Student loans are not limited to students. Parents often help their children cover school fees by going into debt, often in the form of high interest Federal PLUS parental loans.
The best Parent PLUS loan repayment option is one that fits your family’s financial situation and goals, such as paying off loans quickly, getting a manageable payment, or being eligible for a loan forgiveness.
Here are PLUS parent loan repayment strategies to consider.
How To Pay Off Parent PLUS Loans Quickly
Refinance at a lower interest rate
If you want to pay off PLUS parent loans quickly, refinancing at a lower interest rate can help you get off debt faster and save you money in interest. You can refinance parent PLUS loans in your name, or the child can take over the PLUS loan by refinancing it in their name.
To qualify, you usually need good credit and enough income to comfortably pay off all of your expenses and debts, including housing, student loans, and credit cards. Refinancing is not a good option for borrowers who are asking for a student loan forgiveness or who need to make payments based on their income. You will lose these federal benefits by refinancing with a private lender.
Use this calculator to estimate how much you could save by refinancing PLUS parent loans:
Follow the standard repayment plan
How to reduce parent loan payments PLUS
Parent PLUS loan consolidation
Consolidating PLUS Parent Loans won’t save you money in the long run, but it can lower your monthly payments. It is also required to access other parent PLUS loan repayment options such as income based repayment plan and loan cancellation.
When you consolidate PLUS Parent Loans, they become a Federal Direct Consolidation Loan. You can consolidate even if you only have one parent loan PLUS.
You will have 10 to 30 years to repay the consolidated loan, depending on the loan balance. With a longer repayment schedule, you’ll have lower monthly payments, but you’ll also pay more interest over time.
Reimbursement based on income
Reimbursement based on income reduces your monthly federal student loan payment to 20% of your income or the amount you would pay on a 12-year fixed repayment schedule, whichever is less. It also offers a discount after 25 years if you are still making payments at that time.
Income-Based Repayment is the only income-based repayment plan that parents PLUS borrowers can use. To qualify, you must first consolidate your PLUS parent loans.
Switch to income-tested repayment only if you can’t afford the standard 10-year federal repayment plan payments. When repaying based on income, you will pay more interest and you will have to pay income tax on any remitted amount.
How to transfer a parent PLUS loan to the student
Refinancing with a private lender
Parents and students often share the responsibility of repaying parent PLUS loans. But legally the parent owes the debt.
If you want transfer parent PLUS loans on behalf of the student, refinancing with a private lender is your only option. Not all refinance lenders allow this, but many do. To be eligible, the student must have good credit – a mid-600 or higher score – and a low debt-to-income ratio, which means they have enough income to cover their expenses and debts.
How to Get a Parent PLUS Loan Discount
Public service loan remission
Public Service Loan Forgiveness is a federal program that forgoes nonprofit and government employee loans after making 120 monthly payments, or 10 years. Unlike income-tested reimbursement, the remitted amount will not be taxed.
Make sure you understand how to get Public service loan remission before continuing, because the program has very specific rules and requirements. For example, the parent must work for an eligible employer to get a discount on parent PLUS loans; the student’s job does not matter.
If you want to pursue the PSLF, consolidate your parent PLUS loans to switch to the income-tested repayment plan. Otherwise, you may have no balance after 120 payments to forgive.