Parent PLUS Loan Consolidation: Blending Parent and Student Debt Portfolios

Sending a child to college is a significant family milestone, but it often requires taking on substantial debt. Many parents turn to Federal Parent PLUS Loans to cover the funding gaps.

Parent PLUS loans are issued in the parent's name, but they carry two major drawbacks: they have the highest interest rates of any federal student loan program, and they have fewer flexible repayment options than standard student loans.

As college graduates enter the workforce, many families decide to tackle their student debt together. They want to know: Can we consolidate our loans into one single payment, and what is our combined blended interest rate?

Here is the mathematical and legal reality of consolidating Parent PLUS loans, how to find your family's blended student loan rate, and how private refinancing can transfer debt from parent to student.

Use our Loan Payoff Calculator to check your combined monthly payments:

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The Legal Boundary: Federal Consolidation Rules

Before running the numbers, you must understand a critical federal restriction: You cannot consolidate a Parent PLUS loan with a student's Direct Loans through the government's Federal Direct Consolidation program.

The Federal Direct Consolidation program only allows a borrower to combine loans issued in their own name.

• The student can consolidate their Direct Stafford loans.
• The parent can consolidate their Parent PLUS loans.
• The student and parent cannot combine their loans together into a single federal loan.

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Finding Your Family's Combined Blended Rate

Even though you cannot legally combine the loans federally, you should still calculate your household's blended student loan rate to understand the true average cost of your family's college debt. This is the benchmark you must beat if you look at private refinancing.

Imagine a family has the following student loans:

• Student's Federal Stafford Loans: $25,000 at 5.50% interest
• Parent's Federal PLUS Loans: $45,000 at 8.05% interest
• Total Family Debt: $70,000

To find the blended household rate:

Family Blended Rate = (Student Debt × Student Rate + Parent Debt × Parent Rate) ÷ Total Debt

• Student Debt Weight: $$25,000 \times 5.50% = 137,500$
• Parent Debt Weight: $$45,000 \times 8.05% = 362,250$
• Combined Interest Weight: $137,500 + 362,250 = 499,750$
• Family Blended Interest Rate: $499,750 \div $70,000 =$ 7.14%

Even though the Parent PLUS rate is a steep 8.05%, the family's combined borrowing rate is actually 7.14%, because the student's cheaper loans cushion the average.

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Private Refinancing: Transferring Parent Debt to the Student

If the graduate has found a stable job with good income and wants to take over the Parent PLUS loans, the family can turn to private lenders.

Unlike the federal government, private student loan refinancing companies will allow a student to refinance their parent's Parent PLUS loans into the student's name, combining them with the student's own Direct Loans.

Let's look at the options based on our case study:

In this scenario, if a private lender offers the student a combined rate of 6.25% based on their credit score:

• The family's blended rate drops from 7.14% to 6.25%.
• The parent is completely freed from the debt.
• The family saves $400 to $600 per year in interest over a standard 10-year term.

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The Double Consolidation Loophole for Parents

If the parent has a low income relative to their debt and wants to keep federal benefits, they should research the Parent PLUS Double Consolidation Loophole.

Normally, consolidated Parent PLUS loans are only eligible for the Income-Contingent Repayment (ICR) plan, which is the most expensive Income-Driven Repayment (IDR) plan. By consolidating the PLUS loans twice into different federal servicers, the parent can bypass this restriction and qualify for the much more generous SAVE plan (Saving on a Valuable Education), which can slash monthly payments to zero or a fraction of the standard cost.

To learn more about federal student loan calculation rules, read our post on the federal student loan consolidation rounding rule or check out the student loan blended rate calculation guide.

Frequently Asked Questions

Can you consolidate a Parent PLUS loan with your student's loans?

No. The Federal Direct Consolidation program only allows a borrower to combine loans issued in their own name, so a parent cannot federally consolidate their Parent PLUS loans with a student's Direct Loans. The parent consolidates their PLUS loans and the student consolidates their Stafford loans, but the two cannot be merged into one federal loan.

How do you calculate a family's blended student loan rate?

Weight each loan by its balance: (Student Debt × Student Rate + Parent Debt × Parent Rate) ÷ Total Debt. For $25,000 of Stafford loans at 5.50% plus $45,000 of Parent PLUS loans at 8.05%, the weighted interest is $137,500 plus $362,250, divided by $70,000 — a blended family rate of 7.14%.

Can a student refinance a parent's Parent PLUS loan into their own name?

Yes, through a private lender. Unlike the federal government, private student loan refinancing companies allow a student to refinance their parent's PLUS loans into the student's name and combine them with the student's Direct Loans. This transfers the debt off the parent, but permanently forfeits all federal benefits like SAVE and PSLF.

Is refinancing Parent PLUS loans worth it?

It depends on the rate and your reliance on federal benefits. In the case study, a private lender offering the student 6.25% drops the family blended rate from 7.14% to 6.25%, frees the parent from the debt, and saves $400 to $600 per year over a 10-year term. But if you qualify for Public Service Loan Forgiveness, refinancing wipes out that eligibility permanently.