The rising costs of tuition and the leftovers from a flailing economy have seen a growing number of parents turn to the Parent Plus loans for their children’s college education. The Parent Plus loan has good advantages, but it is not the perfect answer to every situation. If you have taken out a Parent Plus student loan, here are some solid reasons to refinance those loans now.
The Parent Plus loan has a high interest rate
This is the most common reason to refinance. Although federal student loans are typically offered at the lowest rate available. Yet when they get to be somewhere in the 6% to 8% range or even higher, it is time to refinance when there is a prevailing drop in rates. This happened to parents who took out Parent Plus loans from 2006-2013 at a time when rates were hitting rock bottom, but the PLUS loan interest rates remained high. The current rates today are still at historic lows, so refinancing makes sense to save a significant amount of money on interest.
If your income is dependable and predictable
Having a great stream of income that is stable and predictable is a reason to refinance that Parent Plus loan. If you have a healthy financial picture you could score a better rate easily. A private lender looks at a borrower’s debt-to-income ratio, credit score, and other factors when deciding whether to approve your refinance application and how low to set your rate.
Those monthly payments come down by refinancing
If you refinance a 10 year payment to a 20 year payment, the benefit is a significant amount cut from the monthly payment. For those looking to be rid of college loan debt, this would not be the best option. Yet, for others who need a financial reorganization due to income or hardship, go for it. Beware of accruing more interest this way; you could end up paying more in the long run.
Release the cosigner
If a cosigner was needed to complete the application then after so many set payments done on time, they can be released. The cosigner is free to go on and improve their credit and obtain loans easier as a result. It is a win-win situation for refinancing.
You have a large Parent PLUS loan balance.
A Parent Plus loan allows borrowers to take out as much as they need to cover the cost of education, separate from other aid. This means parent borrowers can owe big balances. Some lenders require a minimum amount in order to refinance.
Refinancing any federal student loan means a loss of benefits and protections that will not transfer to private lenders in the refinancing process. Parent Plus loan borrowers don’t have access to as many of these benefits such as the ability to opt for income-driven repayment plans such as Pay As You Earn or PAYE.
Parent Plus loans do allow for deferment and forbearance, while private loans may not. Loan borrowers can select from graduated and extended repayment plans. Under some circumstances, Parent Plus loans can be discharged in bankruptcy or upon the death or disability of the borrower or student. These are benefits which do not extend to private loans.
If your income is unpredictable, you may wish to opt with paying a higher interest rate in exchange for these protections.
The Implementation of New and Flexible Repayment programs
There is a good reason to refinance when programs such Pay As You Earn and Income Based Repayment exist. The flexibility is realistic to your life situation. Income Contingent Repayment, Interest only payments, Economic Hardship Deferment, and Grace Period are all implemented for flexible repayment plans. New incentive programs are being developed continuously to battle the student loan dept problem. These programs are so good; it is beneficial to seek what new developments have occurred recently in today’s student loans environment.
With economic health improving and incentives available, there are good reasons to refinance a Parent Plus Student loan. This holds true for other types of student loans too. Programs are available for almost any of the student loan repayment process. Consolidating or refinancing a Parent Plus student loan is good financial move if it improves your financial health. Being well-informed is critical to good outcome. At any point in repayment, a borrower can find resources to help in the repayment processes. The student loan arena is rapidly advancing to help students and parents with success in not only financial avenues for the college education, but to tackle those student loans as well.