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When you refinance Parent PLUS Loans, you combine your existing Parent PLUS Loans into a new, single Parent PLUS Loan with a lower interest rate, lower monthly payment or both. Your new loan is used to pay off your old Parent PLUS Loans. With Parent PLUS Loan refinancing, you can choose new repayment terms to save money each month or to pay off debt more quickly.
There are many advantages to Parent PLUS Loan refinancing, including:
There are two ways to refinance Parent PLUS Loans:
Refinance Parent PLUS Loans in your name only
Refinance Parent PLUS Loans in your child's name
There are several reasons why you should refinance Parent PLUS Loans:
With Parent PLUS Loan refinancing, your resulting Parent PLUS Loan will be a private loan with a private lender. Therefore, if you refinance your federal Parent PLUS Loans, you would no longer benefit from federal programs such as public service loan forgiveness, forbearance or deferment, or an income-driven repayment plan, for example. If these benefits are essential to you, then you may want to refinance your Parent PLUS Loans. However, if you’re comfortable forgoing access to these federal programs to get a lower interest rate and save money, then Parent PLUS Loan refinancing can be an effective strategy for Parent PLUS Loan repayment.
You are a good candidate for Parent PLUS Loan refinancing if you meet the following criteria:
If you don’t meet these or any other requirements, you can apply with a qualified co-signer such as a parent or spouse. A co-signer can help you get approved for Parent PLUS Loan refinancing and get a lower interest rate. Each lender has its own underwriting requirements. For example, some lenders may evaluate additional criteria, such as your debt-to-income ratio. Most lenders may require that your child graduated from a Title-IV accredited college or university.
Parent PLUS Loan refinancing is a smart strategy if your child graduated from college or graduate school, you are employed, and you have high-interest Parent PLUS Loan debt.
Federal loans offer certain benefits such as financial hardship programs and public service loan forgiveness, for example, that won’t be available to you after you refinance federal Parent PLUS Loans. However, if you’re not pursuing public service loan forgiveness or don’t need income-driven repayment plans, for example, then refinancing Parent PLUS Loans may be a smart option for you.
Before you refinance your Parent PLUS Loans, most lenders let you check your estimated new rate before you submit a full application. This is called a soft credit check, and there is no impact to your credit score.
If you like your new rate, you can submit an application to refinance your Parent PLUS Loans. At that time, a lender will pull your credit. This is called a hard credit check, and your credit score is impacted by a few points. You can apply to multiple lenders within a short time frame such as a week, and it will only count as a single credit inquiry. When you make on-time payments on your new loan, you can increase your credit score over time. This is because on-time payments comprise 35% of your FICO score, whereas applying for any new loan counts as 10%.
To get the lowest Parent PLUS Loan refinancing rate, make sure to compare lenders. Most lenders reserve the lowest Parent PLUS Loan refinancing rates for borrowers with strong credit and income as well as a lower debt-to-income ratio. Variable interest rates tend to be lower than fixed interest rates, so you may be able to save money with a variable interest rate student loans. To save interest, you can also choose a shorter loan repayment term. Typically, a shorter loan repayment period such as 5 years will have a lower interest rate than a longer loan repayment period such as 20 years.
When you refinance Parent PLUS Loans, you can choose between a fixed and variable interest rate. A fixed interest rate means that the interest rate will never change for the duration of your loan. A variable interest rate means that the interest rate can change over time based on movements in prevailing interest rates.
A fixed interest rate will provide you with more certainty and predictability because you will have the same interest rate every month. Since the interest rate on a variable interest loan can change, you may have a higher or lower monthly payment over time. Typically, the starting interest rate on variable rate loans are lower than on fixed rate loans.