Can You Transfer a Parent Plus Loan to a Student?
If you want to know how to transfer a parent PLUS loan to a student, the answer is simple: Your student can take on the loan by refinancing it in their own name. As long as the student can qualify to refinance on their own, they can assume full responsibility for the debt.
But knowing whether this is a good idea isn’t always so simple. Here’s how to refinance parent PLUS loans in your child’s name and how to decide whether it’s the right move for both of you.
Can a parent PLUS loan be transferred to a student?
Parent PLUS loans are made directly to parents for their child’s education. Under the current rules, parents cannot transfer these federal loans to a child, and they are solely responsible for paying back the loan.
But there is a way to get around this if you’re thinking about how to transfer the parent PLUS loan to the student. It’s possible to refinance parent PLUS loans in your child’s name.
To refinance parent PLUS loans, your child will need to apply and be approved for the loan through a private student loan lender. They will likely have to supply information about their financials, credit score, school and degree.
Each lender will have varying eligibility requirements — typically, though, lenders want the child to prove they have the financial means to pay back the loan themselves.
How to transfer a parent PLUS loan
To refinance and transfer the parent PLUS loans to your child, follow these three steps:
- Ask your child to apply for a student loan in their name: You can help your child complete the application, but the lender may approve or reject it based on their information alone.
- Include the parent PLUS loan on the refinancing application: Be sure to note that it is under your name.
- If approved, the lender will issue your child a new loan: Once that’s done, the new loan can be used to pay off your parent PLUS loan(s).
Keep in mind that the new loan will typically have different terms and conditions than your parent PLUS loan, as well as a different interest rate.
Unlike your existing loan, the new loan will be entirely in your child’s name, which means they will be solely responsible for making payments. If you’re worried about your child’s ability to repay the loan on their own, you could also consider cosigning the loan for them.
| Pros and cons of refinancing parent PLUS loans | ||
|---|---|---|
| Pros | Cons | |
| You will be released from the responsibility of paying back the loan. | By refinancing with a private lender, your child will lose access to certain federal student loan protections. | |
| Your child will have the opportunity to work towards building their credit score | Your child will have to assume responsibility for paying back the loan. | |
| Your child could potentially be given better loan terms. | Once you refinance federal student loans, you can’t reverse the process. | |
Pros of refinancing parent PLUS loans
There are some benefits to refinancing parent PLUS loans to the student, such as:
- The parent would be released from the original loan.
- The child could build credit by making on-time payments.
- The child may be given better terms on their new loan, depending on the rate environment.
The main benefit of transferring a parent PLUS loan to a student is that, as the parent, you would be released from your financial obligation to pay the loan. This could potentially give you the freedom to pursue other financial goals.
In addition, this transfer can be a way to give your child more financial responsibility. If they can manage to keep up with their loan payments and make them on time, they will likely be able to build their credit score.
Cons of refinancing parent PLUS loans
However, before you decide to transfer your parent PLUS loan(s) to the student, there are some potential downsides you should also be aware of, including:
- By refinancing with a private lender, you’ll lose federal student loan benefits, such as access to income-driven repayment options and Public Service Loan Forgiveness (PSLF).
- The legal liability for the loans will be transferred to your child, meaning that your child will now have to repay the new loan.
- The process is not reversible.
If you want to refinance parent PLUS loans, you and your child should be on the same page. Both of you need to make sure that you understand the financial and legal implications of refinancing and have a firm grasp of what you may be giving up.
Consider contacting the Federal Student Aid Information Center for assistance with making your decision.
Alternative options for immediate relief
Even if you know how to transfer parent PLUS loans to the student, you might decide this move isn’t right for you and your family, especially if you’re relying on federal benefits. Fortunately, you have a couple of other options for managing your parent PLUS loan(s).
For one, you could explore an income-contingent repayment (ICR) plan, which adjusts your monthly payments in accordance with your discretionary income. Note that you’ll have to consolidate your parent PLUS loan(s) before they’re eligible for ICR.
Another option is loan forgiveness through a program like Public Service Loan Forgiveness. If your job makes you eligible for PSLF or a similar program, you could get some or all of your balance canceled. You would also have to consolidate your parent PLUS loan(s) with this option, as PSLF requires that you repay under an income-driven repayment plan.
In addition, some employers even offer student loan repayment assistance to help indebted employees.
While none of these options will get rid of your debt overnight, they could provide relief. And if you do decide to refinance your parent PLUS loan(s) in your child’s name, you could say goodbye to your debt for good.