College Ave Refinancing
College Ave has solid rates, but there are a few red flags that all borrowers should understand.
Editor’s Note 4/4/18: Article Updated to include latest interest rate information.
Last year, College Ave was a brand new company entering the private student loan market. This year they have expanded and added student loan refinancing to their options. College Ave does offer very competitive interest rates with their refinancing and consolidation options, making them a good option in certain circumstances. However, there are a few red flags that borrowers should know before signing up.
College Ave Basics
Variable-rate loans with College Ave start at 2.75%, while fixed-rate loans start at 3.5%. Borrowers must either refinance or consolidate a minimum of $5,000 of debt, while the maximum is $150,000 (graduates of medical, dental, veterinary, or pharmacy programs have a maximum of $250,000). Like most other legitimate lenders there is no origination or prepayment fees associated with these loans.
Borrowers have between 5 and 15 years to repay the loans, and College Ave does provide a little bit more flexibility on repayment than other lenders. For example, while most other lenders let borrowers choose a 10 or 15 year repayment term, College Ave also offers a 12 year term, should it be desired.
Interest Only Payments
One unique feature of College Ave loans is that they offer interest only payments for the first two years. This loan feature is a point of emphasis on their website, but we see it as a bad option for most borrowers. By making interest only payments for two years you will be providing a huge profit to College Ave while not touching your principal balance. If your debt to income ratio is good enough to get approved for the loan, it means you can probably afford to pay more than an interest only payment. The only exception here would be for professionals who are on a low-income for the next year or two, but certain to see a substantial increase in the near future. An example would be young doctors who are on a modest salary in the short-term, but are highly likely to experience a dramatic increase. Even then, paying something towards the principal balance is still the preferable choice.
The Red Flags
One bit of information that does not draw a lot of attention on the College Ave website is the connection to Navient/Sallie Mae. College Ave was started by former Sallie Mae executives, and some of their loans are serviced by Navient. For many borrowers, one of the perks of student loan refinancing or consolidation is getting away from Sallie Mae/Navient, but College Ave may put you right back where you started. Starting in January of 2018 CollegeAve student loans will be exclusively serviced by Nationwide Bank. CollegeAve borrowers who refinanced before 2018 will still have Navient servicing their loans.
We would also note that the maximum repayment length with College Ave is 15 years. The industry standard seems to be 20 years, so they are a little less than the competition in that regard. The problem with the shorter loan term is that it means higher monthly payments.
Finally, as with all private student loan consolidation and refinancing companies, College Ave will consolidate your federal loans into a private loan. The advantage to this move is that it lowers your interest rates and can lower payments, but it comes with a lot of risk. By getting rid of your federal loans, you are giving up perks like Income Based Repayment, and certain student loan forgiveness programs. Before making this step, make sure private student loan consolidation is a good idea for you. However, if you only plan on refinancing private loans, this is not a concern.
With College Ave, the rates are solid, and the repayment length is a little short, but more flexible than most. College Ave falls a little short of the best student loan consolidation companies, but if you are a smart shopper out to get the best rate, it is a company worth investigating to see what rate you qualify for.
While College Ave isn’t the best lender on paper, the actual rate offered could end up beating out other lenders, which is why we suggest shopping around. College Ave is currently one of the lenders on the Credible platform which allows borrowers to check their rates with multiple lenders on one application. They are also currently offering a $200 bonus to borrowers who refinance with College Ave or any other lender on the platform.