One of the messiest situations in student loan refinancing arises when a student is trying to consolidate and refinance their loans that were taken out by their parents to help them pay for school.
This is a common occurrence because while in school, students are only allowed to borrow a certain amount in federal loans, and many times the student’s parents can take out additional funds in the form of a Parent PLUS loan to coverthe rest of the bill.
The problems arise when parents ask their student to pay back the loans that are now in their name.
Going through this refinance process can be a hassle–but it’s not impossible. Here’s how it works.
Students cannot directly take over Parent PLUS loans
According to the U.S. Department of Education, the Parent PLUS loan belongs to the parent–no matter who is making the payment each month.
This means that none of the federal consolidation or repayment programs available to the the student will apply to the portion of their debt that is technically owned by the parents.
This can seem like a major bummer–are students just stuck carrying debt in their parent’s name forever until the balance is paid off? Not quite. There are some other options.
Private lenders will sometimes allow students to refinance parent loans into their own loan
One way that students can simplify their student loan debt and consolidate parental loans with their existing student loans is to refinance through a private lender.
This process works much the same way as any loan refinance–you will essentially be taking out a new loan that is used to pay off the balances of your old loans. But, the difference is that lenders have become more flexible in terms of combining these parent loans with student loans to allow you to refinance it all into one monthly payment, and even extend the terms of repayment over 20 or 25 years in some cases.
There are ways to accomplish this, and the process for doing so is fairly simple. But, that doesn’t mean it’s always the best idea.
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Be careful with your debtto income ratio
One thing to very carefully consider before consolidating your parents’ loans with your own is what impact it will have on your credit rating and how that will effect you over the life of that loan.
For example, if you went to an expensive college and end up consolidating all of your debt into a total sum of $100,000, but you only have an annual salary of $40,000, it will be very difficult for you to get a loan for a car or a house until you’ve paid off a significant portion of that debt.
On the other hand, if those loans remained in your parents’ name, then only the amount that you owed would appear on your credit history. You may still have a high income-to-debt ratio, but it might not be as bad as asituation where you consolidated your parental loans on top of that.
FAQs
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.
Can a student take over a parent PLUS loan? ›
Yes, your Parent PLUS Loan can be transferred to your child. The best way is to refinance the loan with a private lender under your child's name.
Can I take parent PLUS loans from my parents? ›
Can the loan be transferred to the student? No, a Direct PLUS Loan made to a parent cannot be transferred to the child.
Can graduate students take out parent PLUS loans? ›
Parent PLUS Loan Eligibility
PLUS loans are only available to the biological or adoptive parents of undergraduate college students (that's the Parent PLUS) or for students enrolled in graduate or professional schools (that's the Grad PLUS).
Can I consolidate parent PLUS loans with my student loans? ›
Do not consolidate Parent PLUS loans with other federal student loans. Parent PLUS loans do NOT qualify for all of the income-driven repayment plans and loan forgiveness programs. If you combine other loans with Parent PLUS, you will lose those options for your non-Parent PLUS debt.
Can the student pay the parent PLUS loan? ›
Yes, your child can make the monthly payments on your Parent PLUS loan. If you want to avoid having your child apply for student loan refinance, you can simply have them make the Parent PLUS loan payment each month. However, it's important to note that the loan will still be in your name.
What is the parent plus double consolidation loophole? ›
Quick Facts. Double consolidation loophole allows Parent PLUS borrowers to potentially lower monthly payments and qualify for the SAVE Plan. This strategy is set to close on July 1, 2025. Start the process by March 2025 to ensure completion before the deadline.
How to get rid of parent PLUS loans? ›
Parent PLUS Student Loan Forgiveness
After consolidating with a Direct Consolidation Loan, Parent PLUS Loans can be forgiven through two programs: Income-Contingent Repayment (ICR) or Public Service Loan Forgiveness (PSLF).
Are parent PLUS loans forgiven after 20 years? ›
Changing plans can lead to debt relief
The ICR plan has another hidden benefit: it forgives parent borrowers' remaining balance after they've made 25 years' worth of qualifying payments.
Are parent PLUS loans forgiven at age 65? ›
No, the federal government doesn't forgive student loans at age 50, 65, or when borrowers retire and start drawing Social Security benefits. So, for example, you'll still owe Parent PLUS Loans, FFEL Loans, and Direct Loans after you retire.
Unlike all other federal student loans, there are no explicit borrowing limits for parent PLUS loans. Parents may borrow up to the full cost of attendance, which is determined by the institution, not the government, and includes books, travel and living expenses.
Can you inherit parent PLUS loans? ›
Parent PLUS Loans are forgiven when the parent or the child from whom they borrowed the loans dies. Your surviving family members can't inherit the debt. Before that day comes, there are other opportunities to get rid of your student loan debt.
Can parents defer parent PLUS loans? ›
If you're struggling to make your Parent PLUS Loan payments, you can explore temporary relief options like deferment or forbearance. Both of these provide short-term solutions but can lead to a higher loan balance as interest continues to grow.
How can a student take over parent PLUS loan? ›
Bottom Line. So, can Parent PLUS loans be transferred to a student? It is possible… if you refinance your Parent PLUS loan to your child. They'll then take over responsibility for their educational debt, and it could help them build credit.
What is the fastest way to pay off a parent PLUS loan? ›
How to Pay Off Parent PLUS Loans Faster: 7 Ways
- Make Payments While the Student Is In School. ...
- Apply for Public Service Loan Forgiveness (PSLF) ...
- Transfer Loans to Student. ...
- Make Extra Payments. ...
- Take Advantage of Employer Repayment Assistance Programs. ...
- Sign Up for Automatic Payments. ...
- Refinance Your Parent PLUS Loans.
Can more than one parent borrow a PLUS Loan? If a student's parents are divorced, both the custodial and non-custodial parent may borrow a PLUS Loan for their dependent, undergraduate student.
Can you transfer a student loan to a parent? ›
No, you can't transfer federal loans to another person unless you're willing to refinance with a private lender. This will allow you to transfer the debt burden, but you'll lose federal benefits if you refinance.
How can I get out of paying my parent PLUS loan? ›
Loan forgiveness
PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under an approved repayment plan while working full-time for a qualified employer. If your income is low enough, your payments could be as low as $0 per month, according to the government.
