San Francisco-based Social Finance, known as SoFi, is the closest thing to a household name in the student loan refinancing market. It became the first company to refinance federal and private student loans together in 2011. The company also offers personal loans, mortgages and loans for parents who want to borrow to help pay for their child’s college. We review SoFi’s refinancing option and parent loan below.
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SoFi student loan refinancing review
SoFi has emerged as the student loan refinance industry’s biggest lender, having refinanced more than $5 billion in student loans, according to co-founder Dan Macklin. It’s known for both its comparatively low interest rates and the job-related benefits it offers, including members-only career coaching and networking events. It also has a $5,000 minimum loan balance requirement — lower than some of its competitors — and doesn’t cap the balances it will refinance.
Refinancing at a glance
- Variable interest rates between 2.15% and 5.95%; fixed rates between 3.5% and 7.74%.
- Seven-year loan term available in addition to five-, 10-, 15- and 20-year terms.
- Nevada residents can’t currently refinance with SoFi. Minimum loan balance is higher in Arizona, Massachusetts and Pennsylvania due to state laws.
In January 2016, the company announced it would no longer consider FICO scores when evaluating potential customers. Instead, SoFi looks at your financial behavior, such as where you’ve worked and for how long, whether you’ve paid your bills on time, and how much you have to spend after expenses. This method can work in favor of grads with short credit histories who haven’t yet built good or excellent credit scores.
“The credit score itself is not important to us,” Macklin says. “The fact that you have met your obligations and paid your bills is important to us.”
Do you qualify?
| Minimum qualifications | The typical borrower | |
|---|---|---|
| Credit score | None. Considers factors including employment history, income and record of meeting financial obligations. | 774 |
| Annual income | None; taken into account with other factors. | $124,630 |
The average SoFi customer qualifies to refinance on his or her own, without a co-signer. Still, between 15% and 20% of SoFi customers use co-signers, according to the company. You must be a college graduate to refinance with SoFi.
Where SoFi refinancing shines
Interest rates: SoFi offers lower interest rates than many competitors. Rates start at 3.5% for a five-year, fixed-rate loan and 2.15% for a five-year, variable-rate loan. All rates include a 0.25% discount for signing up for automatic payments from a bank account.
As with other lenders, having an attractive financial profile and choosing a shorter loan term will qualify you for SoFi’s lowest rates. Fixed interest rates are generally safer, as they won’t increase (or decrease) due to changes in the market the way variable rates can.
Career coaching: SoFi keeps career services representatives on staff to help customers practice job-hunting skills or learn how to negotiate a higher salary. You can work with a staff member one-on-one or attend online webinars, whether you’re employed or not. You can also make professional connections at SoFi-hosted happy hours, dinners and networking events.
Where SoFi refinancing falls short
Forbearance limitations: SoFi’s unemployment protection program offers borrowers who have involuntarily lost their jobs the ability to pause loan payments for three-month periods and a total of 12 months. The company says it will work with borrowers who experience other types of financial hardship on a case-by-case basis.
But some lenders offer longer forbearance periods than 12 months total in cases of unemployment or economic hardship. They include CommonBond (24 months) and U-fi (24 to 36 months).
Next steps
You can apply to refinance with SoFi directly on its website. Enter your education, employment and student loan details to find out the interest rate you might receive.
However, it’s smart to compare offers before choosing a lender. You can fill out one application and get offers from several lenders through NerdWallet partner Credible, a student loan refinancing marketplace. SoFi is not on Credible.
SoFi parent loan review
In addition to student loan refinancing, SoFi offers private student loans for parents who want to borrow to help pay for their child’s college.
Before you consider this option, fill out the Free Application for Federal Student Aid with your child. Submitting the FAFSA is required for students who want to be considered for many grants, scholarships, work-study opportunities and federal student loans.
Parent loans at a glance
- Variable interest rates between 2.90% and 6.08% APR; fixed rates between 4.25% and 7.75% APR.
- 5- or 10-year loan terms.
- Parent loans are not available for borrowers in Nevada. Variable-rate parent loans aren't available for borrowers in Illinois and Ohio.
Do you qualify?
| Minimum qualifications | The typical borrower | |
|---|---|---|
| Credit score | None | 764 |
| Income | None | $168,000 |
Where SoFi parent loans shine
Competitive interest rates: SoFi’s parent loan interest rates are lower than some major private lenders that offer parent loans and lower than the federal government’s 2016-17 Parent PLUS loan rates. The weighted average interest rate for SoFi parent loans is 5.51%, SoFi spokeswoman Laurel Toney says, and there is no origination fee. Variable-rate loans, whose rates change as the market fluctuates, will be capped if they reach 9.95%.
By comparison, federal PLUS loans have a 6.31% interest rate and a 4.28% origination fee for the 2016-17 school year. However, SoFi parent loans don’t offer valuable benefits that federal PLUS loans do, including access to income-driven repayment plans and the ability to enter forbearance if you experience a financial hardship.
Career services: If you take out a parent loan through SoFi, your son or daughter can take advantage of the company’s professional development services including one-on-one career coaching, interview tips and networking events.
Where SoFi parent loans fall short
No forbearance option: SoFi does not allow parent loan borrowers to enter forbearance, which is a way to temporarily postpone payments. Many other private lenders offer short-term forbearance if a borrower is experiencing a financial hardship.
Lack of flexible repayment choices: SoFi parent loan borrowers have to begin repaying the loan as soon as they take it out. By comparison, other lenders, including College Ave and Citizens Bank, give parent loan borrowers the option to pay interest-only for a certain amount of time before starting full payments.
Next steps
Before you take on debt to pay for your child’s education, make sure you set aside enough money for your retirement. Your son or daughter can take out student loans to pay for college and will have decades to repay those loans, but you can’t necessarily borrow to pay for retirement.
If you decide a private parent loan is the right choice for you, compare your options to find the lowest rate. Other lenders that offer student loans for parents include Citizens Bank, College Ave, Rhode Island Student Loan Authority, Sallie Mae and Wells Fargo.
This post has been updated. It was originally published July 22, 2015, and previously updated March 30, 2016.
Brianna McGurran and Teddy Nykiel are staff writers at NerdWallet, a personal finance website. Email: bmcgurran@nerdwallet.com and teddy@nerdwallet.com. Twitter: @briannamcscribe and @teddynykiel. NerdWallet staff writer Hal Bundrick also contributed to this report.
from NerdWallet
https://www.nerdwallet.com/blog/loans/student-loans/sofi-review-student-loans/
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