decision.
What types of loans can be transferred?
When transferring student loans, the options are limited to private student loans. Here’s a breakdown:
- Private student loans: Some private lenders, such as SoFi, ELFI, and PenFed, may allow the transfer of student loans between individuals, such as from parent to child or between spouses.
- Parent PLUS loans: These can be transferred to the child’s name through refinancing with specific private lenders.
- Spousal consolidation loans: In some instances, spouses can consolidate student loans into both names.
- Federal student loans: These cannot be transferred to another person except in specific circumstances. (See below.)
What are the legal implications?
Transferring a student loan involves legal obligations and potential risks for the transferor and transferee:
- Contract obligations: A new contract will be created, binding the transferee to the terms and conditions of the loan.
- Credit impact: The transferee’s credit may be affected, depending on whether the transferor makes on-time payments.
- Potential loss of benefits: The transferor might lose specific loan benefits, protections, or terms that were part of the original agreement.
- Legal responsibility: The transferee assumes all legal responsibilities for the loan, including repayment and potential default consequences.
Can federal loans be transferred?
Transferring federal student loans to another person is rarely allowed. The only exception might be in the case of a spouse’s death or a spousal consolidation loan that occurred under specific programs no longer available.
Even in those rare cases, the process is restrictive and comes with specific conditions. For most borrowers, transferring federal student loans to another person is not viable.