Transferring Parent Loans to a Student Explained

Parents often take out student loans to help their with child's education -- but may eventually want to transfer Parent PLUS loans to the student or to transfer private loans to students in order to avoid ongoing financial responsibility for the debt. 

The good news is that this is possible -- but figuring out how to transfer private loans or a Parent PLUS loan to the student can be more difficult than it seems. Here's what you need to know about making the switch, so children become responsible for student loan debt that their parents originally took on. 

Can Parent PLUS Loans be transferred to the student?

Parent PLUS Loans are federal student loans from the Department of Education. When a parent has taken out PLUS Loans, they are responsible for covering the debt in the eyes of the government. 

Unfortunately, the U.S. Department of Education does not allow these federal loans to be transferred into the child's name. So, the technical answer to the question can parent PLUS loans be transferred to the student is not through the federal system – only through refinancing with private loans (see below for explainer). 

This is potentially the best option to make children responsible for repaying these PLUS Loans. In some cases, it's possible for a student to take out a private student loan refinance loan to repay the federal Parent PLUS Loan. The student must qualify to do that, though, and there could be some downsides.

How to transfer Parent PLUS Loan to student

If a student wants to take legal responsibility for the debt, the only way to transfer a Parent PLUS loan to the student is to refinance with a private student loan lender. 

Not all private lenders allow this, so it will be important to shop around for one that does – Splash, for example, does offer this ability to transfer loans from the parent's name to the student. And the student will need to meet eligibility requirements to qualify for a private refinance loan. That means they must have:

• Solid proof of sufficient income to repay the new loan
• Limited other debts (typically, total debt including the new refinanced loan must be under 50% of the borrower's income)
• A good credit score (often 700 or above)

If a student can qualify for a refinance loan at a competitive rate, it may be possible to reduce the interest cost compared with the Parent PLUS loan. Juno can help. Juno gets groups of borrowers together and negotiates on behalf of the group to make lenders compete for their business. This helps borrowers qualify for refinance loans at competitive rates, making student loan refinancing more affordable. 

Should you refinance Parent PLUS Loans and transfer to the student?

Determining how to transfer Parent PLUS Loan to the student isn't the only thing that's important. You also need to think about whether making this financial move is a good idea.

See, Parent PLUS Loans are federal student loans and come with many of the benefits other federal student loans offer. There are flexible repayment options, like deferment and forbearance, and it may even be possible for parents to qualify for loan forgiveness or income-driven repayment plans if they consolidate their PLUS Loans into Direct Consolidation Loans.

By transferring these loans to a private loan in the student's name, these advantages of federal student loans will be lost. Giving up these benefits isn't always worth it, especially if loan forgiveness is a possibility.

Transferring private parent student loans

If you took out private student loans as a parent, you have a few potential options. The first is cosigner release where the lender allows the cosigner, such as a parent, to be released from the loan. If the student borrower is able to meet the lender's cosigner release conditions, this could be a good option to get the loans out of a parent's name. However, getting a lender to release a cosigner isn't always an easy process and not every borrower is approved.

You might also be able to transfer those loans to the child by refinancing student loans with a different private lender. In this case, you're simply converting one private loan into another, so you aren't giving up federal benefits, and there's little downside.

The student will need to qualify for the student loan refinance loan, though. And it makes sense to make this switch only if the student qualifies at a lower interest rate than on the current parent loan. Otherwise, transferring the debt can just make payoff more expensive. 

Not all lenders allow a private loan taken in a parent's name to be refinanced into a student's name, but some do. You'll need to research lenders carefully and find one that allows this as an option. Splash, for example, does offer the ability to transfer loans from the parent's name to the student.

Benefits of transferring parent loans to a student

There are some big advantages if you make the decision to transfer private student loans to a student or to transfer a Parent PLUS loan to the student. Some of the benefits include the following:

• You can often reduce the interest rate to save money over the life of the loan if the student qualifies for a more affordable loan
• You may be lower monthly payments
• Parents can free up money for other financial goals, such as saving for retirement
• The debt will no longer show up as an open account on the parent's credit history, so it will not continue affecting their debt-to-income ratio (which could impact their ability to qualify for other loans)
• Students will become legally responsible for the debt and thus eligible for the student loan tax deduction (if they otherwise qualify)

Juno's Exclusive Student Loan Refinance Deals

	Rates	Juno Benefit	Check
Best for Most Can’t be refinanced with a cosigner	Fixed starting at 3.95% APR APR, Variable starting at 5.89% APR including the .25% autopay discount and the .25% Juno discount.	Rate reduction of 0.25%	Soft Credit Check to get rates; Hard Credit Check to refinance
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Alternative Best for Most May be able to refinance with a cosigner	Fixed starting at 4.96% APR, Variable starting at 4.99% APR. May include autopay discount.	Up to $1,000 cash back based on loan amount	Soft Credit Check to get rates; Hard Credit Check to refinance
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Best for Medical Professionals May be able to refinance with a cosigner	Fixed starting at 5.74% APR, Variable starting at 5.49% APR *	Rate reduction of 0.25% *	Soft Credit Check to get rates;* Hard Credit Check to refinance
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Juno's Exclusive Student Loan Refinance Deals

Downsides of transferring parent loans to a student

There are also some disadvantages to think about before considering how to transfer a private or Parent PLUS loan to the student. Here are some of the downsides:

• You could lose access to federal student loan benefits if Parent PLUS Loans are refinanced into private loans.
• Not all students can qualify for a refinance loan.
• There are limited choices of lenders that allow students to refinance their parents' loans into their own name. Splash, for example, does offer the ability to transfer loans from the parent's name to the student.

Is transferring parent loans right for you?

Ultimately, you will need to carefully consider the type of loans the parents have, and the new refinance rate the student qualifies for before deciding whether the student should refinance parent loans. 

If you decide to move forward, Juno is here to help you get the best student loan refinance rates and rewards possible. We'll get you together with a group of borrowers and negotiate on behalf of the entire group to get each individual borrower the best possible rate. To learn more, Join Juno today.