Federal PLUS loans allow creditworthy parents to borrow money to pay for their children’s college costs. While the student receives cash to pay for school, the parent is responsible for the repayment of the loans.
You might be wondering if it is possible to transfer a PLUS loan from your parent to a student if you are a borrower. Direct transfer programs are not offered by the federal government. However, students can assume the debt and refinance it into a private student loan.
Parents and students can have advantages and disadvantages when they transfer Parent PLUS loans. It is important to understand how it works before you decide if it is worth your time.
Why would parents loan a PLUS loan to their child?
Parent PLUS loans allow parents to borrow money for their eligible undergraduate student. Parents can borrow as much as the student’s tuition costs, less any financial aid. These loans are not available for students who have received professional PLUS loans or graduate loans.
Here are some additional facts about Parent PLUS loans:
- Parent PLUS loans are similar to federal student loans but have a fixed interest rate.
- Before parents can apply for PLUS loans, students must fill out the Free Application for Federal Student Aid.
- Parent PLUS loan repayment starts once loan funds have been disbursed, unless parents request a delay while their child is in school at least 50%.
- The primary borrower is the parent and not the student. They are responsible for any loan debt.
- As part of the loan application process, parents will be subject to credit checks. If they have a poor credit history, they may be refused loans.
- Although it’s not common, parents can have PLUS loans forgiven.
Transferring PLUS loans to a student is a way for parents to stop being responsible for the loan’s repayment. Parents who wish to reduce their debt payments and allow them to concentrate on other goals such as their retirement fund or their mortgage payment might find this attractive.
If they don’t want to burden their parents financially, students may choose to transfer PLUS loans. Repaying student loans in their names can be a bonus and help students build credit. This could be a benefit if they are ready to borrow money to purchase a large item such as a home or car.
Can you transfer a Parent PLUS Loan to your child?
Federal law doesn’t allow parents to transfer PLUS loans from their children. After the loan approval, the parent is responsible for the remaining balance until it is paid. Refinance is the only option to loan a PLUS parent loan to student borrowers.
How do I transfer a PLUS Parent loan to a student?
Refinance is when you get a loan to repay a debt. To pay Parent PLUS loan debt, students can apply for a private student loan. The student is responsible for the payments and parents are no longer obligated to the debt.
Consider the pros and cons before you make a decision. These main benefits are:
- Refinancing removes the parents’ responsibility and transfers it to the student.
- Student borrowers may be eligible for a lower interest rate on a refinance loan.
- Students can create a positive credit history while they repay the loan.
Refinance Parent PLUS loans into private student loans can result in losing federal loan protections, as well as access to federal repayment options.
A cosigner is required for private student loans. Students with poor credit histories may have difficulty getting approved. It’s important to shop around for lower rates.
Many private student loan lenders offer Parent PLUS loan financing. Here are the top four refinancing options.
| Rates | Terms of repayment | Minimum credit score | Additional requirements | |
| KHESLC Advantage | 3.74% – 7.53% | 10, 15, or 20 Years | Not disclosed | For approval, students may require a cosigner. |
| Citizens Bank | 1.87% – 6.92% | 5, 7, 10, 15, 15 or 20 years | Not disclosed | Refinance of loan debts exceeding $10,000 |
| Laurel Road | 1.99% – 7.02% | 5, 7, 10, 15, 15 or 20 years | 660 | Refinance must be at least $5,000 in loan debt |
| SoFi | 4.74% – 9.19% | 5, 7, or 10-years | 670 | Refinances must be at least $5,000 in loan debt. |
It is helpful to compare the rates of different lenders when comparing Parent PLUS loan refinancing options. Check your credit score before you apply for a quote. You can also check your credit scores to determine if you require a cosigner.
You should also check the terms and rates of your repayments. Also, be aware of any fees that may apply. Some lenders might charge prepayment penalties, origination fees or application fees for student loan refinancing. Higher fees can lead to higher borrowing costs.
Refinancing is the only method to transfer a Parent PLUS loan into a student’s account. Students who are unable to qualify for a refinance loan may be able to make arrangements with their parents for payment. While the payments will not count towards their credit history, they can help parents avoid repaying the debt.