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When your home energy usage peaks in the summer and winter, you could be surprised by a higher energy bill — and might have to scramble to cover the cost. Signing up for budget billing with your utility providers can eliminate these unexpected cost surges and make it easier for you to plan your monthly expenses.

However, budget billing may not be right for everyone. Below, we’ll explore what budget billing is, how it works, its benefits and drawbacks, and how to set up budget billing on your own — without any help from your provider.

Budget Billing Defined

Budget billing is an alternative, optional payment program for utilities like gas and electricity. By opting into budget billing, you will pay the same predictable amount each billing cycle, regardless of how much or how little energy you actually used.

With budget billing, you can avoid the roller coaster-like highs and lows of utility billing — where costs can skyrocket during sweltering summers and frigid winters. For many, this makes building a monthly budget much easier.

To opt into budget billing, call your utility provider or check out the website for information about what programs are available.

How Does Budget Billing Work?

Energy prices and usage fluctuate throughout the year. This can make it difficult to anticipate what your gas, electric, water, and other utility bills will be each month. Depending on where you live and how harsh the seasons are, you might be in for a surprise on a few bills each year.

Budget billing eliminates those bill fluctuations. Instead, your utility provider analyzes past energy usage for your residence (usually over the prior 12 or 24 months) to estimate an annual total. The company then divides that total into 12 identical payments for the upcoming year.

Of course, it’s unlikely that your energy consumption will be exactly the same as it was the previous year. And with inflation rates and unpredictable weather events, the price of electricity, natural gas, and oil could increase over time. To account for this, your utility provider will track your actual energy usage throughout the year and calculate what you would owe (sometimes called a “true-up amount”).

If you overpaid for the year, the provider may reimburse you for the amount you paid above your actual energy use or they might issue you a credit on an upcoming bill. If you underpaid for the year, you’ll typically have to pay the outstanding balance or the extra will be folded into your upcoming bills.

Either way, the utility provider will use the past year’s worth of data to calculate a new monthly equal billing amount for the year ahead. Some providers may update bill amounts quarterly, rather than annually. Be sure to ask your provider exactly how their budget billing works.

Recommended: Can You Change the Due Date of Your Bills?

Does Budget Billing Save You Money?

Budget billing does not save money on utility bills. It just makes your monthly payments more predictable. Some months, you will likely pay less than what you actually owe. In others, you could be paying more than what you would owe.

Having a predictable line-item in your budget may make it easier for you to handle other monthly expenses or keep you from needing to dip into your emergency fund to cover an especially high energy bill.

Factors That Impact Savings

So is budget billing worth it for eclectic and other utility bills? It can be. While the payment program itself doesn’t lower your energy costs, equal billing programs can still have a positive impact on your finances. Some factors to consider:

•   Energy efficiency: If you become more energy-conscious after enrolling and reduce your consumption, you could end up with a credit at year-end.

•   Rate fluctuations: If utility rates rise during your plan term, your fixed payments might be temporarily lower than actual usage costs.

•   Personal budgeting habits: Budget billing can help you avoid missed payments or overdraft fees, potentially saving you money indirectly.

Advantages of Budget Billing

Budget billing can offer several benefits to households looking for financial stability and easier budgeting. Here’s how it may help you out:

Easier Budget Management

Paying a fixed amount to your utility providers each month makes it easier to build — and stick to – a monthly budget. With predictable bills, you’ll know how much money to set aside each month for utilities. You’ll also know how much is left for other expenses, as well as for savings and retirement contributions, debt repayments, and investments.

Less Financial Stress

If seeing an unusually high total on an email statement or paper bill can send you into a panic, you may appreciate the stability afforded by budget billing. Budget billing won’t save you money, but when you know what to expect each month, you might rest a little easier.

Reducing Late Payment Penalties

If you receive a high energy bill that you can’t afford to pay, you may have to dip into emergency savings, or just pay the bill late. The latter could result in late payment penalties.

With budget billing, you won’t have to worry about a spike in your monthly energy bills and may feel comfortable putting the bill on autopay, which further ensures you never miss a payment.

Predictable Monthly Expenses

This predictability of budget billing supports overall financial planning. It can be particularly helpful for individuals on fixed incomes, such as retirees or those relying on government assistance.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

Drawbacks of Budget Billing

As helpful as budget billing can be for some families, there are also some cons to consider:

Potential Fees

Some utility providers charge a fee to enroll in budget billing. On top of the startup fee, the provider may charge ongoing fees for the service. If that’s the case, budget billing will actually cost you more money than a traditional billing program. It’s a good idea to ask about fees before signing up for any new program.

Chance You Could Underpay

With budget billing, you can end up underpaying throughout the year and, in turn, owing money to your utility provider. This can occur if your actual energy consumption ends up being more than your budget plan accounts for, or if rates rise sharply during the year.

But if you didn’t pay enough each month, you’ll owe whatever remains. If it’s a sizable amount, you may have to rely on a credit card to cover other expenses or take money out of savings to pay off the bill. Many people enroll in budget billing to avoid such surprises to begin with, so this can be counter-productive.

Complacency

When you’re on a budget billing plan, you might get used to a relatively low electric bill in the summer and be tempted to blast the AC. Similarly in the winter, it could be tempting to get all toasty by cranking up the heat, since you won’t feel the financial repercussions of those decisions until much later.

If you don’t think you can be responsible with energy consumption without the threat of a high bill looming over you each month, budget billing may not be the right fit for you.

Possible End-of-Year Adjustment

At the end of the program — usually a year after it kicks off — the utility company will calculate what you actually owed for the year, based on your energy consumption. If you overpaid, you’ll get a credit on a future bill (nice!).

But if you didn’t pay enough each month, you’ll owe whatever remains. If it’s a sizable amount, you may have to rely on a credit card to cover other expenses or take money out of savings to pay off the bill. Many people enroll in budget billing to avoid such surprises to begin with, so this can be counter-productive.

Recommended: Money Management Guide

What Happens If You Are Billed Incorrectly?

Mistakes can happen with budget billing just like with standard billing. It’s important to know how to handle billing errors to protect your finances.

Steps to Resolve Billing Disputes

While every utility company’s dispute process varies slightly, here are the general steps to take if you have an energy billing concern or dispute:

•   Review your bill: Carefully examine the charges, usage history, and any billing adjustments.

•   Gather supporting documentation: If you think you’ve been billed incorrectly, you’ll want to collect previous bills, meter readings, and anything else you feel supports your claim.

•   Contact customer service: Reach out to your utility provider’s customer service department and clearly explain your issue or concern. Ask for clarification and, if necessary, request a correction or adjustment.

•   File a complaint: If your issue doesn’t get resolved, you may need to involve an external agency, such as an energy ombudsman or a regulatory body like the Public Utility Commission.

Can You Make Your Own Budget Billing System?

If your utility provider doesn’t offer budget billing — or if you prefer more control — you can create your own system.

DIY Budgeting Strategies for Utility Bills

By handling budget billing yourself, you can avoid any potential fees the utility provider might have charged you. You can also create a budget billing system for all of your utilities combined. Here’s how:

•   Track historical usage: Sign into your accounts and look at historical data to determine your average monthly cost for each utility. Combine those numbers to get your average total monthly utility costs. Use this amount when building your monthly budget.

•   Set up a separate utility fund: Open a savings account (ideally a ​​high-yield savings account) and deposit a fixed amount each month based on your average utility usage. If your first bill comes in and is less than your monthly budgeted amount, pay the bill and keep the extra funds in the account — you’ll need them later.

•   Automate savings: Set up automatic transfers to your utility fund for consistent budgeting.

•   Monitor your monthly usage: It’s a good idea to assess your usage every few months and adjust your contributions if it changes significantly.

This approach gives you the benefits of budget billing without relying on your utility provider.

Alternatives to Budget Billing

In addition to, or instead of, budget billing, there are other strategies to manage high utility costs and smooth out your expenses.

Energy Efficiency Programs

Many utility providers offer free home energy audits, rebates on energy-efficient appliances, and deals on HVAC systems and other home improvements. Reducing your overall energy usage can permanently lower your monthly bills.

Seasonal Savings Strategies

You can save on utility bills by lowering energy consumption during high-use seasons. Simple actions like sealing drafts around windows and doors, adjusting your thermostat, and turning off unused lights and electronics can lead to significant savings. For more sustained reductions, consider upgrading to LED lighting, installing a programmable thermostat, and adding insulation to key areas like the attic, walls, and crawl spaces.

The Takeaway

Budget billing is a helpful tool for households that want more predictable utility payments. While it doesn’t reduce your energy costs directly, it offers peace of mind, eases budgeting, and helps prevent missed payments. However, there are some downsides to consider. These include potential fees, underpayment risks, and the need for year-end reconciliations.

Before enrolling in a budget billing program, it’s a good idea to review the pros and cons and understand how it can affect your finances each year.

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FAQ

Do all utility companies offer budget billing?

Not all utility companies offer budget billing, but many do — especially larger electric, gas, and water providers. Availability often depends on your location, the specific utility company, and your account history. Budget billing is typically offered to customers with a good payment record and at least 12 months of usage history. To find out if your provider offers this option, check their website or contact customer service directly for eligibility requirements and enrollment details.

Am I better off budget billing or not?

Budget billing can be helpful if you like a predictable utility bill each month. Knowing what you’ll spend may make it easier to budget for other expenses. However, budget billing does have its drawbacks, especially if the utility provider charges a fee for the service.

Can I budget bill for other areas of my budget besides utilities?

Yes, while budget billing is most common for utilities, you can apply similar strategies to other budget categories. For example, you can set aside a fixed monthly amount for irregular expenses like car maintenance, subscriptions, or annual insurance premiums. This method — often referred to as a “sinking fund” approach — helps smooth out large or seasonal costs over time, preventing expense spikes. Budgeting apps and spreadsheets can help you track and manage these monthly allocations effectively.

What happens if my actual energy usage is much higher than estimated?

If your actual energy usage exceeds the estimate used for budget billing, you’ll typically have to pay the difference during a reconciliation period — usually at the end of the billing year. Your utility provider may also adjust your monthly payment going forward to reflect your higher usage. While budget billing can help avoid seasonal spikes, it doesn’t eliminate your responsibility for actual costs, so it’s wise to monitor your usage and be prepared for possible adjustments.

Can I cancel budget billing if it doesn’t work for me?

Yes, most utility companies allow you to cancel budget billing at any time, though the process may vary. When you cancel, you’ll usually be billed for the difference between what you’ve paid and what you’ve actually used. This could result in a credit or a balance due. Be sure to ask your utility provider about any specific terms or timing considerations. If budget billing no longer aligns with your financial needs, switching back to regular billing is usually simple.

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Refinancing student loans can help students save money and pay back their loan faster. However, for international students without a credit history in the U.S., refinancing options are limited. If you’re considering refinancing your student loans as an international student, it’s important to know how the process works.

This guide on student loan refinance for international students will walk you through it.

How Refinancing Student Loans Works

Student loan refinancing is the process of replacing your current student loans with a new loan that has one monthly payment. You can refinance both private student loans and federal student loans, potentially saving money and time as you pay off your debt.

Student loan refinancing companies like SoFi offer fixed and variable interest rates that may be lower than what you’re currently paying on your student loans.

With student loan refinancing, you can also choose from various student loan repayment options and terms, allowing you to pay off your loans as quickly as your budget allows. The shorter your repayment period, the more you’re likely to save on interest, while a longer repayment term typically means you pay more interest over the life of the loan.

As you consider your strategy for paying off your student loan debt, refinancing can be a crucial element in helping you achieve your goal.

Another term you may hear as you’re exploring the idea of refinancing is “consolidation.” The terms are sometimes used interchangeably, but they are not the same thing. With student loans, consolidation is generally associated with federal loans through the Federal Direct Loan Consolidation Program, while refinancing is typically done through a private lender.

Recommended: Can International Students Get Student Loans?

Where to Refinance Student Loans for International Students

When you’re an international student, it’s not always easy to know where to go to refinance your student loan. Many lenders require you to be a U.S. citizen or permanent resident to be eligible for international student loan refinance, but fortunately, some companies provide more flexibility and may offer such options as student loans for H-1B visa holders.

For instance, SoFi as well as MPOWER offer student loan refinance for international students. SoFi considers U.S. citizens, permanent residents, and people who hold a J-1, H-1B, E-2, E3, O-1, or l-1 visa (as of the date of this article).

If you’re a permanent resident, you’ll need to either have at least two years left until your status expires to refinance student loans for international students. And if you’re a visa holder, you’ll need to have at least two years left before your status expires, or you’ve applied for permanent residency.

That said, qualifying based on your citizenship, resident, or visa status doesn’t necessarily mean you qualify based on all criteria. Student loan refinancing lenders also typically have credit and income requirements.
This means that if you don’t have an established credit history — which is not always the case for international students — you may have a tough time getting approved on your own.

If this is your situation, it might be worth getting a student loan refinancing cosigner, such as a trusted family member or friend who is a U.S. citizen or permanent resident, to apply with you to help strengthen the creditworthiness of your application. This can be helpful because a cosigner acts as a backup for your application, and they are also legally obligated to repay the loan if you can’t. Even if you do qualify to refinance your student loans on your own, a co-signer could help you get a lower interest rate.

To help improve your chances of getting approved for international student loan refinance with more favorable terms, such as a low rate, it’s a good idea to choose a co-signer who has a stellar credit history and a solid income.

Eligibility Requirements for International Students

Refinancing eligibility requirements for international students can vary by lenders. However, there are some specific criteria most lenders look for.

Credit Score and Financial History

To be eligible for student loan refinance, an international student needs to have a solid credit history. Lenders generally perform a credit check on borrowers before deciding whether to give them a loan. They check the borrower’s credit score and credit report to see if they have made loan and credit card payments, which helps them assess whether the borrower can repay a refinance loan.

Most international students don’t have a credit history in the U.S. Yet most forms of borrowing, including credit cards, typically require individuals to be U.S. citizens or permanent residents. That makes it difficult to get credit. That’s why having a creditworthy cosigner on the loan can be helpful.

Lenders may also consider your income when deciding whether to give you a loan. They want to see that you have a steady income that’s high enough to make loan payments. Again, a creditworthy cosigner with a steady and sufficient income may help bolster your chances of getting a refinance loan.

Consigner Requirements and Options

When choosing a cosigner, keep in mind that they, too, will need to meet certain requirements from the lender. This generally includes:

•   Being a U.S. citizen or a permanent resident

•   A Social Security number

•   Good to excellent credit (a good credit score is considered to be above 670)

•   A stable job and a steady income

It’s important for the cosigner to understand that they are taking equal responsibility along with the primary borrower for repaying the loan. Any late or missed payments could harm their credit. Make sure the person you choose as your cosigner is someone you trust, and that they are willing to take on the responsibilities — and possible risk — involved.

Two Things to Consider Before Refinancing Your Student Loans

Refinancing might not be the right option for everyone. Here are three things to think about before you make your decision:

You May Not Qualify for a Lower Rate

Your eligibility and student loan interest rate are based on several factors, including your credit history and income. As such, there’s no guarantee you’ll get approved for a lower interest rate than what you’re currently paying, even with a co-signer.

Also, if you already have a relatively low interest rate with your current lender, you may have a hard time getting an even lower rate.

Fortunately, some lenders, including SoFi, allow you to check your rate before you officially apply to refinance. This is done with a soft credit check, which doesn’t impact your credit score.

Refinancing Is Just One Piece of the Puzzle

As you think through your student loan repayment strategy, keep in mind that refinancing isn’t the end of the line. Once you complete the process of refinancing your loans, it’s important to make sure you’re paying down your debt.

For example, consider creating a budget and looking for ways to put extra cash toward your student loan payments each month. If you get some extra money — a chunk of cash for your birthday, say — you can put that toward your loan payments as well.

Additionally, you could go with a shorter repayment period to save even more time and money on your debt. Just be aware that a shorter repayment period means your monthly payments will be higher.

Pros and Cons of Refinancing as an International Student

Refinancing your student loans as an international student could be a way to help manage your monthly payments. But there are advantages and disadvantages to carefully consider before moving ahead.

Benefits of Refinancing

The pros of refinancing student loans include:

•   A lower interest rate: If they can qualify, a lower interest rate can save borrowers money on the amount of interest they pay over the life of the loan. They could potentially save thousands of dollars.

•   Lower monthly payments: With more flexible loan terms, a borrower could lower monthly payments by extending the loan term. However, with a longer repayment term, they will pay more in interest over the life of the loan.

•   Repayment is easier to manage: With refinancing, a borrower has just one loan to keep track of and pay each month, rather than multiple loans. This can simplify the repayment process.

Potential Drawbacks to Keep in Mind

There are several disadvantages to refinancing, such as:

•   Refinancing as an international student may be challenging: Many lenders don’t offer student loan refinancing to international students. Those that do typically offer refinancing to international borrowers with certain types of visas or those with permanent residency status.

•   A cosigner may be required: Many international students don’t have a credit history in the U.S, which is something lenders look for. In that case, a creditworthy cosigner may be needed to secure refinancing.

•   Refinancing federal student loans makes them ineligible for federal benefits: While both federal and private student loans can be refinanced, refinancing federal loans means that borrowers no longer have access to federal programs and protections, such as income-driven repayment plans and federal deferment. (Although federal student loans are not typically available to international students, some international students who are permanent residents of the U.S. or have certain types of visas may be eligible for them.)

The Takeaway

If you’re considering refinancing student loans as an international student, be sure to check your eligibility requirements with private lenders. If you don’t have a strong credit history, consider adding a co-signer who is a U.S. citizen or permanent resident to strengthen your refinance loan application.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What lenders refinance student loans for international students?

Lenders that refinance student loans for international students include SoFi, MPOWER, Earnest, and PNC among others. Generally, you’ll need to have a certain type of visa or be a permanent resident to be eligible. Check the specific eligibility requirements with each lender.

Do I need a U.S.-based cosigner to refinance my student loans?

A U.S.-based cosigner who is a citizen or permanent resident and has strong credit, a steady job, and a good income may strengthen an international student’s application for student loan refinance. That’s because lenders look at a borrower’s credit history and income when deciding whether to issue a loan. A cosigner takes equal responsibility for the loan and repays it in the event the primary borrower can’t.

What are the alternatives if I can’t refinance my student loans?

If you are unable to refinance your student loans, you could create a budget to save money and then put the money you save toward your loan payments to help pay down your debt faster. You can also pay more toward the principal on your loan each month, which may help you pay off your loans faster.

You can look into student loan consolidation if you have federal student loans and want to simplify the payment process, or income-based repayment plans if you’re trying to lower your federal monthly loan payment.

How does refinancing affect my credit score as an international student?

If you are able to refinance your loan as an international student, it could help build your credit over time as long as you consistently make your monthly payments by the due date. When you refinance and make on-time payments, you are helping to build a credit history for yourself, which could make it easier to be approved for loans or credit cards in the future.

Is refinancing worth it if I plan to return to my home country?

You will still be responsible for paying off your student loans if you return to your home country. So if refinancing gets you a lower rate or more favorable loan terms, it may be worth doing.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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If you took out a federal Parent PLUS loan to help your child through college, you may be wondering if it’s possible to transfer the loan into your child’s name now that they’ve graduated and have an income. While there are no federal loan programs that allow for this, there are other options that let your child take over the loan.

Read on to learn how to transfer a Parent PLUS loan to a student.

How to Transfer a Parent PLUS Loan to a Student

There are no specific programs in place to transfer a Parent PLUS loan to a student, but there is a way to do it. To make the transfer of the Parent PLUS loan to a student, the student can apply for student loan refinancing through a private lender. The student then uses the refinance loan to pay off the Parent PLUS loan, and they become responsible for making the monthly payments and paying off the new loan.

Here’s how to refinance Parent PLUS loans to a student.

Gather Your Loan Information

When filling out the refinancing application, the student will need to include information about the Parent Plus loan. Pull together documentation about the loan ahead of time, including statements with the loan payoff information, and the name of the loan servicer.

Compare Lenders

Look for lenders that refinance Parent PLUS loans (most but not all lenders do). Then shop around to find the best interest rate and terms. Many lenders allow applicants to prequalify, which doesn’t impact their credit score.

Fill Out an Application

Once the student has found the lender they’d like to work with, they will need to submit a formal application. They can list the Parent PLUS loan on the application and note that it is in their parent’s name, and include any supporting documentation the lender requires.

Eligibility Requirements for Refinancing a Parent PLUS Loan

To refinance a Parent PLUS loan to a student, the student should first make sure that they qualify for refinancing. Lenders look at a variety of factors when deciding whether to approve a refinance loan, including credit history and credit score, employment, and income. Specific eligibility requirements may vary by lender, but they typically include:

•   A credit score of at least 670 to qualify for refinancing and to get better interest rates

•   A stable job

•   A steady income

•   A history of repaying other debts

If approved for refinancing, the student can pay off the Parent PLUS loan with the refinance loan and begin making payments on the new loan.

Advantages of Refinancing a Parent PLUS Loan

The main advantage of refinancing a parent student loan like a Parent PLUS loan is to get the loan out of the parent’s name and into the student’s. However, there are other potential advantages to refinancing student loans, including:

•   Lowering the interest rate

•   Reducing the monthly payments

•   Paying off the loan faster

•   Helping the student to build a credit history

Disadvantages of Refinancing a Parent PLUS Loan

While it may be beneficial to refinance a Parent PLUS loan into a private loan, there are some disadvantages to Parent PLUS vs. private loans that should be considered. The drawbacks include:

•   Losing federal student loan benefits, including income-driven repayment, deferment options, and Public Service Loan Forgiveness

•   Possibly ending up with a higher interest rate, especially if the student has poor credit

•   The student is solely responsible for the monthly payment, which might become a hardship if their income is low

If you do choose to refinance your Parent PLUS loan, you should note that this process is not reversible. Once your child signs on the dotted line and pays off the Parent PLUS loan, the debt is theirs.

Parent PLUS Loan Overview

The Department of Education provides Parent PLUS loans that can be taken out by a parent to fund their child’s education. Before applying, the student and parent must fill out the Free Application for Federal Student Aid (FAFSA®).

Then the parent can apply directly for a Parent PLUS loan, also known as a Direct PLUS Loan.

The purpose of a Parent PLUS loan is to fund the education of the borrower’s child. The loan is made in the parent’s name, and the parent is ultimately responsible for repaying the loan. Parent PLUS loans come with higher interest rates than federal student loans made to students, plus a loan fee that is the percentage of the loan amount. These loans are not subsidized, which means interest accrues on the principal balance from day one of fund disbursement.

Parents are eligible to take out a maximum of the cost of attendance for their child’s school, minus any financial aid the student is receiving. Payments are due immediately from the time the loan is disbursed, unless you request a deferment to delay payment. You can also opt to make interest-only payments on the loan until your child has graduated.

Pros and Cons of Parent PLUS Loans

Parent PLUS loans allow you to help your child attend college without them accruing debt.

Pros of Parent PLUS loans include:

You can pay for college in its entirety. Parent PLUS loans can cover the full cost of attendance, including tuition, books, room and board, and other fees. Any money left over after expenses is paid to you, unless you request the funds be given directly to your child.

Multiple repayment plans available. As a parent borrower, you can choose from three types of repayment plans: standard, graduated, or extended. With all three, interest will start accruing immediately.

Interest rates are fixed. Interest rates on Parent PLUS loans are fixed for the life of the loan. This allows you to plan your budget and monthly expenses around this additional debt.

They are relatively easy to get. To qualify for a Parent PLUS loan, you must be the biological or adoptive parent of the child, meet the general requirements for receiving financial aid, and not have an adverse credit history. If you do have an adverse credit history, you may still be able to qualify by applying with an endorser or proving that you have extenuating circumstances, as well as undergoing credit counseling. Your debt-to-income ratio and credit score are not factored into approval.

Cons of Parent PLUS loans include:

Large borrowing amounts. Because there isn’t a limit on the amount that can be borrowed as long as it doesn’t exceed college attendance costs, it can be easy to take on significant amounts of debt.

Interest accrues immediately. You may be able to defer payments until after your child has graduated, but interest starts accruing from the moment you take out the loan. By comparison, federal subsidized loans, which are available to students with financial need, do not accrue interest until the first loan payment is due.

Loan fees. There is a loan fee on Parent PLUS loans. The fee is a percentage of the loan amount and it is currently (since October 2020) 4.228%.

Can a Child Make the Parent PLUS Loan Payments?

Yes, your child can make the monthly payments on your Parent PLUS loan. If you want to avoid having your child apply for student loan refinance, you can simply have them make the Parent PLUS loan payment each month instead.

However, it’s important to be aware that if you do this, the loan will still be in your name. If your child misses a payment, it will affect your credit score, not theirs. Your child also will not be building their own credit history since the debt is not in their name.

Parent PLUS Loan Refinancing

As a parent, you may also be interested in refinancing your Parent PLUS loan yourself. Refinancing results in the Parent PLUS loan being transferred to another lender — in this case, a private lender. With refinancing, you may be able to qualify for a lower interest rate. Securing a lower interest rate allows you to pay less interest over the life of the loan.

When you refinance federal Parent PLUS loans, you do lose borrower protections provided by the federal government. These include income-driven repayment plans, forbearance, deferment, and federal loan forgiveness programs. If you are currently taking advantage of one of these opportunities, it may not be in your best interest to refinance.

Parent Plus Loan Consolidation

Another option for parents with Parent PLUS loans is consolidation. By consolidating these loans into a Direct Consolidation Loan you become eligible for the income-contingent repayment (ICR) plan, which is an income-driven repayment (IDR) plan. (Parent PLUS loans are not eligible for IDR plans otherwise.)

On an ICR plan, your monthly payments are either what you would pay on a repayment plan with a fixed monthly payment over 12 years, adjusted based on your income; or 20% of your discretionary income divided by 12 — whichever is less.

One thing to consider if you consolidate a Parent PLUS loan is that you may pay more interest. In the consolidation process, the outstanding interest on the loans you consolidate becomes part of the principal balance on the consolidation loan. That means interest may accrue on a higher principal balance than you would have had without consolidation.

Alternatives to Transferring a Parent PLUS Loan

Instead of learning how to transfer Parent PLUS loans to a student, you could opt to keep the loan in your name and have your child make the monthly loan payments instead. But as noted previously, if you go this route and your child neglects to make any payments, it affects your credit not theirs. Also, when the loan remains in your name, the child is not building a credit history of their own.

You could also choose to consolidate Parent PLUS loans, as outlined above. Just weigh the pros and cons of doing so.

And finally, you could refinance the loan in your name to get a lower interest rate or more favorable terms, if you qualify.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What if I can’t pay my Parent PLUS loans?

If you are struggling to pay your Parent PLUS loan, get in touch with your lender right away. One option they may offer is a deferment or forbearance to temporarily suspend your payments. Keep in mind that with forbearance, interest will continue to accrue on your loan even if payments are postponed.

You could also consider switching the repayment plan you are enrolled in to an extended repayment plan, or refinancing your loan in order to get a lower interest rate.

Can you refinance a Parent PLUS loan?

Yes, you can refinance a Parent PLUS loan through a private lender. Doing so will make the loan ineligible for any federal borrower protections, but it might allow you to secure a more competitive interest rate or more favorable terms. You could also opt to have the refinanced loan taken out in your child’s name instead of your own.

Is there loan forgiveness for Parent PLUS loans?

It is possible to pursue Public Service Loan Forgiveness (PSLF) with a Parent PLUS loan. To do so, the loan will first need to be consolidated into a Direct Consolidation loan and then enrolled in the income-contingent repayment (ICR) plan.

Then, you’ll have to meet the requirements for PSLF, including 120 qualifying payments while working for an eligible employer (such as a qualifying not-for-profit or government organization). Note that eligibility for PSLF depends on your job as the parent borrower, not your child’s job.

What happens if a Parent PLUS loan is not repaid?

If you can’t make the payments on a Parent PLUS loan, contact your loan servicer immediately to prevent the loan from going into default. The loan servicer can go over the options you have to keep your loan in good standing. For instance, you could change your repayment plan to lower your monthly payment. Or you could opt for a deferment or forbearance to temporarily stop the payments on your loan.

Can a Parent PLUS loan be consolidated with federal loans in the student’s name?

No, Parent PLUS loans cannot be consolidated with federal student loans in the student’s name. You can only consolidate Parent PLUS loans in your name.

SoFi Student Loan Refinance
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