Financial technology startup CommonBond offers two products to help borrowers afford college: You can refinance undergraduate or graduate student loans, or Parent PLUS loans, and you can borrow a private student loan to help foot the bill for your MBA. Founded in 2011 by three MBA alumni of the Wharton School at the University of Pennsylvania, CommonBond is well-positioned to help you with both.
Below we review CommonBond student loan refinancing and private student loans. (Click here to jump to the private student loan review.)
CommonBond student loan refinancing review
CommonBond’s roots are in refinancing for graduate students, but it has expanded its reach: About 20% of the company’s refinance customers have undergraduate debt. Borrowers with Parent PLUS loans can also refinance through CommonBond.
Refinancing at a glance
- Interest rates: 2.14% to 5.94% APR (variable) and 3.50% to 7.74% APR (fixed).
- Loan forbearance for up to 24 months.
- 10-year hybrid loan has a fixed rate for the first five years and a variable rate for the subsequent five years.
CommonBond offers five-, seven-, 10-, 15- and 20-year loan terms. Like with many refinance lenders, borrowers get a 0.25% interest rate deduction for setting up automatic debit payments, and there’s no penalty for making early payments. You can refinance up to $500,000 in student loans through CommonBond, which is more than many other lenders allow.
CommonBond also has a forbearance policy that lets borrowers facing an economic challenge, such as job loss, temporarily postpone payments in three-month increments for up to 12 months consecutively and 24 months total. However, interest still accrues while loans are in forbearance.
Do you qualify?
| Minimum qualifications |
The typical borrower | |
|---|---|---|
| Credit score | High 600s | 750+ |
| Income | No specific income requirement | $100,000+ |
Reasons to refinance your student loans with CommonBond
Low interest rates: CommonBond’s interest rates are among the lowest in the industry, with fixed rates from 3.5% to 7.74% APR and variable rates from 2.14% to 5.94% APR. Variable rates change as the markets fluctuate, but CommonBond caps the amount you could pay. The variable-rate caps range from 8.99% to 12.99% APR, depending on your term length.
For context, other lenders offering similar products have fixed rates as high as 9.5% APR and variable rates currently as high as 7.9% APR.
The rate you’ll be offered depends on your credit profile, your cash flow (how much money you have available to repay your student loans given your other financial obligations, such as housing payments or credit card payments), and the term length you choose (shorter terms have lower interest rates, longer terms higher rates).
Unique term lengths: CommonBond has two options that most lenders don’t: a seven-year loan term and a 10-year hybrid loan. With the seven-year loan, you can choose a fixed or variable rate. The 10-year hybrid loan has a fixed interest rate for the first five years and a variable rate for the second five years. It’s one of the company’s more popular products, says CommonBond Chief Marketing Officer Phil DeGisi.
The seven-year loan and the hybrid loan are good options for people who want to repay their student debt quickly but can’t quite commit to a five-year term. Rates for the seven-year loan are higher than those that come with five-year loans, but not as high as 10-year rates. Hybrid loan rates aren’t as low as five-year fixed loan rates, but they’re lower than the seven-year fixed loan rates.
COMMONBOND LOAN INTEREST RATES
| Loan type | Fixed APR | Variable APR | Hybrid APR |
|---|---|---|---|
| 5-year | 3.50% to 5.99% | 2.14% to 4.94% | N/A |
| 7-year | 4.00% to 6.49% | 2.44% to 5.07% | N/A |
| 10-year | 4.61% to 7.00% | 2.94% to 5.32% | 3.79% to 6.23% |
| 15-year | 5.12% to 7.49% | 3.31% to 5.69% | N/A |
| 20-year | 5.37% to 7.74% | 3.56% to 5.94% | N/A |
Where CommonBond student loan refinancing falls short
The hybrid loan is risky: Although some borrowers can save with hybrid loans, there’s risk involved with variable interest. You’ll have the same rate for the first five years, but there’s no way to tell what the variable rate will be once it kicks in — it could be higher or lower than the fixed rate, depending on market conditions at that time.
You can minimize your risk of rising variable interest rates by paying off the hybrid loan as soon as possible. There’s no prepayment penalty, and many customers pay off their hybrid loans in fewer than 10 years, DeGisi says.
More limitations: CommonBond has some eligibility criteria that some similar lenders don’t. For example, borrowers need to have graduated from college to qualify for a CommonBond student loan. Borrowers refinancing undergraduate loans need to have graduated more than two years prior to qualify. Citizens Bank, on the other hand, will consider lending to borrowers who haven’t received a diploma. Additionally, borrowers in Delaware, Idaho, Louisiana, Mississippi, Nevada, Rhode Island, South Dakota, Tennessee and Vermont are not eligible for a loan through CommonBond.
Next steps
If you’re ready to refinance your student loans through CommonBond, you can apply on the company’s website. However, it’s smart to compare interest rates from multiple lenders before you make a decision.
You can compare rates from several lenders by filling out one application through Credible, a student loan refinancing marketplace and NerdWallet partner.
Remember: When you refinance federal student loans, they become private loans. Private student loans don’t offer as many borrower protections as federal loans do, such as the ability to enroll in income-driven repayment plans and forgiveness programs.
CommonBond private student loans review
In addition to student loan refinancing, CommonBond offers private student loans for borrowers pursuing an MBA at 29 schools.
Private MBA loans at a glance
- 6.23% (10-year fixed APR), 6.72% (15-year fixed APR).
- 2% origination fee.
- Available to borrowers in 29 MBA programs.
You don’t need a co-signer to qualify for a private student loan with CommonBond, but you do need good credit — the typical CommonBond MBA loan borrower’s credit score is 750 or higher, CommonBond spokeswoman Michaela Kron says. You can borrow up to $110,000 a year.
If you’re not an MBA student or you want to compare other lenders, check out NerdWallet’s private student loan page for several other options. Before turning to private student loans, be sure to fill out the Free Application for Federal Student Aid, also known as the FAFSA, to see if you’re eligible for grants, scholarships, work-study or federal student loans.
Repayment options
Similar to many other private lenders, CommonBond offers three routes to paying back your debt:
- You can start making full loan payments during school. This approach will save you the most money.
- You can make interest-only payments during school. With this option, you’ll make small monthly payments, tackling interest as it accrues. You’ll begin making full monthly payments (interest and principal) starting six months after you graduate or leave school.
- You can defer your loan payments while you’re in school. Interest will still accrue while you’re in school; that interest will be capitalized, or added to your principal balance, at the end of your six-month grace period. To avoid capitalization, which will cost you more money in interest, pay off the interest that accumulates during school before your six-month grace period ends.
Reasons to use CommonBond
Option to temporarily postpone payments if you’re struggling: If you lose your job, get sick or otherwise become cash-strapped, CommonBond will let you temporarily stop making payments. Known as forbearance, this option allows you to postpone payments for up to 12 months consecutively and 24 months total. Interest will still accrue during forbearance; pay it down if you can to avoid it from capitalizing at the end of your forbearance period.
Be part of a professional community: CommonBond hosts networking events for borrowers, including panels, dinners and an MBA summer internship program. It also makes introductions between borrowers and relevant people and companies in borrowers’ professional networks.
Where CommonBond falls short
No variable interest rates: You can’t get a variable rate for a CommonBond MBA loan. Variable rates typically start out lower than fixed rates, so you may be able to get a lower rate with a private lender that does offer variable rates. However, variable rates are riskier because they can increase or decrease as the economic markets shift; fixed rates stay the same throughout the life of the loan.
Fewer protections than federal student loans: CommonBond and other private lenders don’t offer as many borrower protections as the federal government does, such as income-driven repayment plans and forgiveness programs. Make sure you’re aware of the potential benefits you’re giving up by not taking out a federal student loan. If you plan to work for the government or a nonprofit, for example, you could be eligible for Public Service Loan Forgiveness and have your remaining loan balance forgiven after 10 years. That’s not an option if you have private loans.
Next steps
Before you commit to taking on a private student loan, fill out the FAFSA to see if you qualify for grants, scholarships, work-study or federal student loans. If you decide that a private student loan is right for you, click the button below to compare interest rates and borrower protections across several different lenders.
Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: teddy@nerdwallet.com. Twitter: @teddynykiel.
from NerdWallet
https://www.nerdwallet.com/blog/loans/student-loans/commonbond-review-student-loans/
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