Can I Refinance A Parent PLUS Loan with Other Student Loans?

A college education has become an expected, though costly, rite of passage for students. The average cost of a typical in-state public school, according to College Data, is slightly over $24,000 per year. It's no surprise that ever-increasing price tag has led to the growing student loan debt we face as a society.

However, one area of college financing that's commonly overlooked is Parent PLUS loans. These loans provide parents another option to help fund their child's college expenses. As students look for ways to save money on repayments, they've turned to refinancing their student loans. Parents, on the other hand, don't always have that option when it comes to saving money. Take the following into consideration when looking to refinance Parent PLUS loans.

You Have Few Options with Refinancing

There has been considerable growth in the student loan refinancing industry. New graduates entering the job force with considerable debt have more refinancing options than ever to lower their monthly student loan payments. The same is not true for parents with PLUS loans as they're made directly to the parent.

With the Department of Education reporting that parents hold $62 billion in associated debt, this is an issue affecting many Americans. Unpaid student loan debt can create problems for aging parents in a number of ways, including:

  • Needing to put off retirement to repay loans
  • Living on a limited income if in retirement
  • Fewer assistance plans than found with student loans disbursed directly to students

Worse yet, Parent PLUS Loans typically carry a higher interest rate – currently just below 7 percent, according to the Government's website. This would make it seem as if parents are stuck repaying PLUS Loans with no recourse. Thankfully, that's not the case.

All Hope is Not Lost

While Parent PLUS Loans aren't eligible for refinancing in the strict sense of the word, there are several options available to those who want to lower their repayments – or get rid of them altogether.

The first option to refinance a Parent PLUS Loan is the traditional refinancing route. As the current PLUS Loan interest is just under 7 percent, this can potentially save a good amount of money as refinance rates are typically lower. Parents don't refinance the loans themselves; rather, as their children refinance their loans, the parents' PLUS loans can be rolled into the child's package.

There are a few things to consider with this option:

  • You need to make sure both parent and child are on the same page
  • The child will now be legally responsible for repaying the loan, not the parent

Assuming both parties are in agreement, this can be a good way to absolve parents from student loan debt so they can focus on other needs like retirement planning. If refinancing with a child's loans is not an option, parents can also consider taking a personal loan at a lower interest rate and possibly with an income sensitive repayment plan as well.

Keep the Whole Picture in Mind

It's understandable that parents want to help their children through college. On many levels, it's the loving thing to do, though it does not come without cost. Options are plentiful for students to refinance their loans to lower rates, though the same can't yet be said about Parent PLUS Loans. This is why the entire picture must be taken into consideration when taking out a PLUS Loan and deciding how to repay it.

While parents may make more than their children in the present, that won't always be the case. That's also not to mention the impact it can have on the a parent's retirement planning, which can impact both the parent and child in the long run.

The Bottom Line

There are options available to refinance Parent PLUS Loans, though they're not as prevalent as those for students. Be wise in your planning so as to not overburden yourself or your child with unnecessary debt.

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