Author Topic: Refinance Parent Plus loans to wife's name or get multiple tax deductions?  (Read 1383 times)

MFG_Hotspur

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My wife has ~$157K in student loans. $100K of that is in her parents' names and the other $57K is in her name, but we are paying off all of it ourselves.

We recently looked into refinancing the $100K through SoFi because the Parent Plus loans have a weighted average interest rate of 8.15%. While looking into this, I realized we actually might be better off keeping the loans in her parents' names and taking two separate student loan interest deductions. Her parent's are divorced and the $100K is split up pretty equally between them. We can't take advantage of the deduction since we collectively make over the limit to take this deduction.

I already reached an agreement with her mom for us to give us the money back from the deduction so we can apply it directly back to the loan if we keep it in her name. If I reach the same agreement with her dad, is there any reason I should refinance? If I am getting up to $5k/year (2 X $2500 deduction max) back that I wouldn't otherwise, I think it would be best to sit tight and not refinance. Am I missing anything?

For context we plan on paying all of this off in the next 2.5 years.

Lastly, this is my first post after reading the blog over the last couple weeks. I've become pretty inspired to get my finances in order and this is our first step in doing so.


MFG_Hotspur

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I realized this is a deduction to taxable income right after I posted this. So it looks like it would be closer to $1.6K in money back.

This makes the contest a lot closer between SoFi and keeping it in her parent's names. I think we will need to apply and see what rates we get.