Updated September 7, 2017
CommonBond has been refinancing student loans for the last few years, and has recently created a Parent PLUS refinance program. If you’re a parent of a graduate who has loans with interest rates above 7%, and you’ve been looking to refinance to a more affordable rate,CommonBond may have the solution you’ve been looking for.
Details of CommonBond’s Parent PLUS Loan
With CommonBond’s Parent PLUS loan, you can refinance a maximum of $500,000 on a 5, 10, 15, or 20 year term.
CommonBond offers variable loans with rates starting at 2.72% APR and fixed loans ranging from 3.14% to 7.25% APR.
There’s also a hybrid loan option offered only on a 10 year term. For the first 5 years, you pay at a fixed rate, and for the following 5 years, you pay at a variable rate.
CommonBond allows you to transfer your PLUS loan to your child. If they can afford to take on the loan and want to lessen the burden you’re shouldering, this is a great option not available with the Federal Direct PLUS loan.
A payment example looks like this: if you refinance $10,000 on a 10 year term with a variable APR of 3.17%, you’ll pay around $97.35 per month. That comes to a total of $11,681.69 over 10 years. If you refinance under the same terms, but with a fixed APR of 4.74%, your monthly payment will be $104.80, and you’ll pay a total of $12,575.90 over 10 years.
How Does CommonBond’s Parent PLUS Loan Compare to a Federal Direct PLUS Loan?
Depending on when you took out your Parent PLUS loan, you could have an interest rate of 6.84% to 8% or higher. With CommonBond’s low rates, it’s not surprising its customers save, on average, $14,000 by refinancing.
Direct PLUS loans have a 6.84% fixed rate as of the 2015-2016 academic year;variable rates are unavailable. While fixed rates are great for stability, they’re higher and more expensive over the course of 10 years.
Judging by interest rates and terms offered, refinancing through CommonBond will save you money. However, it’s not for everyone. If you think you may need to take advantage of income-driven repayment plans, or if your loans are eligible to be forgiven, you might want to stick with your original loan, as private lenders don’t offer these benefits.
On the other hand, if your child is willing to take on your PLUS loan, you can transfer it to them through CommonBond. A Direct PLUS loan taken out in your name can’t be transferred to your child – not even through a Direct Loan Consolidation.
Your child must have graduated from one of CommonBond’s approved Title IV schools or graduate programs to refinance. You must be a U.S. citizen or permanent resident to be approved as well.
If your child is refinancing the loan into their name, they must have graduated with at least a Bachelor’s degree, and 24 months need to have passed from their date of graduation before they can apply.
Credit history and income is also taken into consideration. Having a credit score of 720 or above will help you secure the best rates possible. If your child doesn’t have a long credit history, they can apply with a cosigner.
Application Process and Documents Needed
CommonBond says it only takes minutes to receive a credit decision, and it uses a soft inquiry (initially) to give you estimated rates. A hard inquiry will be used if you want to move forward with the loan and get an exact rate.
Once your loan is approved, it typically takes 30 to 60 days to begin monthly payments with CommonBond.
If you’d like to transfer your PLUS loan to your child, he or she will need to fill out a separate application. Your child can select the option “I graduated and want to refinance,” and input your loan information.
Documents needed include:
- Proof of employment – you can submit your two most recent paystubs, two most recent years of tax documents, or a letter of acceptance from a job you just secured
- Proof of residence – driver’s license, utility bill, or recent bank statement all work
- Loan documentation – you need your most recent loan statement with the account number and details for the loan you want to refinance
You’ll upload these documents after receiving a pre-approval to move onto the next stage in the refinance process. In the FAQ,CommonBond says the entire process can be completed in a few business days.
The Fine Print
There’s no origination fee or prepayment penalty associated with the loan. In fact, CommonBond goes so far as to state, “No application fees. No origination fees. Nothing that ends with the word ‘fees.’” on its website.
However, anytime you’re refinancing federal student loans to private student loans, you should be aware you’re forfeiting several benefits exclusive to federal loans. These benefits include loan forgiveness, cancelation, discharge, deferment, and access to income-driven repayment plans.
Repayment Assistance Options for Parents
CommonBond doesn’t offer as many repayment options as other lenders, but it does say it’s willing to help borrowers out in case of an economic hardship with temporary loan forbearance. This means you won’t be required to pay your monthly payment for a set period of time.
If forbearance isn’t enough, or if you still can’t pay after the period of forbearance has ended, you can speak with CommonBond and it will try to find another repayment solution for you.
Pros and Cons of CommonBond’s Parent PLUS Loan
Pro: CommonBond offers a hybrid loan, which involves paying at a fixed rate for 5 years, and a variable rate for the following 5 years. It’s an interesting way to save, especially if you value stability and can afford to take on the “risk” of a variable loan after 5 years.
Con: The loss of federal benefits can be a negative if you think you’ll need them. Loan forgiveness doesn’t apply to everyone, and if you think you have enough savings (or a source of very stable income), then you may not need the extra repayment assistance provided.
Pro: If you are unable to pay due to permanent disability (or in the event of the death of a borrower), the loan is eligible for forgiveness if there’s no cosigner on the loan.
Con: Repayment assistance isn’t as robust as other private lenders, such as SoFi, but the important thing is CommonBond is willing to work with borrowers in case of financial hardship.
Pro: For parents who have taken out PLUS loans recently, you might be happy to refinance to a variable rate with CommonBond. This is a good option if you want to pay off your loan quickly – lower interest rates mean more of your payment going toward principal.
Con: CommonBond offers terms up to 20 years. Be careful about refinancing to a longer term to “save money” – the longer you pay back a loan, the more interest you’ll pay. Your monthly payment may be lower, but it’s worthwhile to pay extra (when you can) so you’re not stuck paying this loan back for the next 20 years, well into your retirement.
Pro: Customer service from CommonBond is extremely accessible. It has a live chat feature on the website, and you can email or you can call. Its FAQ is also helpful in answering any questions you may have.