We all want our kids to have the best education money can buy. Unfortunately, we don’t all have the money to pay for it. When the university financial aid package isn’t enough, many parents take advantage of the Federal Parent Loans for Undergraduate Students, also known as Parent PLUS Loans.
These loans can be a great way to support your child’s college education, but it’s not always easy to keep up with the monthly payments over time. Maybe your financial situation has changed, or you’re juggling several PLUS loans simultaneously. Luckily, you have a few solutions that could ease your burden, including consolidating or refinancing your loans.
If you’re not familiar with these terms or unsure where to start, don’t worry. These five tips should help make refinancing Parent PLUS Loans easier and more streamlined.
1. Research Federal Consolidation Programs
Suppose you want to modify your loans, which the Federal government still holds. You may have options that don’t involve refinancing them with a private lender. The government might not offer you a lower interest rate, but a Federal consolidation loan can streamline all your separate payments into one, making them more manageable.
2. Check if You Qualify for Loan Forgiveness
Most people think of student loan forgiveness programs and assume that Parent Plus Loans wouldn’t qualify, which isn’t true. After you consolidate your loans with a Federal consolidation loan, you may be eligible for the Public Service Loan Forgiveness (PSLF) program.
Of course, you’ll need to meet the criteria—to work in a certain type of public service career continuously and keep up with your payments for a number of years.
If you don’t qualify for PSLF, you may find relief by taking advantage of the income-driven repayment programs. In this case, your payments would be capped at a certain percentage of your income, and the remaining balance of your loan will be forgiven at the end of your repayment period.
3. Compare Different Private Lenders
If you’re still interested in refinancing your Parent PLUS Loans after following steps one and two, start by researching different private lenders and their refinancing options. Most larger and more well-established lenders offer them. But you may also find smaller, lesser-known institutions offering better interest rates or perks to attract new borrowers.
You’ll need to fill out a form or speak with a lender directly to get an offer based on your financial situation. They’ll need general information, such as the balance of your loans, your current interest rate, and income details.
We recommend speaking with someone directly, even if the lender has no physical location. This way, you’ll know if their customer service is up to par, which will be important later if you ever encounter issues.
Always check unbiased, third-party reviews. The most honest opinions come from real customers, but sometimes, it’s hard to sift through the fake ones. If you can get a personal referral from someone who’s happy with a particular lender, that would be an excellent place to start.
4. Read the Fine Print
After choosing a few lenders you’re comfortable with, read all the terms of their loan offers carefully. At first glance, you might be tempted to go with whoever gives you the lowest monthly payment. But keep in mind the following details, as any of them could make a big difference in the long run:
Interest rate
You want to avoid paying a higher interest rate than your current one. Moreover, ensure to ask if it is a fixed or variable rate. A variable interest rate might start very low, but it can suddenly jump later for reasons you can’t control.
Monthly payments and other terms
Your lender will likely give you several options for your monthly payment amount. But keep in mind that a lower payment will usually extend the life of your loan—possibly by many years. That also means that, even with a lower rate, you’ll be paying much more in interest over time.
If you are expecting to earn a higher income in a few years, ask the lender if it would be possible to adjust your repayment plan later to pay off the loan in a shorter time frame. You should also ask what will happen if you miss a payment or undergo a financial hardship that prevents you from making timely payments.
5. Keep Up With Your Current Loan Payments
It will take some time to process your application for refinancing. While it’s in the works, ensure you continue making the payments for all your existing financial obligations.
Managing several loans can be tricky. Taking smart steps like exploring your options, including refinancing, can make a big difference.
Rajani Baburajan
