How to Refinance Parent PLUS Loans

College graduates aren’t the only ones struggling to repay student debt. If you’re one of the many parents who took out a Parent PLUS loan to help your child pay for college, you might be looking for ways to lower your interest rate or otherwise change your loan terms.

How to refinance Parent PLUS loans

Before you start the process of refinancing your Parent PLUS loans, take a moment to consider your goals. Are you primarily interested in lowering your monthly payment? Or are you mostly focused on saving money over time?

As you move forward and compare lenders, those answers will help you determine whether refinancing will help you reach these goals.

Step 1: Check your credit score and financial profile

If you haven’t checked your credit score recently, now is a good time to do so. There’s no magic number that qualifies you to refinance your loans, but most lenders are looking for scores that are at least in the mid-600s.

However, qualifying for a refinance doesn’t mean that you’ll qualify for a lower interest rate. If you want the best available rates, your credit score should be in the mid-700s or higher.

Your credit score isn’t the only thing that matters when it comes to refinancing Parent PLUS loans. Lenders will also look at your debt-to-income ratio(DTI) and verify that you have a stable source of income.

Step 2: Compare private lenders that refinance Parent PLUS loans

Refinancing isn’t something you should rush into. Take your time to compare lenders and the loan terms they offer. Most lenders have prequalification options, so they can show you your interest rate and monthly payment without putting a hard inquiry on your credit report.

Step 3: Choose between fixed and variable rates

Many lenders allow you to choose between fixed-rate and variable-rate refinancing options. With a fixed-rate loan, your interest rate stays the same as baseline rates fluctuate.

With a variable-rate loan, your rate changes with the market. That means if rates drop, you could potentially save a considerable amount in interest. However, if rates rise, you might end up paying much more than you anticipated.

Step 4: Gather your documents and apply

The exact documents you’ll need to refinance may vary by lender, but most require the following:

• Your government ID
• Your Social Security number or other proof of citizenship
• Proof of income
• A 30-day payoff statement for your current Parent PLUS loan

Most of the time, you should be able to apply to refinance your loan online.

Step 5: Review your new loan terms and sign

If you’re approved, take the time to carefully read through your loan document before signing. It’s especially important to compare your interest rate and the total amount in interest you’ll pay over time with your current loan.

Make sure you’re comfortable with the monthly payment, interest rate, and other loan terms.

Pros of refinancing Parent PLUS loans

Now you know how to refinance Parent PLUS loans. But should you? These are some of the main benefits of refinancing:

• You may qualify for a lower interest rate
• If you have multiple Parent PLUS loans, you can combine them into one
• You may be able to lower monthly payments or adjust the terms of your loan

Ultimately, if you can qualify for competitive rates, refinancing may grant you financial flexibility and save money over time.

Cons of refinancing Parent PLUS loans

Before you refinance, you should consider potential downsides as well:

• You’ll lose access to hardship protections and other federal borrower protections
• Private refinancing generally comes with strict credit and income requirements

Make sure you carefully weigh the pros and cons before committing to refinance. Remember that once you refinance a Parent PLUS loan with a private lender, you can’t switch back to a federal loan.

Improve your chances of approval by boosting your credit score

Once you know how to refinance Parent PLUS loans, you shouldn’t immediately rush to do so. If your credit isn’t in good standing, you might not qualify for a lower interest rate than you currently have, or you may not be able to refinance at all.

If you’re looking for ways to boost your credit score before you apply, Kikoff can help. We’re a credit-builder app connecting you to credit lines and other tools to help you improve your score. Download our app and get started for free today!