Best Lenders to Refinance Parent PLUS Loans in 2024

Refinancing Parent PLUS loans can be a strategic move to ease the financial burden on parents who have taken out loans to fund their child's education. In this article, we will explore the intricacies of Parent PLUS loans, discuss the top lenders for refinancing these loans in 2024, delve into the optimal timing for refinancing, provide a step-by-step guide on how to refinance, examine the pros and cons of this financial decision, present alternative options, and address frequently asked questions to help parents make informed choices.

What Are Parent PLUS Loans?

Parent PLUS loans are federal loans that parents can take out to help pay for their child's education. These loans have fixed interest rates set by the government, and eligibility is not based on financial need. While Parent PLUS loans offer a source of funding for education, they come with certain drawbacks, such as higher interest rates compared to other federal student loans. Refinancing Parent PLUS loans involves obtaining a new loan from a private lender to replace the existing federal loan, potentially resulting in a lower interest rate and better terms.

Key features of Parent PLUS loans include:

• Credit Check:Unlike other federal student loans, Parent PLUS loans require a credit check. However, the credit requirements are not as strict as those for private loans.
• Fixed Interest Rates:Parent PLUS loans have fixed interest rates set by the federal government. The interest rate is typically higher than rates for other federal student loans.
• Flexible Borrowing Limits:Parents can borrow up to the full cost of their child's education, minus any other financial aid received.
• Repayment Options:The standard repayment plan for Parent PLUS loans is 10 years, but there are options for extended and income-contingent repayment.

Top 5 Lenders for Refinancing Parent PLUS Loans

Here are the best lenders to refinance Parent Plus Loans:

1. SoFi

SoFi, short for Social Finance, is a well-known online lender that offers a variety of financial products, including student loan refinancing. SoFi has consistently been a top player in the student loan refinancing arena. Founded in 2011, the company has built a strong reputation for offering competitive interest rates and a variety of loan terms. SoFi caters to a wide range of borrowers, providing options for Parent PLUS loan refinancing as well. They are recognized for competitive interest rates and flexible repayment options. SoFi often considers factors beyond credit scores when evaluating loan applications, making them an attractive option for borrowers.

Key Features:

• Competitive Interest Rates:SoFi is known for offering some of the lowest interest rates in the market, potentially saving borrowers thousands over the life of their loan.
• Flexible Repayment Options:Borrowers can choose from a range of repayment terms, allowing them to customize their plan to fit their financial situation.
• Member Benefits:SoFi offers additional benefits such as career counseling, member events, and financial planning assistance.

User Experience:

SoFi has received positive reviews for its user-friendly online platform, making the application and management of loans convenient. Customer support is often praised for its responsiveness.

Parents seeking to refinance their Parent PLUS loans will find SoFi an attractive option due to its competitive rates and additional member benefits. The flexibility in repayment terms is a key selling point for those looking to tailor their loan to their financial goals.

2. Earnest

Earnest is another strong contender in the student loan refinancing market. Earnest stands out for its unique approach to loan underwriting, considering factors like savings patterns and earning potential. Known for its data-driven approach to lending, Earnest assesses the financial profile of borrowers comprehensively, potentially offering more personalized interest rates. This lender allows borrowers to customize their loan terms to align with their financial goals. Earnest also offers benefits such as the ability to skip a payment once a year if needed.

Key Features:

• Customizable Loan Terms:Earnest allows borrowers to choose their monthly payment, giving them control over the duration of their loan.
• Precision Pricing:Interest rates are determined based on factors beyond credit score, such as savings patterns and earning potential.
• No Fees:Earnest does not charge application or origination fees, making it a cost-effective option for borrowers.

User Experience:

Earnest stands out for its transparent and personalized approach. Borrowers appreciate the detailed application process, which considers various financial aspects beyond credit scores.

With its emphasis on precision pricing and a commitment to no hidden fees, Earnest appeals to borrowers seeking transparency and customization in their refinancing journey. Parents looking for a lender that considers their unique financial situation will find Earnest to be a compelling choice.

3. CommonBond

CommonBond is recognized not only for its refinancing options but also for its social mission. The company aims to make a positive impact by providing education funding and has partnered with Pencils of Promise to support education initiatives around the world.

CommonBond is a lender with a strong commitment to social responsibility. They offer competitive interest rates and provide a "Hybrid" loan option, allowing borrowers to enjoy fixed rates for the first five years and variable rates thereafter. CommonBond also has a program called "CommonBridge," which assists borrowers in finding employment if they face financial hardship.

Key Features:

• Hybrid Repayment Options:CommonBond offers a hybrid loan option, allowing borrowers to enjoy lower interest rates for the first few years before switching to a fixed rate.
• Community Involvement:Borrowers may appreciate CommonBond's commitment to social responsibility, as the company funds education projects in underserved areas.
• Personalized Support:CommonBond provides personalized support to borrowers, helping them navigate the refinancing process.

User Experience:

Customers often highlight CommonBond's easy application process and the positive impact they feel by supporting a socially responsible lender.

For parents interested not only in refinancing but also in contributing to a social cause, CommonBond is an appealing option. The hybrid repayment plans provide flexibility, while the company's commitment to education initiatives can resonate with borrowers looking to make a difference.

4. Laurel Road

Laurel Road, acquired by KeyBank, specializes in student loan refinancing and has a strong reputation for offering competitive rates.  Laurel Road has gained recognition for its focus on healthcare professionals and high-earning graduates. However, its refinancing options extend beyond these demographics, making it a viable choice for Parent PLUS loan borrowers. They provide a variety of loan terms and have options for both fixed and variable interest rates. Laurel Road also extends refinancing options to parents who have borrowed Parent PLUS loans.

Key Features:

• Specialized Programs:Laurel Road offers specialized programs for professionals, such as doctors and dentists, with unique benefits tailored to their needs.
• Autopay Discount:Borrowers can benefit from an interest rate reduction by enrolling in autopay, providing additional savings over the life of the loan.
• Cosigner Release:Laurel Road offers a cosigner release option for eligible borrowers, providing an opportunity for financial independence.

User Experience:

Customers appreciate Laurel Road's responsive customer service and the ease of the application process. The specialized programs are particularly attractive to professionals in specific fields.

For parents seeking a lender that provides specialized programs and potential interest rate reductions, Laurel Road is a strong contender. The cosigner release option adds an extra layer of flexibility for borrowers who may want to release their cosigner in the future.

5. Splash Financial

Splash Financial is an online marketplace that connects borrowers with lenders offering student loan refinancing. Splash Financial is gaining traction as a student loan refinancing platform that partners with credit unions to provide competitive rates. The company focuses on simplifying the refinancing process, making it accessible to a wide range of borrowers. They provide a straightforward and user-friendly platform for comparing loan offers. Splash Financial works with various lenders, ensuring borrowers have access to competitive rates and terms.

Key Features:

• Credit Union Partnerships:Splash Financial collaborates with credit unions to offer competitive interest rates and flexible repayment options.
• Referral Program:Borrowers can earn rewards through Splash Financial's referral program, providing an additional incentive for recommending the service to others.
• Educational Resources:Splash Financial provides educational resources to help borrowers make informed decisions about their refinancing options.

User Experience:

Customers appreciate Splash Financial's straightforward application process and the benefits of working with credit unions. The referral program adds an extra layer of savings for borrowers.

Splash Financial's collaboration with credit unions makes it an attractive choice for parents seeking competitive rates. The referral program aligns with the growing trend of borrowers looking for ways to maximize savings through loan referrals.

When to Refinance a Parent PLUS Loan

Refinancing a Parent PLUS loan should be carefully timed to maximize its benefits. Here are some situations when refinancing might be a strategic move:

Improved Credit Score

If the borrower's credit score has significantly improved since taking out the Parent PLUS loan, refinancing could result in a lower interest rate, saving money over the life of the loan.

Interest Rate Environment

When overall interest rates are lower than the rate on the existing Parent PLUS loan, refinancing can lead to substantial savings. Monitoring market trends can help borrowers identify favorable times for refinancing.

Stable Financial Situation

If the borrower's financial situation has stabilized, and they have a steady income, lenders may be more willing to offer favorable refinancing terms.

4. Cosigner Release

Some lenders allow for the release of a cosigner from the loan after a certain number of on-time payments. Refinancing provides an opportunity to remove a cosigner from the loan if the borrower meets the eligibility criteria.

5. Desire to Change Loan Terms

Refinancing also allows borrowers to modify their loan terms, such as extending the repayment period for lower monthly payments or choosing a fixed or variable interest rate based on their preferences.

How to Refinance Parent PLUS Loans

Refinancing Parent PLUS loans involves several steps, and it's essential to approach the process thoughtfully. Here's a step-by-step guide:

1. Evaluate Your Financial Situation

Before considering refinancing, assess your current financial situation. Review your credit score, income stability, and overall debt. Determine if refinancing aligns with your financial goals.

2. Research Lenders

Explore different lenders and compare their offerings. Consider factors such as interest rates, repayment terms, and any additional benefits or features they may offer. Online marketplaces can be helpful in obtaining multiple offers at once.

3. Gather Necessary Documents

Lenders will require various documents, including proof of income, employment verification, and details about your existing Parent PLUS loan. Have these documents ready to streamline the application process.

4. Apply for Refinancing

Submit applications to your chosen lenders. Be prepared to provide accurate and up-to-date information. Some lenders may perform a soft credit check during the pre-qualification stage, which won't impact your credit score.

5. Review Offers

Once you receive offers, carefully review the terms and conditions. Pay attention to interest rates, loan terms, and any fees associated with the refinancing. Choose the offer that best aligns with your financial goals.

6. Complete the Refinancing Process

After selecting a lender, complete the necessary paperwork to finalize the refinancing. This may involve providing additional documentation and signing the new loan agreement. The new lender will pay off your existing Parent PLUS loan, and you will begin making payments to the new lender.

7. Monitor Repayment

Stay organized and keep track of your new loan's repayment schedule. Set up automatic payments if possible to avoid any issues with late payments. Periodically review your financial situation to ensure that the chosen repayment plan remains suitable.

Pros and Cons of Parent PLUS Loan Refinance

Understanding the advantages and disadvantages of refinancing Parent PLUS loans is crucial for making an informed decision.

Pros:

• Potential for Lower Interest Rates: Refinancing can lead to a lower interest rate, resulting in reduced overall interest payments over the life of the loan.
• Savings on Monthly Payments:A lower interest rate or extended repayment term can translate to more manageable monthly payments, providing financial relief.
• Flexibility in Terms: Refinancing allows borrowers to customize their loan terms, such as choosing between fixed and variable interest rates or adjusting the repayment period.
• Release of Cosigner: For those who initially had a cosigner on the Parent PLUS loan, refinancing provides an opportunity to release the cosigner, assuming eligibility criteria are met.

Cons:

• Loss of Federal Benefits: Refinancing a federal loan with a private lender means forfeiting federal benefits, such as income-driven repayment plans and loan forgiveness programs.
• Credit Check Impact:The refinancing process typically involves a hard credit check, which can have a temporary impact on the borrower's credit score.
• Potential Fees: Some lenders may charge fees for loan origination or other services, impacting the overall cost savings achieved through refinancing.
• Variable Interest Rate Risks: Opting for a variable interest rate carries the risk of future rate increases, potentially leading to higher overall loan costs.

Alternatives to Refinancing Parent PLUS Loans

Refinancing is not the only option for managing Parent PLUS loans. Consider these alternatives:

• Income-Driven Repayment Plans: Federal Parent PLUS loans are eligible for income-contingent repayment plans, which adjust payments based on the borrower's income. While this may not lead to lower interest rates, it can make payments more manageable.
• Public Service Loan Forgiveness (PSLF): If you work in a qualifying public service job, you may be eligible for PSLF, which forgives the remaining balance on federal Direct Loans after 120 qualifying payments.
• Deferment or Forbearance: Temporary relief options, such as deferment or forbearance, may be available for borrowers facing financial hardship. These options allow for the postponement or reduction of loan payments.
• Loan Consolidation: Consolidating Parent PLUS loans through a Direct Consolidation Loan can simplify payments but may not result in lower interest rates. It retains federal benefits but does not release cosigners.

FAQs

Furthermore, here are some of the most frequently asked questions about Refinancing Parent PLUS Loans

Can I refinance Parent PLUS loans with bad credit?

While some lenders may consider borrowers with less-than-perfect credit, having a higher credit score improves your chances of securing a favorable refinancing offer.

Can I refinance if I have multiple Parent PLUS loans?

Yes, you can refinance multiple Parent PLUS loans into a single loan for simplicity and potentially better terms.

Will refinancing affect my eligibility for federal loan forgiveness?

Yes, refinancing with a private lender will make you ineligible for federal loan forgiveness programs.

Can I refinance Parent PLUS loans while my child is still in school?

Some lenders may allow you to refinance while your child is still in school, but most require that the student has graduated.

Is there a cosigner release option with refinancing Parent PLUS loans?

Some lenders offer cosigner release options after a certain number of on-time payments, providing eligibility criteria are met.

Conclusion

Refinancing Parent PLUS loans is a strategic financial decision that requires careful consideration of individual circumstances. By exploring the top lenders in 2024, understanding when to refinance, learning how to navigate the process, and weighing the pros and cons, parents can make informed choices to better manage their education-related debt. It's essential to stay informed about alternative options, such as income-driven repayment plans and federal forgiveness programs, to ensure that the chosen path aligns with long-term financial goals. Ultimately, the key is to strike a balance between reducing financial stress and maintaining access to valuable federal loan benefits.