How Parent Plus Loan Refinancing Works to Save You Money


You love your kids but now you’ve got tens
of thousands in Parent Plus loans and a monthly payment that’s keeping you from creating
your own financial future. How does Parent Plus Loan refinancing work
and is it the solution to free you from this burden? I’m revealing two options for Parent Plus
loans that could help you get clear of the problem and back on your feet. We’re talking Plus loan refinancing today
on Let’s Talk Money! Beat debt. Make money. Make your money work for you. Creating the financial future you deserve. Let’s Talk Money. Joseph Hogue with the Let’s Talk Money channel
here on YouTube I want to send a special shout out to everyone in our community, thank you
for taking a part of your day to be with us. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. So I’m probably one of the last remaining
holdouts saying college is still worth it and I fully understand the irony here from
a guy with an online business that requires absolutely no degree. But college isn’t cheap so we’ve come
up with all kinds of ways to pay for it, some great and…some not so much. In this video, we’ll look at Parent Plus
loans, the pros and cons of this way to pay for college. I’m then going to reveal three ways to refinance
your parent plus loans to get out from under that burden. It’s part of a partnership with Splash Financial,
a three video series on paying for college from the different student loan repayment
options we talked about in our last video to how to refinance your student loans. Splash Financial is a leading, tech-driven
student loan refinance company that works with you to consolidate all your loans into
one monthly payment. You may be able to get lower rates on your
loans to put your payments within your budget and the process to check your rates takes
less than three minutes. I want to get to how parent plus loan refinancing
works but I’ll leave a link to Splash in the video description below. Now if you’re on a video about Parent Plus
Loan refinancing, I’m guessing most of you already have parent plus loans or know something
about them. I still want to cover some of the pros and
cons but I don’t want to spend too much time here. We’ll cover the basics of the program but
I want to get to those three ways to refinance your parent loans. US News reports the average cost of attendance
at a public in-state university at $9,700 for the 2018-2019 school year. That’s per year and less than a third the
cost to attend a private university. That’s not going to be covered by regular
student loans so the Parent Plus loan program has become a way to fill in the gap. The Parent Plus is a part of the government’s
Direct Plus program for unsubsidized loans made available through schools. The loans aren’t need-based so anyone can
apply and they have a special advantage to fill in that gap left by other aid. Your borrowing limit on a Parent Plus loan
is the cost of attendance minus any other financial aid. That means you can completely cover the rest
of those college costs with this loan. Because parents usually have better credit
than their college-bound teens, the Parent Plus loan might be easier to get than another
unsubsidized loan to the student. There are some drawbacks to the Parent Plus
program and some pitfalls to avoid. First, understand this is YOUR loan. You can’t transfer parent plus loans to
anyone else and missing payments can destroy your credit. We’ll talk about those refinancing options
pretty soon but understand this is just like any other loan on your credit. Rates on a Parent Plus loan are higher than
other types of student loans. You’ll find current rates on studentaid.ed.gov,
currently at 7.6% in May 2019. The rate changes but it’s a fixed rate once
you get your loan so your actual rate won’t change after getting the money. One huge drawback of the Parent Plus program
is the additional loan fee, currently at 4.26% of your loan. Frankly, I’m surprised the fee is allowed
to be so high. Four and a quarter percent, that means borrowing
$20,000 will cost you over $850 on top of the fairly high interest rate. Not all schools participate in the Parent
Plus program and you have to file a FAFSA to apply. Understand also that repayment starts immediately
on these loans. There’s no deferment until the student graduates
like with other student loans. Some schools offer a deferment period but
it’s not always the case. So the Direct Plus program can be a great
way to fill in that gap and help your kids go to college but it’s probably not the
kind of loan you want to be trapped under for too long. That current rate of 7.6% is well above the
rate on mortgages, subsidized student loans and even Parent Plus refinance rates. In fact, refinancing a Parent Plus loan can
save thousands and lower your payment. Let’s look at a hypothetical example here
compares a 15-year repayment on a $30,000 loan at the current Parent Plus rate of 7.6%
versus the starting rate of 3.75% on Splash Financial. Now these rates are current as of 5/1/2019
and the current 15-year rate is around 4.91% but might change so check your current rate. There’s no loan fee on Splash and they currently
offer a $300 bonus for refinanced loans over $30,000 with the link I’ll put in the video
description below. Now let’s look at two refinancing options
for Parent Plus loans as well as the pros and cons of each. First is I see a lot of parents refinance
the loan in their name. This doesn’t take the loan off their credit
but can mean lower rates and payments. That example we just looked at, refinancing
a $30,000 loan at 4.91% instead of the 7.6% parent plus rate would have lowered the monthly
payment and put it within budget. Besides the potentially lower payment and
interest savings, since parents usually have better credit than their children, this might
be the easier refinance. The current minimum credit score at Splash
is 700 FICO or as low as 670 with a cosigner. One drawback to a Parent Plus Loan refinance
is that you’ll lose those federal loan benefits like public service forgiveness or the income-contingent
repayment. With that public service loan forgiveness
program, you have to make 10-years of payments while employed in some of those approved public
sector jobs. Remember though, that PSLF program for parent
loans requires you to first consolidate and then enter the income-contingent program. Parent Plus loans by themselves aren’t eligible
for the loan forgiveness. Since most parents are well into their 40s
or 50s when they take these loans, this isn’t going to help much anyway unless you’re
willing to quit your job and get one in public service. Another option is for the student to refinance
their parents’ loan in their own name. I talked to Mark Wilson over at Splash and
he said this is one he’s seeing a lot, students refinancing loans their parents cosigned originally
to remove the loans from their parents’ credit. This option offers benefits for the student
as well as the parents. For the parents, they no longer have that
monthly burden and can get back to saving for their retirement. As a father, I’ll do everything possible
to make sure my son is set up to succeed but I’ve also got to make sure I’ve got enough
to live on in retirement and don’t become a financial burden on him. Getting that Parent Plus loan off your credit
is not only going to help improve your debt-to-income and other credit factors, it’ll free up
space in your budget to pay off other debt. On the student’s side, refinancing the loan
gives them the opportunity to start building credit with those regular repayments and just
start being responsible for their debts. Maybe it’s a tough burden to bear but that
debt paid for a college education so they need to consider it an investment in their
future. Refinancing your Parent Plus loan is pretty
quick and straight forward for the student or parents. US citizens are eligible to apply on Splash
and they’ll do a soft-check on your credit first so it doesn’t affect your credit score. There are no origination or early repayment
fees and terms are available from five years to 15-year repayment. Splash can refinance loans of $7,500 up to
$300,000 and offers a $300 bonus for refinancing over $30,000 with rate discounts for borrowers
with graduate degrees. You’ll need a minimum credit score of 700
FICO or 725 for loans over $150,000 but the minimum drops to 670 FICO if you have a cosigner
with a 720 credit score. Checking your rate on a refinance takes less
than a few minutes and you’ll usually get an email approval in less than an hour. Splash loans are funded by credit unions and
banks so it’s available in all 50 states and Washington DC. You’ll set up an account with your email
and then enter your contact info. With just your annual income and education
information, you’ll be able to get your rate within minutes. You’ll need some documents to apply so it’s
best to have those handy to speed up the process. This includes payoff statements for your loan,
pay stubs for the past three months, identification and proof of income. Splash will need to verify your income, education,
identity and current loans. They’ve been working to automatically verify
some of these through credit reporting but you still may need to upload some docs. Look for that link in the video description
below to check your rates on Splash Financial. Checking your rate on a parent plus refinance
won’t affect your credit score and Splash has terms from five- to 15-year repayment
plans. We’re here Mondays, Wednesdays and Fridays
with the best videos on beating debt, making more money and making your money work for
you. If you’ve got a question about money, just
scroll down and ask it in the comments and we’ll answer it in a video.

Paul Whisler

4 Comments

  1. For those who wants to have a good amount of savings. Watch this video.

  2. I ended up paying for my parents plus loan since I knew my mom wouldn't be able to afford it.

  3. Question: can I refinance my parent plus loan through splash and still be eligible to do a 25 year extended repayment plan as opposed to the 10 year?

  4. Question. My mom took out a parent plus loan for my sister and put me as a co-signer. Fast forward 7 years and I’m $32k in debt and my sister is a college drop out with no hopes of ever repaying these loans. Can my mom refinance and relieve me of my responsibilities?

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