Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Updated on Friday, January 8, 2016
Parent PLUS loans are a convenient way to fund an undergraduate education because the approval criteria is pretty flexible, almost dangerously so. Almost any parent who doesn’t have adverse credit history (aged delinquencies, bankruptcies or tax liens) can qualify and the maximum is the cost of attendance minus any other financial aid. This means parents could end up borrowing high sums of money without the lender (the Federal government) determining if it’s possible to realistically pay it back.
But, everyone taking out a Parent PLUS loan gets the same interest rate (6.84% at the time of writing) across the board regardless of creditworthiness. Fortunately, private lenders are providing an opportunity to refinance Parent PLUS loans, which may give you the opportunity to save if you’re currently repaying a Parent PLUS loan and you have the credit to qualify for a better interest rate.
A Parent PLUS loan refinance with a private lender can reduce your monthly payment and help you pay off debt faster. Purefy (formerly CordiaGrad) is one of several lenders that has a simple refinance with competitive rates, transparent terms and no hidden fees.
Basics of the Purefy Parent PLUS Refinance
Purefy will refinance a minimum of $20,000 in student loans. Fixed interest is offered from 5.00% to 6.00% APR and fixed interest loan terms are 5, 8 and 12 years. Variable interest ranges from 4.30% to 4.50% APR and variable interest loan terms are 5 and 8 years.
Purefy offers two types of interest rate reduction discounts. You can get a 0.50% rate discount if you make monthly auto-payments from a Purefy Bank Account. If you don’t want to open a Purefy Bank Account you can still earn a 0.25% discount by making auto-payments from any other U.S. bank.
Applicants with an annual income less than $42,000 or a credit score less than 700 will need a cosigner to qualify. There’s no cosigner release policy, so whoever cosigns is jointly responsible for the entire life of the loan. Purefy may offer deferment or forbearance in unique circumstances like job loss, death or illness, but it’s only considered on a case-by-case basis.
Application and Funding Process
In order to qualify for a Purefy loan you must:
- Be a U.S. citizen over 23 years old
- Be refinancing a completed bachelor’s degree or above
- Have a strong credit history
- Be employed for at least 2 years
- Have a minimum annual income of $42,000 (or $25,000 with a cosigner)
You’ll need your driver’s license, pay stubs or tax return, your child’s transcript and the loan payoff statements to apply for a refinance. After you apply online, Purefy does an initial review of your profile to offer you loan terms. Once approved, you sign off and funds are disbursed to pay off your Parent PLUS loans. Then, you start making payments directly to Purefy.
Fees and Gotchas
Purefy has no prepayment, origination or application fees. The only fees involved are charged if your payment is late or returned.
One gotcha is that Purefy only offers refinances to U.S. citizens. There are a few other lenders that will refinance student loans for permanent residents including Citizens Bank and DRB, we’ll discuss these two alternatives as well.
Pros and Cons
According to Purefy, borrowers on average save $23,000 in interest over the lifetime of their loan. So, for parents the best pro is the potential to save big if you qualify for the most competitive rates. Plus, this loan has no fees and you can complete the online application within minutes.
The con of the Purefy refinance is that other lenders offer even lower interest rates. In addition, there’s not much flexibility with loan terms and the longest loan term available is 12 years, which may be unrealistic if you have a huge sum of debt.
Finally, the drawback of refinancing federal student loans like the Parent PLUS loan with a private lender is it disqualifies you from certain federal loan benefits. Make sure you understand all the benefits that you’ll no longer be eligible for if you refinance your federal loans.
Alternatives to a Purefy Parent PLUS Refinance
Two other lenders that offer Parent PLUS refinances are Citizens Bank and DRB. Both will approve permanent residents and DRB also has lower interest rates.
Citizens Bank approves U.S. citizens, permanent residents and resident aliens with a Social Security card. The loan terms are 5, 10, 15 and 20 years. Fixed interest is available from 6.64% – 7.24% APR. Rates include a 0.50% discount that’s made up of two offers. You get a 0.25% Loyalty Discount if you have a Citizens Bank account open before applying. You get another 0.25% Automatic Payment Discount if you make automatic payments from any bank account.
Laurel Road Bank(formerly known as DRB) accepts U.S. citizens and permanent residents with the right documentation. It offers variable interest starting at 2.99% APR and fixed interest starting at 3.50% APR. You can get a 0.25% rate reduction if you make automatic payments from a Laurel Road Bank checking account. Terms are available for 5, 7, 10, 15 and 20 years.
Who Will Benefit Most from a Purefy Parent PLUS Refinance?
Any parent paying Parent PLUS loans can benefit from a Purefy loan if you have strong enough credit to get a lower interest rate. In comparison, the current rate for Parent PLUS loans is 6.84% and the very best fixed rate on a Purefy loan refinance is almost half of that at 3.95%.
Always keep in mind, the Purefy (or any student loan refinance) isn’t a solution to lower your monthly federal loan payment because you’re struggling to keep up each month. You’re better off staying with your federal loans and exploring the benefits of income-driven repayment plans. But, if your Parent PLUS loans are in good standing and you’re financially secure, a Purefy refinance is a great way to tackle student loan debt.