Can You Give Away Your Student Loans?September 8, 2021
Note: Education Loan Finance only allows the transferring of parent loans to their child through refinancing. ELFI does not allow the transfer of student loans to their parent or the transfer of student loans from one spouse to another, unless the loans being refinanced were originally cosigned by the party they are being transferred to.
If you’re making payments toward student loans, they’re likely a significant drain on your finances. As you pay your bill every month, you may be wondering if it’s possible to transfer student loans to someone else.
Unfortunately, you can’t just give the loans away. As the borrower that signed the loan agreement, you’re responsible for repaying the debt. However, for many people, there’s a workaround: student loan refinancing.
Can student loans be given away?
Student loans can’t be given to another borrower in their current state. Lenders don’t allow you to transfer ownership of your loans to another person. Even if you took out money on behalf of someone else — for example, a parent taking out Parent PLUS Loans to pay for their child’s undergraduate degree — you are solely responsible for the loan’s repayment, and your child doesn’t have any legal responsibility to repay the debt.
With both federal and private student loans, the only way to transfer the loans into someone else’s name is to refinance them through a private refinancing lender. At ELFI, we only allow the transfer of student loans from a parent to their child.
How to transfer student loans to another person
To transfer your debt, the person who will be responsible for repaying the loans going forward will have to submit an application and be approved by the refinancing lender.
Transferring student loans to a child
If you are one of the 3.6 million people that have taken out federal Parent PLUS Loans to pay for your child’s college education, you’re responsible for repaying the entire balance. Your child has no obligation to repay it. But Parent PLUS Loans can be a significant burden, and your child may be willing to take over the debt to give you some relief.
The federal government doesn’t have a way for parents to move the debt into their child’s name. Parent PLUS Loans can only be transferred to a child through student loan refinancing.
To transfer the loans, your child must meet the lender’s borrower requirements when they submit their application, or they won’t be approved for the loan.
Not all lenders allow borrowers to transfer the loans into another person’s name. ELFI, for example, only allows the transfer of parent loans to a student but does not allow the student to transfer their loans to a parent. You may qualify for parent loan refinancing if you are refinancing at least $15,000 in Parent PLUS Loans or private parent student loans. When the loans are refinanced, you can choose a variable or fixed interest rate. You can select a term of five, seven, or 10 years for parent refinancing loans, so you can pick a term that works for your budget.
Transferring student loans to a parent
While ELFI only allows parents to transfer student loans to their child through refinancing, with some lenders, it’s possible to transfer student loans from a child to a parent. In this case, if you realize your child is struggling to repay their loans and want to help them, you could refinance the loans and take them over. Going forward, the loans will only be under your name, and you’ll be responsible for their repayment.
Transferring student loans to a spouse
If you are married and your spouse earns significantly more than you or has a much better credit score, it may make sense to transfer your student loans to your partner. When your spouse applies for a refinancing loan, their income and credit score may allow them to get a lower interest rate than you’d get, helping your household save money. ELFI, however, does not allow the transfer of student loans from one spouse to another through refinancing.
How to transfer student loans to another lender
What if you have student loans, are able to make the payments, but are unhappy with your lender or loan servicer? Customer support and communication can vary a great deal by lender, so you may want to transfer your loans to another lender to get better service.
There are two different ways to transfer your loans to a new servicer:
1. Direct Consolidation Loan
If you have federal student loans, you may be able to consolidate your debt with a Direct Consolidation Loan. While federal loan consolidation won’t reduce your interest rate or help you save money, it could simplify your repayment. You’ll have just one loan and one monthly payment to remember, and you may be able to extend your repayment period for a lower monthly payment.
When you consolidate your loans with a Direct Consolidation Loan, the government will transfer your loans to a new loan servicer. You cannot select a servicer. Rather, one is selected for you, so this isn’t always an effective way to get better service.
2. Student Loan Refinancing
If you have private student loans or a mix of federal and private loans and are dissatisfied with your loan servicers, you can choose a new lender by refinancing your loans and combining them together.
With Direct Consolidation, you cannot pick your own servicer. But with student loan refinancing, you can. You can shop around and research lenders to find one that has a good reputation for customer service and that offers multiple benefits for borrowers.
When you refinance your student loans, the lender will pay off your old ones, so you won’t have to deal with your old servicers. All of your loans will be combined and managed by the refinancing lender or the lender’s loan servicing partner, so you only will work with one company to make payments or to get help when you have questions.
Handling your debt
While you can’t just give your student loans away, you may be able to transfer student loans to another person — or another lender — by refinancing your debt. If you think that this approach is right for you, make sure the person you want to transfer the loans to is willing to take over the loans and can meet the lender’s borrower requirements. They will have to submit their own loan application for the total loan balance.
Until you receive a notification that the existing loans are paid off, continue making all of your required monthly payments. Otherwise, you could rack up costly late fees and negatively impact your credit score.
If you want to refinance your loans to a new lender, you can get a rate quote from ELFI with the Find My Rate tool.* It only takes just a few minutes to fill out the form, and it won’t affect your credit score.