If you pursued a college education, you likely have one thing in common with the majority of graduates – student loan debt.
According to the Federal Reserve, the level of student loan debt in the U.S. tripled between 2001 and 2016. A separate report released by Experian claims, in 2017, 13% of Americans had a student loan, and most had more than one. The average balance was more than $34,000, contributing to over 1.4 trillion dollars in total student loan debt owed.
This kind of debt means many grads are starting their professional lives saddled with large payments – making it hard to build an emergency fund, save for retirement, or purchase a home. So, if you wish your student debt were more manageable, you’re not alone.
If you hold one or more student loans, you may be able to save money on interest and lower your monthly payment by refinancing through SoFi. Interested in learning more?
In this SoFi Review, we’ll explore SoFi’s student loan refinancing service. We’ll look at their rates, the benefits, the drawbacks, and ultimately help you decide if SoFi student loan refinancing is a good option for you.
Let’s get to it!
SoFi at a Glance
- Founded by Stanford University graduates in 2011
- Offers student loan refinancing, mortgages, medical/dental resident refinancing, personal loans, wealth management, and more (we’ll focus on student loan refinancing)
- 18 billion in refinanced student loans
- Offers student loan refinancing in all 50 states, plus the District of Columbia
- Simplifies repayment by refinancing federal and private student loans into one low-rate payment
- Can often offer lower interest rates than private loans, Graduate PLUS loans, and unsubsidized Direct Loans
SoFi Student Loan Refinancing: How it Works
When you refinance student loans, what you’re really doing is paying off your existing loans and getting a brand new one.
The main benefit of refinancing is that you get a new, often lower, interest rate. A lower interest rate can mean significant savings over the life of your loan. You also get a new term, which affects how quickly you’ll pay off your loan and the size of your payments.
To apply for SoFi student loan refinancing, you start by getting pre-qualified on their website. The pre-qualification process is super fast and lets you know whether you qualify and if so, what rates and terms you’d be looking at.
Pre-qualification counts as a soft credit inquiry, so there’s no impact on your credit score. If you get the green light, you can go ahead and complete the rest of the online application. There are no application or origination fees.
Once you’re approved, your existing loans will typically be paid and closed within 7-10 business days. Until then, be sure to make any payments that are due during that time with your current servicer. From then on, you’ll have a new loan with one payment, serviced by MOHELA (SoFi’s third-party partner).
The best way to make payments on your new loan is to set up autopay from your bank account. It’s easily the most convenient way to pay, plus SoFi offers a $0.25% rate discount when you sign up for autopay. That’s what we call a no brainer.
SoFi Student Loan Refinancing: Eligibility Criteria
SoFi can help grads save money on student loan interest, but not everyone will qualify. To be eligible for SoFi student loan refinancing, you must:
- Be at least 18 years of age
- Be a U.S. citizen, visa holder, or permanent resident (permanent residents and visa holders must have two years of validity remaining or have the renewal process started)
- Be employed, have a job offer scheduled to begin within 90 days, or be able to demonstrate income from other sources
- Have graduated from a Title IV school with an associate degree or higher
- Have a credit score of at least 650
If for some reason you don’t qualify, you can check out a site like Credible to compare student loans from other companies.
SoFi Student Loan Refinancing: Rates and Terms
SoFi offers fixed and variable rate loans with terms that range from 5 to 20 years. Their fixed rates start at 3.20% APR and variable rates start at 2.31% APR (including the $0.25% autopay discount). The exact rates they’ll offer you depends on the details of your application, including your income and creditworthiness.
SoFi Student Loan Refinancing: Pros and Cons
|Pros of SoFi Student Loan Refinancing||Cons of SoFi Student Loan Refinancing|
|Easy online pre-qualification and application||Hard to get approved|
|Flexible repayment options||Must have earned a degree to qualify|
|Competitive interest rates||Only available to graduates of Title IV-accredited schools|
|0.25% rate discount for using autopay||Makes you ineligible for Public Service Loan Forgiveness|
|No application, origination, or prepayment fees||Forbearance caps out at 12 months|
|Career coaching service included||No co-signer release|
|Access to no-fee investing through SoFi’s wealth management division|
|Honors the first six months of any grace period|
Where SoFi Student Loan Refinancing Shines
The most important reason to consider refinancing your student loans is to save money by securing a lower interest rate. In many cases, SoFi can often offer better rates, especially compared to private loans. Over the life of your loan, this can add up to thousands of dollars in savings.
Lower Monthly Payments
In addition to saving money on interest, refinancing may also be able to help lower your monthly payment. By securing a lower rate, extending your term, or both, you may be able to reduce your monthly payment significantly – creating more wiggle room in your budget.
Simplify the Payment Process
If you have multiple student loans, managing all those payments can be difficult. If they’re not all set up for autopay, you have to worry about making each payment on time. Even if they do come out of your bank account automatically, multiple payments can make budgeting difficult. Refinancing and consolidating student loans into one payment simplifies things and makes payments more manageable.
Flexible Repayment Options
In addition to offering a range of rates and terms, SoFi offers its customers a deferment option when they return to grad school, undergo rehab for a disability, or begin active military duty. They also provide a forbearance benefit in the event you lose your job. Forbearance means you can delay your payments in 3-month increments, up to a maximum of 12 months.
SoFi offers its customers some pretty neat perks, including career counseling and no-fee investing through their wealth management platform. So, if you lose your job, SoFi gives you a break on your payments for a few months and helps you get another job. We think that’s a pretty good deal.
Where SoFi Student Loan Refinancing Falls Short
It’s Hard to Get Approved
The qualification criteria for SoFi student loan refinancing are pretty steep. You need to be employed, have consistent cash flow, and have a strong credit history. They only refinance loans for people who graduate with at least an associate degree from Title IV schools. So, if you didn’t finish or if your school isn’t on the approved list, you won’t be eligible.
You Won’t Be Eligible for Public Service Loan Forgiveness
You need to be careful when refinancing federal loans. Remember, refinancing means closing the old loan and getting a brand new one. If you choose to refinance a federal loan, you’ll no longer be eligible for federal loan-specific programs like Public Service Loan Forgiveness (which is handled through FedLoan). Not all federal loan holders qualify for loan forgiveness programs, but it’s important to find out what you’re eligible for and make sure you don’t give up a benefit you might need to use later.
Forbearance Benefits Limited to 12 Months
Having the option to delay student loan payment if you lose your job is a significant benefit, but it caps out at 12 months.
No Cosigner Release
If you need to strengthen your SoFi student loan refinancing application, you can add a cosigner. That cosigner will want to proceed with caution, though, because once their name is on the loan, it’s not coming off unless they die, or you refinance the loan under just your name. Other companies do offer cosigner releases, so this is a drawback for SoFi.
Who Should Consider SoFi Student Loan Refinancing
Anyone with Private Student Loans – If you have private student loans, you might be able to get a lower interest rate through refinancing. If you have more than one loan, you can also simplify your life by consolidating them into one payment.
Anyone with High-Interest, Unsubsidized Direct Loans – Some people assume a federal loan means a low interest rate, but that isn’t always the case. If you took out a high-interest or unsubsidized student loan, you may be able to find a better deal with SoFi.
Anyone with Graduate PLUS Loans – Graduate school is expensive, and the rates on Graduate PLUS loans can be higher than in the private market. Put these two together, and your interest will accrue lightning fast. A lower rate on those big loans can save you some serious cash.
Who Should Skip SoFi Student Loan Refinancing
Federal Loan Holders with Low Interest Rates – If your interest rate is unbeatable, you won’t save money by refinancing.
Federal Loan Holders Who May Seek Loan Forgiveness – Depending on your circumstances, you might qualify for some benefits that are only available to federal loan holders. Once you refinance with a private lender, you’re no longer eligible. We recommend you review the benefits available to you and assess whether you’re ever likely to use them before you consider refinancing.
How to Apply for SoFi Student Loan Refinancing
Applying for SoFi’s student loan refinancing is super easy. Just create a profile online, enter your loan details, and see if you pre-qualify. Get started for free here.
Pre-qualification doesn’t impact your credit score and saves you from wasting time if you don’t meet the eligibility criteria. You’ll see the rates and terms you qualify for, and you decide from there if you want to go ahead and complete the full application (all online).
SoFi Review: Final thoughts
So, should you refinance student loans through SoFi?
If you have high interest student loans and you meet SoFi’s eligibility criteria, you might be able to save some serious cash by refinancing at a lower interest rate. We think that’s always worth exploring. After all, that extra money can mean increased cash flow to pump into other financial goals. Heck, you could use the money you save to put extra payments on your student loans to get them paid faster.
Like we mentioned before, you do want to be careful about refinancing federal loans. If you’re paying higher rates, it’s absolutely an option that can save you money. You just need to make sure you’re comfortable giving up benefits that are only available to federal loan holders.
We hope this SoFi review helped you get a sense of their student loan refinancing program and how it might benefit you. Thanks for reading!