If you are one of the 3.5 million parents who owe a combined $98 billion in parent PLUS loans, refinancing them can give you the opportunity to save more in the long term.
This guide will walk you through the basics of refinancing parent PLUS loans and how can First Republic’s Personal Line of Credit help. But before diving into refinancing, it is important to understand the basics of parent PLUS loans.
What are parent PLUS loans?
A Direct PLUS loan is made by the U.S. Department of Education to graduate or professional students and parents of dependent undergraduate students. It is commonly referred to as a parent PLUS loan when made to a parent borrower. The parent borrower is fully responsible for repaying the loan — both principal and interest.
What are the eligibility criteria for parent PLUS loans?
To receive parent PLUS loans, you must fulfill the following criteria:
- Be the biological or adoptive parent (or in some cases, the stepparent) of a dependent undergraduate student enrolled at least half-time at an eligible school
- Not have an adverse credit history (unless you meet additional requirements)
- Meet the general eligibility requirements for federal student aid
Please note: Grandparents and legal guardians are not eligible to receive parent PLUS loans, even if they have had primary responsibility for raising the student (unless they have legally adopted the dependent student).
What is the current interest rate for parent PLUS loans?
For Direct PLUS Loans first disbursed on or after July 1, 2021, and before July 1, 2022, the interest rate is 6.28% (as of October 1, 2021). For the most accurate interest rate, please check here.
Direct PLUS Loans disbursed before July 1, 2021 may have a different interest rate. Keep in mind, the interest rate is fixed throughout the life of the loan. For your specific rate, please check your loan documents.
Can I refinance my parent PLUS loans?
You can refinance your parent PLUS loans, but only through a private lender.
Once you refinance your parent PLUS loans, the federal government is no longer the lender. Therefore, you may permanently be giving up tax and repayment benefits, including forbearance, deferment and forgiveness.
Note: Currently, all payments for certain types of federal student loans are suspended until January 31, 2022, per an executive order by the president. Interest will not accrue during this time period.
What are the benefits of refinancing parent PLUS loans?
In general, there are three main benefits of refinancing parent PLUS loans through a private lender:
- Lower interest rates: By refinancing your parent PLUS loans at a lower fixed interest rate, you may have the opportunity to get out of debt faster.
- Lower monthly payment: Having lower monthly payments can help you in managing your cash flow.
- Single monthly payment: You can combine your multiple student loans (private or federal) into one simple, convenient payment.
Bonus Tip: Based on your personal situation, you may have the option of refinancing your parent PLUS loans and transferring the refinanced private loan to your child’s name. However, it is critical to understand all the aspects here.
Can I transfer my parent PLUS loans to the student?
According to the U.S. Department of Education, a parent PLUS Loan made to you, as a parent, cannot be transferred to the student (i.e., your child). However, if you refinance your parent PLUS loans using a private lender, you can transfer the private loan to your child subject to loan terms.
Should I transfer my parent PLUS loans to the student?
As a responsible parent, it is wise to weigh the pros and cons of transferring your parent PLUS loans to the student through a private lender. While this will depend on your personal circumstances, here are some key things to consider before making the final decision.
- Your child may be able to get a lower interest rate when refinancing
- Your child could build his or her credit profile by making on-time payments
- You, as a parent, can focus on other family-related expenses
- If your child experiences more of the above pros, your relationship with him or her may be positively impacted
- Your child may not be eligible to get a lower interest rate when refinancing
- Your child’s other financial goals may get impacted by the burden of repaying your parent PLUS loans
- Your child will not be eligible for any repayment benefits, including forbearance, deferment and forgiveness by the federal government
- If your child experiences more of the above cons, your relationship with him or her may be negatively impacted
How do I refinance my parent PLUS student loans?
Once you are ready to refinance your parent PLUS student loan debt, following these steps can help you move easily through the process:
- Review your credit score: Some lenders will run a soft credit check, to save you time in the application process. Reviewing your credit ahead of time will help you be prepared and knowledgeable before getting your new interest rate.
- Identify the loans you want to refinance and collect information: Gather the lender name, loan ID number and current loan balance of your PLUS loan(s) from your loan servicer’s online account or by phone. This will be vital information when comparing lenders.
- Pick your lender: The right lender will be the one that best aligns with your financial goals. Consider lower interest rates, lower monthly payments and flexible loan repayment plans to save more in the long run.
- Apply: Apply for your refinanced loan with your new chosen private lender. The application process may vary for different lenders.
What are my parent PLUS loan refinancing options?
Since there are many ways to refinance your parent PLUS loans, it is best to do your own research before taking the final decision. As with any financial product, do consider the pros and cons of each refinancing option before committing.
Student loan refinancing
Student loan refinancing is a loan type that enables you to use a new loan from a private lender to pay off your existing federal or private student loan balance, to secure different loan terms (for example, a lower interest rate, longer repayment term or lower monthly payments, etc.).
Typically, a student loan refinancing product is unsecured and may come with additional fees based on your loan terms.
Keep in mind, a student loan refinancing product cannot be used for expenses beyond student loans. If you intend to finance additional expenses along with your student loans at one fixed rate, this may not be the right solution for you.
A personal loan is money that you borrow from a lender, which you repay in fixed monthly payments over a set time period. If you know you’ll need a large sum of money all at once to cover something necessary that you want to pay over months or years, an affordable personal loan might make sense.
Based on your lender, personal loans may be secured or unsecured.
Since a personal loan is an installment loan, your payments will encompass both principal and interest, and will remain constant each month, though you can pay more to expedite payoff.
Personal loans may also come with additional fees, such as service fees, origination fees or prepayment penalties, which add to the total cost.
Personal line of credit
A personal line of credit is a set amount of money from which you can borrow, up to the limit, for a given period of time, referred to as your draw period. It can be a good way to ensure that you have access to funds for anticipated and unanticipated expenses.
With a personal line of credit, you take from the available balance only the amount you need during the draw period, and interest only accumulates on what you borrow.
Like personal loans, a personal line of credit may be secured or unsecured based on the terms and conditions of the lender.
A personal line of credit is revolving, which means that as soon as the debt is repaid, you can borrow up to your credit limit again (during your draw period) without going through another loan approval process.
How can First Republic’s Personal Line of Credit help?
A smart financing strategy can help you handle your parent PLUS student loans, while meeting your other financial goals. With the right student loan refinancing option, you can get lower interest rates without impacting your cash savings.
First Republic’s Personal Line of Credit offers fixed interest rates as low as 2.25% Annual Percentage Rate (APR) with discounts1. It also offers the benefit of interest-only payments, wherein you only pay interest on what you draw for in the first two years, and repay the full loan with term options that best suit your financial goals. Plus, you won’t be charged origination, maintenance or prepayment fees — ever.
In addition, you can customize your debt payoff strategy with multiple repayment options.
First Republic Personal Line of Credit Repayment Options
Please note, a First Republic Personal Line of Credit is not a student loan, and you may be permanently giving up the benefits of a student loan. This may include certain deferment, forbearance and forgiveness options.
Be sure to consider these factors before making any final decisions on refinancing student loans, and talk to a banker if you have any additional questions.
Interested in learning more about First Republic’s Personal Line of Credit? See your available fixed-rate options using this personal line of credit calculator.
1. Annual Percentage Rate. Rates effective as of 10/07/2021 and are subject to change.
Borrower must open a First Republic ATM Rebate Checking account (“Account”). Terms and conditions apply to the Account. If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: 1) 2.00% for maintaining automatic payments and direct deposit with the Account, 2) 0.50% for depositing and maintaining a deposit balance of at least 10% of the approved loan amount into the Account, and 3) an additional 0.25% for depositing and maintaining a deposit balance of at least 20% of the approved loan amount into the Account.
Minimum $500 to open an ATM Rebate Checking account. A monthly fee (currently $25) will apply if a minimum monthly average balance of $3,500 is not maintained. Domestic and foreign ATM access fees are rebated at the end of the monthly cycle. Foreign currency conversion and other usage fees vary by country and network and are not included in the rebated ATM access fees.
Personal Line of Credit consists of a two-year, interest-only, revolving draw period followed by a fully amortizing repayment period of the remainder of the term. Draws are not permitted during the repayment period. Full terms of 7, 10 and 15 years available.
This product can only be used for personal, family or household purposes. It cannot be used for the following (among other prohibitions): to refinance or pay any First Republic loans or lines of credit, to purchase securities or investment products (including margin stock), for speculative purposes, for business or commercial uses, or for the direct payment of post-secondary educational expenses. This product cannot be used to pay off credit card debt at origination.
Personal Line of Credit minimum is $60,000; maximum is the lesser of $350,000 or debt to be repaid at origination plus $100,000. If no debt to be repaid at origination, the maximum loan amount is $100,000. Line of credit cannot be fully drawn at origination.
The terms of this product may differ from terms of your current loan(s) that are being paid off, including but not limited to student loans. By repaying such loans, you may permanently be giving up tax and repayment benefits, including forbearance, deferment and forgiveness, and you may not be able to re-obtain such benefits if this loan is refinanced with another lender in the future.
Contact your legal, tax and financial advisors for advice on deciding whether this is the right product for you. Terms and conditions apply.
Product is not available in all markets. For a complete list of locations, visit firstrepublic.com/locations. Applicants must meet a First Republic banker to open account. This is not a commitment to lend; all lending is subject to First Republic’s underwriting standards. Applicants should discuss line of credit terms, conditions and account details with their banker.
The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document.
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