Despite its rising costs, higher education remains a cornerstone of personal and professional development in the United States. For many, a college degree is still seen as the pathway to higher earning potential, career stability, and social mobility.
However, with the escalating price tags attached to college tuition, fees, and living expenses, families find it increasingly difficult to afford higher education without incurring substantial debt. The cost of education has outpaced inflation, leading to students and parents assuming enormous loan burdens to fund degrees.
Many families consider this investment worthwhile, believing that the long-term benefits of a college degree outweigh the costs. Bachelor’s degree holders typically earn significantly more over their lifetime than those with only a high school diploma.
Unfortunately, this optimism comes at a cost, often in the form of significant debt. American families increasingly turn to federal loans, including the Parent PLUS loan program, to bridge the gap between student financial aid packages and the actual cost of attendance. The total US student loan debt is currently around $1.753 trillion. Of the total debt figure, as many as 3.8 million Americans owe $112.2 billion in outstanding Parent PLUS loans as of Q4 2023.
These loans enable parents to fund their children’s education but come with high interest rates and few flexible repayment options. As a result, parents—many of whom are nearing retirement age—find themselves facing significant financial strain.
Options like Parent PLUS loan refinancing offer a way out from the student debt cycle. Here, we tackle how education financing can be strategically managed through novel refinancing options, some of which can be applied online.
The Growing Burden of Student Debt and Parent PLUS Loans in the US.
Student debt has ballooned to an alarming figure nearing $2 trillion. About seven percent of total student debt comes from Parent PLUS loans—a fact that many ignore. Moreover, the number of Parent PLUS borrowers has increased by 200,000 over the last five years—a growth of 5.5 percent.
What makes Parent PLUS loans especially burdensome is their structure. These loans often come with higher interest rates than other federal student loans and require immediate repayment, unlike federal loans issued directly to students, which typically have a grace period before repayment begins.
As a result, parents can find themselves overwhelmed by the cost of their children’s education while balancing their financial obligations, such as mortgage payments, retirement savings, and emergency funds.
Parent PLUS Loans: The Impact on Families and Older Americans
Parent PLUS loans are becoming a pressing issue, particularly for older Americans. Unlike traditional student loans, typically paid off in one’s younger years, Parent PLUS loans extend the debt burden into midlife and beyond.
A growing number of borrowers of retirement age are still repaying Parent PLUS loans, often at the cost of their nest egg. Many of these parents face a tricky balancing act: how to simultaneously save for retirement, cover medical or emergency expenses, and manage student loan debt. With the rising cost of living and education expenses, many parents need more financial flexibility, leading them to explore refinancing options to secure better loan terms and interest rates.
Why Parent PLUS loans negatively impact low-income families
The original purpose of the Parent PLUS program was to give high-asset families flexibility in paying college tuition for their children. The US Congress designed it to carry high origination fees and interest rates to cover the federal program’s administration costs fully. This design made Parent PLUS loans inherently more costly for borrowers, especially long-term.
Hence, Parent PLUS loans are not ideal for low-wealth or low-income families. Moreover, Parent PLUS borrowers are ineligible for most income-driven repayment (IDR) plans the federal government offers. They are also as difficult to discharge in bankruptcy as any other student loan.
However, their straightforward application and approval process makes them appealing to some borrowers. Applications for up to tens of thousands of dollars can be processed in minutes. More surprisingly, a family can take out large amounts as the loan is capped by nothing else but the child’s entire tuition balance plus expenses after applying for other forms of aid.
The above-stated features make Parent PLUS loans a potential cause for a perfect storm of financial troubles for families for which they weren’t originally intended. Those without high income or sufficient wealth can end up saddled with enormous debt. These loans are built with the assumption that the family can understand the consequences of long-term debt.
The Case for Refinancing Parent PLUS Loans
Refinancing a Parent PLUS loan involves replacing the existing loan with a new one with different terms, often through a private lender. This strategy allows borrowers to harness the advantage of lower interest rates, extended repayment terms, or lower monthly payments, making it simpler and more convenient to manage the loan alongside other financial commitments.
Refinancing can benefit those with solid credit scores or stable income, as lenders typically offer better rates to low-risk borrowers.
Key Benefits of Refinancing
Refinancing offers several notable advantages compared to paying off a Parent PLUS loan the conventional way, including:
Lower interest rates
One of the primary reasons parents refinance their Parent PLUS loans is to secure a lower interest rate. Parent PLUS loans are known for their astronomical interest rates, and in 2024, federal Parent PLUS loan interest rates soared even higher.
Between 2024 and 2025, the loans charge an interest rate of 9.08 percent plus fees—a three-decade high. Comparatively, these current federal interest rates for Parent PLUS loans are significantly higher than private loan rates for qualified borrowers.
Reducing the interest rate can lower monthly payments and reduce the overall cost of the loan.
Flexible repayment terms
Refinancing allows Parent PLUS borrowers to extend their repayment period, spreading the loan over 10 to 25 years. While this may increase the total interest paid over time, it can make monthly payments more affordable and provide immediate financial relief.
Consolidation
If parents have taken out multiple Parent PLUS loans over the years, refinancing offers an opportunity to consolidate them into a single loan, simplifying payments and streamlining financial management.
Transfer of responsibility: an ideal option when approaching retirement
Some refinancing options allow parents to transfer the loan responsibility to their children. This option appeals to parents who want to reduce their financial burden as they approach retirement while enabling their child to take over repayment responsibilities.
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Are you eligible for refinancing a Parent PLUS Loan?
Before considering refinancing, it’s essential to understand the eligibility requirements set by private lenders. While federal programs like Parent PLUS loans are accessible to most parents, refinancing through a private lender may require stricter criteria.
Key factors lenders typically consider include:
Credit score
Borrowers with excellent credit scores—800 or higher—are more likely to qualify for better refinancing rates. A higher credit score communicates to lenders that the borrower is less of a financial risk, allowing them to offer lower interest rates.
Income stability
Lenders also consider a borrower’s income bracket and employment status to assess their overall capability to repay the loan. Borrowers with a steady and sufficient income are more likely to secure favorable terms.
Debt-to-Income ratio
Lenders evaluate the borrower’s debt-to-income ratio (DTI) to ensure they can manage additional debt. A lower DTI increases the chances of loan approval and may result in better rates.
Step-by-Step Process for Refinancing Parent PLUS Loans
If you’ve decided that refinancing is the right solution for your financial situation, here’s a step-by-step guide to help you through the process:
Evaluate your current loan
Begin by assessing your current Parent PLUS loan. Review the loan’s interest rate, remaining balance, and repayment term. This will help you understand whether refinancing can offer significant savings.
Check your credit score
Before applying for refinancing, check your credit score. If you have a subprime score—a credit score below 670—consider improving, it before pursuing refinancing options. Many lenders base their offers on your creditworthiness; a higher credit score usually implies better rates.
Shop around for lenders
Not all lenders offer the same refinancing options or interest rates. Take the time to shop around and compare offers from different private lenders. Look for reputable online lenders with unique benefits, competitive rates, and flexible repayment terms.
Compare rates using a reliable platform
Find a leading platform for Parent PLUS loan refinancing. SoFi, a global fintech company, stands out as a top choice, as parents can check their refinancing rates online within minutes without affecting their credit score. SoFi offers competitive rates, flexible repayment terms, and even options to transfer the loan to the student, making it a popular choice for Parent PLUS loan refinancing.
Submit an application
Once you’ve selected a lender, submit your refinancing application. Be prepared to provide documentation, including your credit report, income statements, and information about your current loan.
Review and accept the offer
If approved, review the new terms of the loan offer carefully. Before accepting the offer, consider the new interest rate, monthly payment, and repayment term. Ensure the new loan provides enough savings to make the refinancing worthwhile.
Manage your new loan
After accepting the refinancing offer, your new lender pays off your existing Parent PLUS loan, and you start making payments on the new loan. Stay on top of your payments to avoid defaulting on the new loan.
Exploring Alternative Solutions
While refinancing can be a sound strategy for managing Parent PLUS loans, it’s not the only solution, nor is it suitable for everybody. Also, remember that refinancing can remove your access to federal loan benefits.
To be thorough, parents should also consider other options that may offer relief:
Income-contingent repayment plans (ICR)
For parents struggling to make payments, consolidating their Parent PLUS loan into a new Direct Consolidation Loan and applying for an Income-Contingent Repayment (ICR) plan can provide a more manageable payment structure. Under ICR, payments are capped at a percentage of your discretionary income or based on what you would pay over a 12-year fixed plan.
Public Service Loan Forgiveness (PSLF)
Parents who work in qualifying public service jobs may be eligible for loan forgiveness under the PSLF program after making 120 qualifying payments. While Parent PLUS loans are not directly eligible, consolidating them into a brand-new Direct Consolidation Loan can make the loan eligible for PSLF.
Adjusting repayment strategies to suit retirement
Parents close to retirement and still repaying Parent PLUS loans should evaluate their financial goals and adjust their repayment strategy accordingly. For instance, those with significant retirement savings might opt for a faster repayment schedule to become debt-free sooner. In contrast, those with limited retirement funds might prioritize lowering their monthly payments through refinancing or income-driven repayment plans.
Managing Parent PLUS Loans With Smart Refinancing Strategies
Parent PLUS loans have become a significant financial burden for many families, especially older Americans juggling education costs with retirement savings and other financial responsibilities.
As higher education costs continue to rise, parents must explore strategies like refinancing to optimize their loan terms and reduce the strain on their finances.
Refinancing offers a practical solution for parents looking to secure lower or more favorable interest rates, reduce monthly payments to attainable amounts, and even consolidate multiple loans into one manageable payment. With options like SoFi making it easier to check rates and customize repayment terms, parents can take control of their financial future and alleviate the pressures of education-related debt.
However, refinancing is not the only pathway. Income-contingent repayment (ICR) plans, Public Service Loan Forgiveness (PSLF), and careful retirement savings planning offer additional relief and long-term strategies for those balancing loan repayment with other life priorities. By assessing their financial situation, exploring all available options, and making informed decisions, parents can tackle their Parent PLUS loans and work toward financial freedom.
Ultimately, Parent PLUS loans are manageable with the right approach. By acting early, refinancing when advantageous, and taking a proactive stance on debt management, parents can free up cash for savings, investments, and more secure retirement plans—ensuring a brighter financial future for themselves and their families.
