Can parent PLUS loans be transferred to students? Here’s what you should do

Parent PLUS loans, given by the United States Department of Education, assist parents in financing their child’s education by paying expenditures not covered by other financial aid. But what if a parent wants to pass financial obligation to their child? While not simple, it is feasible under certain conditions.

How Parent Plus Loan Transfers Work?

Parent PLUS loans cannot be transferred directly to students using government programs. After graduation, students can refinance the debt in their name with a private lender. To do so, the student must have good credit, a steady salary, and be prepared to take on debt. Not all lenders allow for the refinancing of Parent PLUS loans; if a co-signer is necessary, the parent may still bear some obligation. Some private lenders have co-signer release alternatives, which remove the parent from the loan if specific requirements are satisfied, such as continuous on-time payments.

Advantages and disadvantages of moving loans:

For parents, transferring the loan discharges their financial commitment and removes the debt from their credit history. This can free up credit for other financial objectives, such as purchasing a home. Furthermore, by refinancing, students may acquire a cheaper interest rate, thus saving money overall. For students, taking up the debt represents a step toward financial independence. They can reduce their monthly payments and overall financial load if they qualify for a reduced interest rate.

Furthermore, refinancing the loan with a private lender eliminates government loan perks like forgiveness programs and income-based repayment schedules. Families should carefully consider whether moving their debt is the best option. Some may prefer a shared repayment approach, in which the student makes payments while the loan stays in the parent’s name. Transferring a Parent PLUS loan to a student is a big choice that needs careful consideration. Parents and kids can assess if this financial change coincides with their long-term goals by considering the benefits and drawbacks.