Sometimes, parents tend to take student loans on behalf of their children in college. These loans are taken to meet the financial needs of the student while in college. Parents take loans for their children through the parent PLUS loan. However, can a parent PLUS loan be transferred to the student? Yes, it is possible to transfer the student loan to the student, but it is not so easy to carry out. Immediately a student graduates, some parents transfer the loan back to the child, while some children take the loan from their parents.
A Parent PLUS loan is a type of loan that allows parents to take student loans for their children in college. These loans can be very useful to parents to fund their children’s schooling. This federal loan has lower credit criteria and more flexible repayment terms than other lenders, making it a good option for students.
Can a Parent PLUS Loan Be Transferred to the Student?
Federal programs do not allow parents to transfer their parent PLUS loan to the college student who benefitted from the loan taken. If a federal PLUS loan is taken, the borrower is responsible for the loan repayment until it is completed. However, there are some other ways the transfer of the loan may be possible.
The student can decide to refinance the parent PLUS loan taken by their parents through a private lender under their names. To make refinancing possible, the student will have to take out another loan to pay off the original PLUS loan. The new loan will be taken under the college student’s name, and through the private lender, they can make repayment for the PLUS loan. Unfortunately, refinancing a federal student loan comes with risks, and it is not to be taken by everyone.
How to Transfer Parent PLUS Loans to the Student
As previously stated, to transfer a parent PLUS loan to a student, the student will have to refinance the loan. Before proceeding with the loan transfer, you need to first confirm from the student if they are willing to take on the loan repayment responsibility.
Once that is confirmed, you can now proceed with refinancing the loan under the student’s name. Ensure you have good credit before processing the refinancing of the loan. However, if you have good credit, you may qualify for a lower interest rate or a more preferable repayment term. Below are the steps to follow to refinance the loan:
Step 1. Compare Lenders
Before you process the application process, you will need to compare lenders to identify the one preferable to you. Go through the loan terms to confirm if the lender agrees to refinance a parent PLUS loan in a student’s name. Some of the lenders, such as Laurel Road, PenFed Credit Union, SoFi, and CommonBond, allow refinancing to parent PLUS loans. Do not forget to check if you meet the lender’s criteria for refinancing the loan.
Step 2. Prequalify
If possible, prequalify for a refinanced loan to see the loan terms. Fill in some of the basic information required during the prequalification process to see if you are eligible for refinancing of a loan. You can also take the opportunity to check the interest rate along with its repayment term without causing harm to your credit.
Step 3. Consider Co-signing
If you have bad credit, getting a co-signer is needed to help you qualify for refinancing a loan. A co-signer with good credit gives you the upper hand at approval for a loan. However, if the borrower defaults on payment, the co-signer is left with the loan repayment, and their actions may affect your credit. Ensure you review the lender’s policies to know if they allow co-signers.
Step 4. Submit the Application
Once you find the right lender to refinance the parent PLUS loan, you can now proceed with the application completion. Provide every document such as pay stubs and identification, tax filings, driver’s license, and any other required documents.
If your lender requires a co-signer, provide the required documents of the co-signer. Every lender has a different application method. Depending on your lender, you may need to submit additional information before your refinancing loan approval.
Benefits of Refinancing a Parent PLUS Loan
There are some benefits attached to refinancing a parent PLUS loan. Some of these benefits are:
- Parents are no longer responsible for the loan repayment.
- The student can build a credit profile.
- Chances of getting a lower interest rate than your current one are guaranteed.
These are some of the benefits that come along with the benefits of refinancing a parent PLUS loan.
Disadvantages of Refinancing a Parent PLUS Loan
Just as there are some benefits to refinancing this loan, there are also disadvantages to it. Some of these disadvantages include:
- Less stretchable repayment term.
- Access to federal protections and benefits will be lost.
- Parents may still be required to stay on the loan.
These disadvantages are some of the reasons why students do not consider refinancing parent PLUS loans.
