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Refinance Parent Plus Loan??

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Refinance Parent Plus Loan??

I was wondering thoughts on refinancing parent plus loans. My interest rates are between 6-7.35% but a decent chunk (1/3) are at 7.35%. My kids just graduated so I have 10 years of repayment still.
My FICO 8: EX: 833, EQ: 716 TU: 836
I owe approx $64K. I want to buy a house in 1-2 years. My current SL payment is $765- which is manageable... I’ve been paying $800 but toss around trying to pay off in 5 years so maybe getting a PT job that goes just to these loans- but honestly - as anyone else would feel, that’s not super appealing since my day job is busy- and I like to have a life... but would also love to be debt free ASAP and that’s my only debt. Because my kids have just now graduated- repayment schedule is 10 more years.
So- obviously having a lower interest rate than 7.35% is appealing... and is likely possible even if I were to extend the timeframe to 20-25 years (lowering payments for DTI for mortgage). Maybe that’s a bad idea??

Also- because of the 2 kids- it creates 2 installment loans on my credit report and refinancing would bring it down to 1 unless I kept them separate. Is this going to hurt my credit score?

My career is pretty solid- income is around $110Kish - sometimes more or less - and I’m not super worried about job loss... Again ideally I would like to payoff in 5 years but just trying to set myself up for mortgage approval, payoff debt, protect/increase my credit score and pay less on interest if possible. Just trying to figure out best course of action... thank you!!
Message 1 of 6
5 REPLIES 5
Established Contributor

Re: Refinance Parent Plus Loan??

If you decide to refinance with a private lender, all the federal loan protections will disappear. Right now if you consolidate the loan, you will have options to payments based on income and even loan forgiveness programs. At your income this might not be appealing, but it's a nice safety net in case you run into a bad situation.
If you get a private loan to pay this off, all bets are off. Personally, I would not trade in the security of a federal loan. Quite a few people ended up regretted trying to save a little but on interest. Life is just too unpredictable and the private lenders won't care.
You also might want to check out the benefits of a FHA loan and being on an income-driven plan. Your monthly payments become the focus, not the total amount owed.
Lastly, those loans are aging nicely. You have two different tradelines creating positive payments. If you consolidate, it will cost you an inquiry and create a new tradeline at 100%. With your score it might not have that much of an impact though.



Message 2 of 6
Established Member

Re: Refinance Parent Plus Loan??

I’m wondering if anyone has had a good experience with refinancing student loans here? Over 3% difference is substantial savings over 5-25 years... thank you!
Message 3 of 6
Established Contributor

Re: Refinance Parent Plus Loan??

Absolutely. There were two posters on here who had loans over $500k...and they're doctors. They will benefit. Or if someone took out a small loan to start with.
However, the vast majority of people will benefit from loan forgiveness. If you didn't go to graduate school or consolidate your PLUS loans, you could have your loans forgiven at year 20. PSLF at 10 years. There are many other loan forgiveness programs too. Not to mention the federal loan protections in case you lose your job, get sick, etc. as well as the payments that factor in your income.
Unless you're one of the lucky few, people should be less concerned about trying to save a bit of money on student loans. That path usually leads to regret. (See: people who started with private student loans)



Message 4 of 6
Established Member

Re: Refinance Parent Plus Loan??

I am not eligible for income based repayment plans or public service loan forgiveness- since I make $150K/annual and don’t work in public service/government work. I could do a consolidation at the same interest rate and lengthen the timeframe if I want- but that’s my only option for me in keeping them as federal loans.

I owe $64K and would like to payoff in 5 years- but I might want to buy a house in a few years and want lower payments for a bit or other options... my career is pretty steady- and heaven forbid I lose my job, many of the private loan companies offer a pause while unemployed. My current interest rate is around 7.35% and I have been offered 4.3% for private.
Message 5 of 6
Established Contributor

Re: Refinance Parent Plus Loan??

Income-based repayment plan, or the IBR plan, is a type of Income-driven repayment plan. You are correct, it's not the one you would qualify for.
PLUS loans become eligible for an Income-driven repayment plan (the income-contingent repayment plan, or ICR plan) but only after the loan is consolidated. This would of course mean a new loan at 100% utilization, but refinancing would do that anyway.
Once you consolidate and it's placed with a servicer if your choosing, you'll be placed on the plan you chose. Don't choose any other IDR plan other than ICR; it will only throw a wrench in the processing.
Then you'll be protected it you lose your job, you can make the lower payments to save up for the house and higher than the minimum payment when you want to pay it off either. I think auto-debit also gives you a .25% reduction in your interest rate. I personally wouldn't risk a lower rate over the potential for disaster and I've had several people ask his to reverse their decision to refinance. Once you do it, you can't get the federal protections back.
You night also want to do some research and learn the benefits of getting a FHA loan on an income-driven repayment plan.



Message 6 of 6
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