PLUS Loan Refinance - Disclosures

Important Disclosure About Refinancing Your PLUS Loans

You are eligible to refinance both Federal PLUS for Parents loans and Federal PLUS for Graduate/Professional Students loans (“PLUS Loans”) with this consolidation loan.  This consolidation loan also allows you to consolidate one or more private education loans along with at least one PLUS Loan that you wish to consolidate.  You may consolidate only those PLUS Loans or private education loans that are in your name.  You may not use this loan to consolidate only private education loans or loans owed by other borrowers.  Because PLUS Loans are government loans, you should be aware of the following important facts about how refinancing may affect your rights.

1. A PLUS Loan is made according to rules set by the U.S. Department of Education.  PLUS Loans have fixed interest rates, meaning that the interest rate on a PLUS Loan will never go up or down. 
2. Some PLUS Loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers.  Depending on the type of PLUS Loan that you have, the government may discharge your loan if you or the student dies or become permanently disabled.
3. Depending on the type of PLUS Loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service.  If you are an active-duty servicemember and you obtained your PLUS Loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
4. If you are unable to pay your PLUS Loan, the government can refer your loan to a collection agency or sue you for the unpaid amount.  In addition, the government has special powers to collect the loan, such as taking your tax refund and applying it to your loan balance. 
5. A private student loan is not a government loan and is not regulated by the Department of Education.   A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender. 
6. If you refinance your PLUS Loan, your new lender will use the proceeds of your new loan to pay off your PLUS Loan.  Private student loan lenders do not have to honor any of the benefits that apply to PLUS Loans.  Because your PLUS Loan will be gone after refinancing, you will lose any benefits that apply to that loan.  If you are an active-duty servicemember, your new loan will not be eligible for servicemember benefits.
7. Your private student loan will have a fixed interest rate that will never go up or down and that may be less than the rate of your PLUS Loan.  If the interest rate on the new private student loan is less than the interest rate on your PLUS Loan, your payments will be less if you refinance.
8. If you are a borrower with a secure job, emergency savings, strong credit and are unlikely to need any of the options available to distressed borrowers of government loans, a refinance of your PLUS Loans into a private student loan may be attractive to you. You should consider the costs and benefits of refinancing carefully before you refinance.
9. If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
10. Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship.   In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.