What you need to know about Parent PLUS Loan repayment

If you’re reading this, then you probably decided to help your child with the cost of college by taking out a Parent PLUS Loan.

Now that you’ve made that admirable decision, what do you need to know about your loan’s repayment? Here are the answers to some of the most frequently asked questions.

When does Parent PLUS Loan repayment begin?

You start repaying your loan once it’s fully disbursed — or paid out — to the school for that academic year. The specific timeframe depends on the school.

Generally speaking, colleges with a two-semester academic calendar will receive two loan disbursements from lenders. The first happens that August or September for the fall semester; the second in January or February for the spring semester. In this situation, repayment would begin after that January or February disbursement.

Or, you may want to wait until your child is out of school to start making payments. In that case, you can request deferment. Deferment means no payments are required while your child is enrolled (half time or more) in school. Then you get an additional six months — after they graduate, leave school, or drop below half-time enrollment — before your payments begin.

However, in Parent PLUS Loan deferment, interest will accrue. With this in mind, you could either:

• Make interest-only payments during deferment, or
• Have the accrued interest added (capitalized) to your loan principal after deferment.

Interest-only payments during deferment keep interest from accruing while your child is in school.

What are your Parent PLUS Loan repayment options?

Parent PLUS Loans have four repayment plans:

1. Standard repayment plan: Pay off your loan by making fixed monthly payments for 10 years.
2. Graduated repayment plan: Start with smaller payments, then have your payments gradually increase during the 10-year repayment period.
3. Extended repayment plan: Fixed or graduated payments for 25 years.
4. Income-contingent repayment: This option reduces your monthly payment to either 20% of your income or the monthly payment amount on a fixed 12-year repayment plan (whichever option is cheaper).

Can you transfer repayment responsibility to your child?

Unfortunately, no. You, the parent, are legally responsible for repayment of the loan.

Can you refinance Parent PLUS Loans?

Yes, you can!

Depending on the private lender selected, refinancing your Parent PLUS Loan could result in one or both of these benefits:

1. Lowering your interest rate: All federal Parent PLUS Loans are issued with the same interest rate. However, refinance loan interest rates are determined on creditworthiness, so you could potentially find a lower rate if your credit is in good standing.
2. Improving your repayment terms: Refinancing gives you more repayment length options, which is helpful if you want to pay your loan off faster or slower than the standard 10-year repayment plan. Depending on the lender, you could choose a repayment length of 5, 7, 10, 15, or 20 years.

In a rising-rate environment, it’s important to refinance as soon as possible to lock in the lowest interest rate that you can. Then, if the environment changes and rates start dropping, you could always refinance your refinance loan to get a better interest rate.

Keep in mind that refinancing — which is only available through private lenders — means forfeiting federal loan benefits, such as income-based repayment.

More information

Are you interested in refinancing your Parent PLUS Loan? An Education Refinance Loan for Parents through Citizens could lower your interest rate and/or simplify repayment by combining multiple Parent PLUS Loans into a single loan.