How to Refinance Parent PLUS Loans

Last updated 03/19/2024 by

In the discussion about the student loan crisis, most of the attention goes to recent graduates. But the average parent borrows $21,000 to help a child through school, according to a study by researchers at the University of Southern California.

Much of that debt comes from Parent PLUS Loans, a federal student loan that allows parents to borrow on behalf of their student child.

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How Parent PLUS Loans work

Students are generally limited in how much they can borrow each year. But with Parent PLUS Loans, parents can borrow up to the full cost of attendance at their child’s school, less any other financial assistance the child has received.

And, unlike student-initiated loans, payments for Parent PLUS loans are due once they’re disbursed. You can request a deferment until your child is out of school, but interest will accrue during that time, so it’s best to tackle the debt immediately.

Are Parent PLUS Loan payments tax-deductible?

Yes. You can deduct the interest you pay on your Parent PLUS Loan on your tax return. The limit is $2,500. Also, “the deduction is subject to an income cap of $80,000, or $160,000 if filing a joint return,” says Jay Fleischman, student loan and bankruptcy attorney, and host of the Student Loan Show podcast.

Parents who are looking to refinance a PLUS loan with a private lender should not only weigh the cost of refinancing and the savings that come with a lower interest rate, but also consider the loss of income-driven repayment options and other protections available only to federal loans.

Note that, if you are just paying off your child’s loan, you cannot deduct the interest on your tax return, because the loan is in your child’s name.

Can a Parent PLUS Loan be transferred to the student?

Yes. However, the transfer cannot be made through the Department of Education. The student must refinance the debt in his or her name. The student must be able to demonstrate that they have the financial means to pay back the debt.

Not all refinancing lenders allow this, however. SoFi and CommonBond are the top lenders that do.

Can a Parent PLUS Loan be forgiven?

Yes. A Parent PLUS Loan may be discharged in the following circumstances:

The child for whom you borrowed dies.
You die or become totally and permanently disabled.
The school closed before the student completed the program.
The student withdrew from school, but the school didn’t pay a refund that it owed.
Through bankruptcy; you must prove that repaying the loan would cause undue hardship.

How can I lower my Parent PLUS Loan?

As with any debt, there are plenty of repayment strategies you can use to pay down a Parent PLUS Loan more quickly. However, they aren’t eligible for most income-driven repayment plans.

“Parent PLUS loans are eligible for income contingent repayment only if they are included in a Federal Direct Consolidation Loan,” says Fleischman. That’s the repayment plan with the highest monthly payment.

What’s more, you have to consolidate your loans to get access to income-contingent repayment. Also, neither consolidation nor the income-contingent repayment plan helps lower your interest rate.

Because Parent PLUS Loans tend to have higher interest rates than student-borrowed federal loans, refinancing is a great way to lower your interest rate and, in turn, lower your payments and interest paid.

Top Parent PLUS Loan refinance options

If you’re looking to refinance your Parent PLUS Loans, either by yourself or to transfer to your student, the top two options are SoFi and CommonBond. Read on to learn more about the features of each.

SoFi Parent PLUS Loan refinance program:

You can refinance as little as $5,000 or up to the cost of attendance.
No application, origination, or prepayment
There is no grace period and no options for deferment.
Offers repayment terms of five, seven, 10, 15, and 20 years.
The application process will consider your employment history, income, credit, and education.
Offers both fixed and variable interest-rate loans.

See our SoFi review page for up-to-date rates.

CommonBond Parent PLUS Loan refinance program:

You can refinance up to $500,000 in loans.
No application, origination, or prepayment
There is no grace period and no options for deferment.
You may apply for forbearance if you are suffering from economic hardship.
Offers repayment terms of five, seven, 10, 15, and 20 years.
The application process will consider your employment history, income, credit, and education.
Offers fixed, variable, and hybrid interest-rate loans.

See our Commonbond review page for up-to-date rates.

Should you refinance your Parent PLUS Loans?

If you have a solid income, a good employment history, and great credit, refinancing your Parent PLUS Loans will likely lower your interest rate.

“Parents who are looking to refinance a PLUS loan with a private lender should not only weigh the cost of refinancing and the savings that come with a lower interest rate,” says Fleischman, “but also consider the loss of income-driven repayment options and other protections available only to federal loans.”

If you feel like refinancing is right for you, check out both SoFi and CommonBond to compare their features and find out which offers the best refinancing program for your needs.

Ben Luthi

Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.

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