Student loan refinancing isn’t only for young professionals just as student debt isn’t limited to this generation. Parents of college students take out parent PLUS loans for their children and are still paying them off. This could be in addition to loans taken out for their own education and responsibilities like a mortgage or other children’s education.
Taking out parent PLUS loans is different from co-signing as the parent is solely responsible for the loan. Parent PLUS loans disbursed before July 1, 2016 have an interest rate of 6.84%. Parents often take out loans for their children to go to school so their children don’t have to take on loans themselves or because all other options have been exhausted. Parents who take out loans don’t have as much time to pay off education debt as their children who are early in their careers. At this stage in life, it’s important for parents to build up retirement savings as much as possible, especially if they are behind. The monthly payment towards a student loan could be taking away from a parent’s retirement savings by a couple hundred to a thousand dollars a month – a huge amount of money that misses out on 401K growth.
What refinancing can do for parent PLUS borrowers.
In most cases, refinancing parent PLUS loans can lower one’s interest rate and get loans on a more favorable term. It is often more beneficial to refinance as an established adult than as a young professional, as established borrowers have had time to build credit and likely have a higher income. As a more established borrower, parent PLUS refinancers often save more by qualifying for lower rates than those who are early in their careers.
We offer the option to transfer the remaining balance of a parent PLUS loan to a child who is ready to take on the responsibility of the loan. The benefits of refinancing go beyond getting the parent off the loan, as the child is able to save on interest costs and receive a more favorable term. We offer unique terms of 5, 8 and 12-years making it easier for parents (or their children) to get out of debt faster.
Many parents are still paying off their own student loans. Over a third of student debt is owed by those 40 and over. As parents or seasoned professionals get closer to retirement, they shouldn’t be worrying about their student loans. We recommend a 5-year loan term for those looking to get out of debt as quickly as possible and save the most on interest costs. We are able to combine any education loans, so if you are a parent paying off your own student loans as well as parent PLUS loans for a child, we can refinance all of your loans together.
Parent PLUS loan borrowers and student loan borrowers need to be aware of all their options for paying off student debt. It’s important to realize that you will lose federal benefits, such as public service forgiveness or income-based repayment, if you refinance with a private lender. However, if a borrower doesn’t qualify for forgiveness or need federal programs, refinancing may be the best path to save money and get out of debt faster. The best way to lower the interest rate on your federal student loan is through refinancing with a private lender – which in most cases can save thousands on interest costs. Refinancing offers many of its own benefits, like a cosigner release and the ability to work directly with the lender if the borrower comes into trouble. When you’re still paying off something from 20 years ago, it’s time to look at refinancing.