Can a Parent PLUS Loan Repayment Be Deferred? Is Instant Payment Immediate After loan disbursement?
In the world of student loans, Parent PLUS loans are a common choice for parents helping their children fund their education. But what options are available when it comes to refinancing these loans? Here's a breakdown of the main choices and what you need to know.
Refinancing with a Private Lender
Refinancing a Parent PLUS loan with a private lender is one way to potentially lower your interest rate or monthly payments. However, this comes at a cost: you'll lose access to federal benefits such as income-driven repayment plans, deferment, forbearance, and federal forgiveness programs.
Some private lenders that accept Parent PLUS loan refinancing include ELFI and SoFi, each with their own eligibility criteria. For instance, SoFi requires a minimum credit score of 650, while Earnest requires a minimum of 665.
SoFi offers fixed APRs ranging from 4.99% to 9.99%, and variable APRs from 5.99% to 9.99%. Earnest, on the other hand, offers fixed APRs from 4.45% to 9.99%, and variable APRs from 5.88% to 9.99%.
Federal Consolidation and Income-Driven Repayment (IDR)
Currently, parents can consolidate Parent PLUS loans into a Direct Consolidation Loan, which allows them to enroll in income-driven repayment plans like Income Contingent Repayment (ICR). However, this option will become unavailable after a July 1, 2026 deadline, so parents with Parent PLUS loans have until then to consolidate and enroll in IDR plans if they wish.
Deferment and Forbearance
Parent PLUS loans are eligible for deferment and forbearance under certain circumstances, such as when the child is enrolled at least half-time at an eligible school, or in cases of unemployment or financial hardship. During deferment, interest accrues on the loan, and you're responsible for paying it off when the deferment period ends.
Making the Right Choice
If you're struggling to afford your monthly Parent PLUS loan payments, consider refinancing PLUS loans or enrolling in the Income-Contingent Repayment plan. Remember, when you refinance with a private lender, you'll lose federal benefits, so it's important to weigh the pros and cons carefully.
In conclusion, understanding your options for refinancing federal Parent PLUS loans is crucial for managing your student loan debt. Whether you choose to refinance with a private lender or consolidate and enroll in IDR plans, make sure you're making an informed decision that best suits your financial situation.
[1] NerdWallet. (2021). Parent PLUS Loan Refinancing. https://www.nerdwallet.com/loans/student-loans/parent-plus-loan-refinancing [2] Federal Student Aid. (2021). Parent PLUS Loan Deferment. https://studentaid.gov/manage-loans/deferment-forbearance/deferment [3] Federal Student Aid. (2021). Parent PLUS Loan Forbearance. https://studentaid.gov/manage-loans/deferment-forbearance/forbearance [4] Federal Student Aid. (2021). Consolidation Loans. https://studentaid.gov/manage-loans/consolidation/consolidate-loans
- For personal-finance management, using an app that has a savings calculator and loan calculator could help parents better understand their financial situation when considering refinancing Parent PLUS loans.
- Refinancing Parent PLUS loans can help with business expansion, as lower interest rates on loans could free up more capital for innovative ventures.
- Before opting for refinancing through a private lender, take time to research education regarding personal-finance and loan options to ensure a well-informed choice, since doing so might lead to losing federal benefits such as income-driven repayment plans and federal forgiveness programs.
- In addition to refinancing, understanding the advantages of federal consolidation and income-driven repayment (IDR) is essential, as it can make managing student loan debt more manageable, especially when compared to the potentially higher interest rates of private lenders.
- When exploring various options to refinance federal Parent PLUS loans, it's vital to keep in mind the factors affecting one's credit, such as credit scores and repayment history, as these may play a significant role in securing competitive rates from private lenders like ELFI and SoFi.
