As a parent, you want to do everything you can to make sure your child is on track for college graduation. Maybe you even opted to take loans in your own name to close the college funding gap.
But as retirement nears, you may find that your Parent PLUS loan payments are preventing you from putting more towards your nest egg—or perhaps you're delaying retirement just as your children are becoming more financially stable and independent.
So can you offload those loans to your child? Yes, but not directly. Let's discuss how the process works.
Federal loans cannot be transferred
Unfortunately, regardless of your financial situation, Parent PLUS loans cannot be transferred into your child’s name, even after graduation. According to the rules set by the federal Direct Loans program, parents alone are responsible for paying back these loans.
Refinancing is an option
That doesn’t mean you’re out of luck, however.
Many private lenders offer the option to refinance the loan in the student’s name once they have graduated—assuming the child is willing to apply and can pass a credit check without a cosigner.
If your child is approved for a refinance, the Parent PLUS loan you took out through Direct Loans will be paid off and a new loan will be created with a private bank.
Changes in terms
Keep in mind that some things about the loan will change in the refinancing process. As a private loan, the loan won’t be eligible for as many repayment and deferment options. It also won't be eligible for federal loan forgiveness programs.
The interest rate will also likely change when the loan is refinanced—however, that might be for the better. Private loans are offered at both variable and fixed interest rates and may be offered at more competitive interest rates than you've been paying for your PLUS loan. As of January 2018, current refinancing rates are as low as 2.58%.
If your Parent PLUS loan payments are dragging you down financially, you don’t have to be limited by federal loan stipulations. Seek out a private lender who can refinance the loan in your child’s name to lighten your financial load.
Check out our picks for the best banks for student loan refinancing at our sister site, Comet.