Generally speaking yes, you could save money by refinancing Parent PLUS loans. Parent PLUS loans have the highest fixed interest rates of all federal student loans. Refinancing can help you get a lower rate on the loan, but only if you meet certain criteria.
Here’s what you need to know about Parent PLUS loans and how to save money by refinancing.
Parent PLUS loans are a type of federal student loan. Unlike other student loans, these are only available to parents to help pay for their child’s college costs. Students can’t avail of these loans directly.
Parent PLUS loans have several advantages but they do have a few downsides too. The biggest advantage is that there’s no loan limit. Parents can borrow as much as the total cost of attendance minus any other financial aid their child receives. The downside is that these loans have a high-interest rate, which is fixed for all borrowers regardless of credit score.
If you have good credit, refinancing can help you save money on your Parent PLUS loans.
The federal government doesn’t offer refinancing. You can only refinance your Parent PLUS loans with a private lender. Private lenders don’t offer standard interest rates to all borrowers. When you apply for refinancing, they will quote you a new rate based on your credit score and income. If your credit is good, you’ll qualify for a lower interest rate. The stronger your financial credentials, the lower the rate you’ll qualify for. This lower rate will result in lower accrued interest over the term of the loan adding up to substantial savings.
There are two things you can do to boost your savings when refinancing any loan:
The higher your credit score, the more you’ll save when you refinance Parent PLUS loans. If you’re considering this option, it helps to work towards increasing your credit score in advance.
Doing these things consistently is the fastest way to improve your credit score and qualify for the lowest interest rate possible:
If you’re earning sufficient monthly income, it’s a good idea to increase your monthly payments when you refinance Parent PLUS loans. The higher monthly payments will reduce the loan term. This gives the interest less time to accrue, racking up your savings. As an additional bonus, you’ll clear your debt faster too.
The combination of good credit and higher monthly payments will result in maximum savings when you refinance Parent PLUS loans.
We hoped you enjoyed this article! Remember, you canand potentially lower your monthly student loan payments and save money.