The best way to pay off Parent PLUS loans faster is to pay more than the minimum each month. This is true for any type of student loan.
But Parent PLUS borrowers can also get rid of their loans faster by refinancing with a private lender. Refinancing can save you money and get you out of debt faster if you get a lower rate on a higher interest PLUS loan, go for a shorter repayment term, or do both.
Refinancing Parent PLUS Loans is not for everyone, including those with bad credit and borrowers who do not want to give up federal loan protection. Here are strategies for paying off PLUS parent loans faster if refinancing doesn’t make sense to you, as well as when to consider this option.
Make interest payments only during school
You don’t have to make PLUS loan payments while your child is in school or for six months after graduation. Late payments can make sense if you have other financial priorities, like getting a second child’s education, or if your child has agreed to pay off the debt for you.
Interest is still accrued during a carry forward of the PLUS Parent Loan, and is added to your balance once the loan goes into repayment. This will increase your future payments, potentially limiting your ability to pay extra for the loan. If you choose to delay full payments, try to pay only the interest for now.
On the PLUS parent loan deferral application, you can choose to pay interest only.
Stick to the standard repayment plan
If you do not defer PLUS loans, your first payment will be due 60 days after the loans are disbursed. You will automatically enter the repayment on the standard plan – 120 monthly payments over 10 years. Stick to this schedule if you can afford it.
You can pay less each month under others parent loan repayment options PLUS, such as extended repayment or income contingent repayment. But these plans lower your bills by increasing your repayment term, so standard repayment is the fastest option for paying off parent loans.
Share repayment responsibility
According to a 2019 report by private lender Sallie Mae, 50% of families expect children to at least share the responsibility for repaying their parents’ loans.
If you and your child are both going to contribute to Parent PLUS Loans, you should each consider paying a little more.
For example, let’s say you have $ 17,000 in PLUS loans. Each month, you owe around $ 200, based on current interest rates and a 10-year repayment term. If you and your child each contribute $ 125 each month, that additional $ 50 would reduce your repayment term by two and a half years.
If you can’t pay more each month, stagger your payments so that you each pay every two weeks. Doing bi-weekly payments, you will make an additional payment per year. This would pay off the debt 13 months earlier.
Should You Refinance Parent PLUS Loans?
To refinance PLUS loans, you will need strong credit – at least in the high 600% – or a co-signer who meets that threshold. Having enough income to cover your future payments is also a must, especially if you plan to shorten your repayment term to pay off your loans faster.
You will save the most money by refinance PLUS loans ASAP in your repayment term. Use this calculator to model your payments at different rates and shorter repayment terms to see what matches your repayment goals: