As a parent, it’s your job to make sure your kids are okay. That’s why back when they needed help with money for college, you gladly took out loans. But, the loans are getting harder to manage so you’re thinking about refinancing. You wonder: How can I refinance my parent PLUS loans? Can I refinance my child’s student loans?
Here’s everything you need to know about refinancing your child’s student loans.
Refresher on Refinancing
When you refinance a loan, you’re allowing a lender to pay off your current loan. They’ll then give you a new loan, oftentimes with better loan terms, to pay them back. Better terms like lower interest rates can save you a lot of money in the long run. Take a look at the table below to see what we mean.
| Original Loan | New Loan A | New Loan B | |
| Loan Amount | $30,000 | $30,000 | $30,000 |
| Interest Rate | 7% | 3% | 3% |
| Repayment Term | 10 years | 10 years | 5 years |
| Total Interest | $11,799.05 | $4,761.87 | $2,343.64 |
Notice how the total interest paid keeps going down. New Loan A has a lower interest rate and saves you around $7,000. New Loan B has a lower interest rate and a shorter repayment term. This not only lowers the interest even more but also helps you pay off the loan faster. As you can see, refinancing can translate into big savings. That’s why it can be a great move for you.
How to Refinance Parent PLUS Loans
Decide if Refinancing Is Right for You
Before you begin the process of refinancing, you need to make sure that refinancing is right for you. Consider the types of loans you have. Are they private or federal loans? Think about your financial goals. Will refinancing now help you meet them? Finally, make sure you’re in a position where you’ll get better loan terms. It’s not worth it if you get similar or worse terms than before.
Compare Parent Loan Refinance Rates
Use Sparrow to help you find the best parent PLUS loan refinance rates. The Sparrow application matches you with what you qualify for from our 17+ partnering lenders. You can then compare refinance rates side-by-side, helping you narrow down your options to see which is best for you.
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Choose Which Lender You Want to Work With
When it comes to choosing a refinance lender, think about what you want in your new loan. Do you want a shorter term? Who offers the best student loan refinance interest rate? Do they offer any benefits? These are just some questions you should ask yourself to figure out which lender you want to work with.
Complete a Formal Application With the Lender
Once you’re ready, fill out and submit a formal application with the lender. You’ll also have to submit additional documents with your application. These include:
- Loan statements
- Proof of income/employment
- Proof of residency
- Proof that your child graduated and from what school
Can I Refinance Private Parent Loans?
Yes, you can refinance private parent loans. As long as you can get better loan terms, there are few downsides to refinancing your private loans. To qualify, you’ll need at least a good credit score and a stable income. A typical credit score that qualifies is at least in the high 600s, and the higher that score is, the better. Each lender will also have additional requirements that you must meet, so be sure to check on that.
Can I Refinance Parent PLUS Loans?
Yes, you can refinance your Parent PLUS Loans. It’s not much different from refinancing private student loans, so all of the information above still applies. However, when you refinance a federal student loan, you’ll lose out on federal benefits. This includes benefits like income-driven repayment plans and possible loan forgiveness. For this reason, you’ll want to weigh the pros and cons to decide whether refinancing is worth it to you.
Can I Refinance a Student Loan as the Cosigner?
While refinancing may take you off as a cosigner, you cannot refinance the loan. As a cosigner, you’re there more to vouch for the primary borrower. Even though you also take on responsibility for the loan, only the primary borrower is fully in charge of it. So, only they can start the refinancing process.
If you’re not looking to be a cosigner anymore, some lenders offer cosigner release options. Lenders will release cosigners after borrowers have made a number of on-time payments. Have your child check with their lender to see if they offer this.
Benefits of Refinancing Parent Loans
Regardless of your loan situation, refinancing your parent loans has great benefits. For one, you can save a lot of money on your loans. The earlier table showed how that was true. Yet, that isn’t the only benefit.
If you have multiple private student loans, you have the option to consolidate them when you refinance. That way, instead of making many monthly payments, you’ll only make one. Refinancing can also transfer the loan to your child. This will help them build a credit history and release you from the debt.
Final Thoughts from the Nest
Refinancing can be a challenging process, but it pays off in the end. It can be good for both you and your child. When you’re ready to start the process, use Sparrow to help you. All you have to do is fill out the application, which won’t take long. Fill out the application now, and let us support you so you can focus on the other goals you have.