Should I Refinance a Parent Plus Loan?

Parent PLUS loan refinancing is an option for families to consider to manage the higher interest rates that can come with Parent PLUS loans. PLUS loans usually have higher rates than other federal student loans, and, over time, a higher rate can add thousands of dollars to a loan’s total repayment cost. 

Refinancing replaces your federal Parent PLUS loan with a new private loan under different interest rates and repayment terms. This can reduce your total cost by possibly lowering the interest rate and monthly payment, particularly for borrowers with strong credit and steady income. However, refinancing also converts a federal loan into a private one, removing access to federal repayment programs and forgiveness options.

If you qualify for significantly better terms and do not rely on federal protections, refinancing may make sense. If those protections are important to you, keeping the loan federal may be the safer option.

RELATED: How to Refinance a Student Loan With Bad Credit

Potential benefits:

• Lower interest rate. If you qualify for a lower private rate, more of your payment goes toward the balance rather than interest, which can reduce your total repayment cost.
• Lower monthly payment. Refinancing into a longer repayment term can reduce your monthly payment amount.
• May open the option to transfer the loan. If a private lender offers it, refinancing may allow the loan to be transferred into the student’s name, shifting legal responsibility.

Potential tradeoffs:

• Loss of income-driven repayment. Refinancing converts the loan into a private loan, permanently removing eligibility for all federal income-driven repayment plans. Parent PLUS borrowers are typically limited to Income-Contingent Repayment (ICR), and that option is lost once refinanced.
• Loss of federal forgiveness programs. Refinanced loans no longer qualify for Public Service Loan Forgiveness or other federal forgiveness programs.
• Loss of standardized federal hardship protections. Federal loans include structured deferment and forbearance options under federal rules. After refinancing, any payment relief depends on the private lender’s policies, which vary by company.

Refinancing a Parent PLUS loan may be worth considering in the following scenarios:

It may be favorable to refinance in cases where:

• You qualify for a meaningfully lower interest rate. Even a 1 to 2 percentage-point reduction can lower the loan’s total cost over time.
• You do not plan to use Income-Contingent Repayment (ICR). If your income is stable and you do not rely on income-driven payments, losing access to ICR may not be an issue.
• You are not pursuing federal forgiveness. If you have no plans to work for a qualifying public service employer or seek Public Service Loan Forgiveness, then refinancing won’t take away an option you don’t intend to rely on.
• You want to transfer the loan to your child. Some private lenders allow refinancing in the student’s name if the student meets the lender’s credit and income requirements.

RELATED: Here’s the Credit Score You Need to Refinance Student Loans

To see how refinancing can affect your costs, consider this repayment scenario.

Assume you have a $60,000 Parent PLUS loan at 8.94% on a 10-year term. At that rate, your monthly payment would be about $758, and total interest over the life of the loan would be roughly $31,000 with a total cost of almost $91,000.

If you refinanced that loan to 6.50% for the same 10-year term, your monthly payment would fall to about $681, and total interest would drop to roughly $21,750 with a total loan amount of about $81,750. That reduces total interest by about $9,250 compared to keeping the rate at 8.05%.

If instead you refinanced to a 15-year term at 6.50%, your monthly payment would drop to about $523. However, total interest would rise to roughly $34,200 with a total cost of about $94,000 because the loan lasts longer. Even with a lower rate, extending repayment can increase the total amount you pay over time.

Both the interest rate and the repayment length matter when evaluating whether refinancing truly saves you money.

Parent PLUS loans can be consolidated into a Direct Consolidation Loan while remaining in the federal system. After consolidation, the loan becomes eligible for Income-Contingent Repayment (ICR), which adjusts payments based on income.

Extended Federal repayment plans, such as the Extended Fixed and Extended Graduated plans, can also reduce monthly payments by lengthening the term, but at the cost of higher total interest and overall loan costs over time.

These federal options do not lower the interest rate, but they preserve income-driven repayment eligibility, forgiveness opportunities and standardized hardship protections.