Ask Terry Questions Parent Plus Loan

Parent Plus Loan

By Terry Savage on September 05, 2018 | College Savings / Student Loans

I am looking for some guidance on my Parent Plus Loans. We took out Parent Plus loans to put both of our boys through college. Our youngest will be graduating in December. I am paying on 3 of my older sons loans already. I am starting to feel overwhelmed since the loan balance is more than my mortgage balance and the interest is still being charged even on the ones in repayment. Is it better to refinance these loans with a fixed rate of interest? I get offers in the mail all of the time. I am just looking for some guidance.

Terry Says

The way PLUS loans work, it could take longer to pay these off than the mortgage on your home! And you are solely responsible — even to the point where they will deduct payments from your Social Security.
It’s a bit too late now, but I hope you will read the column I recently posted about looking ahead with younger children and explaining that you simply can’t afford to pay for all of them going through a four-year college expense!

OK, now comes the hard part — answering your specific question. Refinancing PLUS loans can be done in two ways:
1. Refinance in your own name — but that means you need very good credit.
2. Refinance in the student’s name — but that means he or she must have a job already, good credit — and good prospects (from the lender’s point of view).

Perhaps consider asking each child to refi half of your PLUS loans in their name (along with maintaining payments on whatever other student loans they have).
Here’s an excellent link from Nerdwallet explaining the process.

And here’s a link to some of the best PLUS loan refi options.

And here’s a hint. Check with your own local credit union. And here’s a warning: If you’re thinking about refinancing your house, don’t take a floating rate home equity loan or you could be faced with much higher rates and a balloon payment down the road. Just consider rolling the entire amount into your mortgage if possible, so the interest will likely be deductible.

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