Can You Transfer or Refinance a Parent PLUS Loan to a Student?

• You can’t transfer a Parent PLUS loan to your child through a federal program, but you can refinance it through a private lender.

• If your child has limited credit history, refinancing might come with higher interest rates.

• After refinancing, your child takes over the loan and becomes responsible for making payments.

No, you can’t transfer a Parent PLUS loan directly to your child through any federal program. But there’s a workaround: refinancing the loan through a private lender. Refinancing puts the loan in your child’s name, shifting the responsibility from you to them.

But, refinancing also turns the loan into a private loan, which means you’ll lose federal benefits. If programs like Public Service Loan Forgiveness (PSLF) or income-driven repayment (IDR) plans are valuable in your situation, refinancing might not be the best choice.

Related: Parent PLUS Loan Forgiveness [2024]

When you refinance a Parent PLUS loan, you’re replacing the loan with a new private loan in your child’s name. Your child becomes the borrower, and they’ll be the one to pay it back. This also means that the loan terms will change — you may get a new interest rate and repayment plan.

Most lenders require your child to have a good credit score and steady income to qualify. If your child has little credit history, they might still get approved but could face higher interest rates.

Risks of Refinancing a Parent PLUS Loan

The biggest thing to remember is that when you refinance, the loan is no longer a federal loan, and this means:

• You lose access to federal repayment plans like IDR, which help lower payments based on income.

• You also lose access to PSLF and other federal protections.

This can have a big impact on your finances, especially if the student could benefit from loan forgiveness or flexible payment options in the future.

For families who need federal benefits, refinancing might not be the best choice. But if the goal is to transfer the loan to the student and maybe get a lower interest rate, refinancing through a private lender is the best way to do it.

Related: Who Is Responsible for Paying Parent PLUS Loans?

If refinancing sounds like the right option for you, here’s how you can go about it:

Step 1: Check Eligibility

Before refinancing, your child needs to meet certain requirements. Most private lenders look for a credit score of 680 or higher and a low debt-to-income ratio. This means your child must show they have enough income to cover both living expenses and loan payments.

Why it matters: If your child doesn’t meet these standards, they might not qualify for refinancing or could face higher interest rates, making the loan more expensive over time.

If your child has limited credit history, some lenders may still offer options, but this often comes with higher interest rates.

Step 2: Find a Lender

Not all lenders offer refinancing for Parent PLUS loans. You’ll need to compare multiple lenders to find one that fits your needs.

What to look for when comparing lenders:

• Interest rates: Check both fixed and variable rates.

• Loan terms: How long is the repayment period, and how flexible is it?

• Lender reputation: Choose a trustworthy lender with good reviews.

Picking the right lender can save you money and ensure better terms for the new loan. Fixed rates stay the same, while variable rates may start low but can increase.

Step 3: Apply for Refinancing

Once you’ve chosen the right lender, it’s time to submit the refinancing application. Your child will need to choose between a fixed-rate loan with steady payments or a variable-rate loan, which can change over time.

A fixed-rate gives you predictable payments, while a variable rate might start lower but could increase, making payments harder to manage.

Step 4: Sign the Agreement

Once the lender approves the application, your child becomes the new borrower. They will sign a promissory note for the new loan, officially transferring the responsibility from you to them.

Related: How to Get a Copy of a Student Loan Promissory Note

Step 5: Complete the Transfer

After signing the agreement, the lender will pay off the original Parent PLUS loan, and your child will start repaying the new loan.

Make sure to keep making payments on the original loan until the transfer is completed to avoid late fees or penalties. If you overpay during the transition, the servicer will issue a refund.

As expert student loan lawyers, we recommend exploring other options if your child doesn’t qualify for refinancing due to poor credit or low income. Here’s what you can consider:

Cosign the Loan

If your child’s application is denied, you can cosign to help them qualify. By cosigning, you guarantee the loan, which can increase the chances of approval and secure a lower interest rate.

Be sure to check the cosigner release conditions, as many lenders require 24 to 36 months of on-time payments before releasing the cosigner.

Related: Student Loan Cosigner Rights

Hire a Personal Finance Coach

If your child struggles with credit, working with a personal finance coach can help them improve their financial profile.

A coach can guide them on how to build credit, manage debt, and set up a budget. While this won’t immediately transfer the loan, it can make refinancing possible in the future.

Timeline: Improving credit can take several months to years, so patience is key. Start with free financial resources or credit-building tools before paying for coaching.

Explore Repayment Options

If refinancing isn’t possible, parents can explore federal repayment plans to make Parent PLUS loans more affordable. For example:

• Income-Contingent Repayment (ICR): You can consolidate your Parent PLUS loan into a Direct Consolidation Loan and enroll in ICR, which bases payments on your income.

• Deferment or Forbearance: If you’re facing temporary financial difficulties, you may qualify for deferment or forbearance to pause payments for a short period.

Federal repayment plans can ease the burden of high monthly payments, and deferment or forbearance can give you short-term relief if you’re in a tough financial spot.

You can transfer a Parent PLUS loan to your child by refinancing it with a private lender. But before you make the switch, think about whether losing federal benefits is worth it.

If refinancing doesn’t make sense for your family, there are other ways to manage the loan.

For guidance on how refinancing could impact your long-term goals, book a call with our student loan lawyers to help you find solutions that lower payments while keeping federal benefits.