When Does It Make Sense to Take Over Your Parent’s PLUS Loan?

Paying for college is a costly venture, and parents often step up with a federal Parent PLUS loan so their student can focus on school—not on bills. But after graduation, many families ask a smart question: should the student refinance and take over that Parent PLUS loan? We’ll cover what you need to know to decide when it does and doesn’t make sense. 

First things first: What’s actually possible? 

• You can’t “transfer” a federal Parent PLUS Loan to the student within the federal student loan system. By law, the parent is the borrower.

• A student can take over the debt by refinancing with a private lender (a new private student loan in the student’s name that pays off the Parent PLUS balance). Numerous private lenders, including credit unions, offer this option. 

When refinancing might make sense 

1. You can significantly lower the interest rate. If your credit, income, and debt-to-income (DTI) ratio qualify you for a rate well below your parent’s PLUS rate, refinancing can reduce total interest and monthly payments. Many lenders allow you to estimate your rate without impacting your credit score, making it easier to compare options.
   • Rule of thumb: Look for at least a 1–2 percentage point drop versus your current weighted rate, assuming you keep a similar repayment term.

2. Your parent doesn’t need federal loan protections. Parent PLUS loans can access certain federal benefits (e.g., Public Service Loan Forgiveness after federal loan consolidation, or deferment/forbearance options). If your parent isn’t using—or won’t qualify for—these benefits, moving the debt to a private loan in your name may be a better path.

3. Family balance-sheet benefits matter. Refinancing into the student’s name:
   • Frees up the parent’s credit and DTI for other loans such as mortgages, car loans, or retirement planning.
   • Aligns responsibility with benefit—the education helped your earning potential; owning the loan can feel fair.

4. You have solid financial footing. 
   • Stable job and income (ideally with an established emergency fund of 3–6 months). 
   • Comfortable DTI (often <35%, including the new payment) 

When you probably shouldn’t take over (yet) 

• Your parent is PSLF-eligible. This can apply if they are employed by the government or a not-for-profit organization. They must consolidate to a federal Direct Consolidation Loan and make payments under the Income-Contingent Repayment (ICR) plan to pursue forgiveness. Private refinancing would forfeit that path. 

• Your refinance rate isn’t better than the current PLUS rate (or savings are not substantial unless you pick a much longer term, which can raise total interest). 

• Your income is variable (commission-based, early-stage startup, or changing fields) and you value federal safety nets over potential rate savings. 

• The current loan has a short remaining payment term (e.g., <2–3 years): the interest you’d save may not justify paperwork or the loss of protections. 

Step-by-step: How to evaluate your options

1. Review the current PLUS loan’s terms (balance, rate, remaining months, monthly payment).

2. Check rates with several private lenders. Our finder tool can help you compare rates and terms among leading credit union lenders.

3. Review borrower protections, including forbearance options, unemployment assistance, and cosigner release timelines (if a parent will co-sign your refinance).

4. Decide on a repayment term strategy:
   • Shorter term = higher payment, bigger total interest savings.
   • Longer term = lower payment, potentially more total interest. 

Special considerations (Don’t skip these!) 

• Federal vs. private trade-offs are irreversible. Once you refinance to a private loan, you can’t turn it back into a federal loan later. 

• PSLF & IDR rules are nuanced. Parent PLUS loans have limited income-driven options (typically via Direct Consolidation + ICR) and PSLF rules apply to the parent borrower, not the student. If there’s any chance your parent could qualify, reconsider a private refi. 

• Death/disability discharges: Federal loans carry specific discharge rules; private lenders’ policies vary—read the fine print. 

• Taxes & deductions: Student loan interest deductions may apply but have income limits. 

Bottom line 

It often makes sense for a graduate to take over a Parent PLUS loan if you can secure a clearly lower rate, your parent doesn’t need federal forgiveness or protections, and your cash flow is stable. If PSLF or federal safety nets are on the table—or your refinance offer isn’t compelling—press pause and keep the loan federal. 

Through our credit union finder tool, you can compare refinancing options from trusted credit unions nationwide—without affecting your credit score.