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How Does SoFi Help with Student Loans?

SoFi offers some borrowers lower payments and lower interest rates. However, in certain circumstances, using SoFi is a mistake.

Written By: Michael P. Lux, Esq.

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SoFi can be a great help to many student loan borrowers.

However, using SoFi’s services is potentially risky. Before signing up with SoFi, it is critical that you understand how SoFi works and the pros and cons of choosing to work with a company like SoFi.

Moving Student Loans to SoFi

Moving to SoFi sounds like a simple process, like moving your checking account from one bank to another.

Unfortuantely, moving student loans is a bit more complicated.

In this case, “moving to SoFi” means refinancing your student loans with SoFi. In a student loan refinance, SoFi pays off the balance of student loans you want to move. A new loan SoFi loan is created, and you repay SoFi according to the terms of the new loan.

By eliminating your old loans and replacing them with a new loan, SoFi offers the chance for borrowers to get better loan terms, like a lower interest rate or lower monthly payments. However, borrowers need to be careful to ensure that the new loan terms are better.

Is SoFi a Good Company? SoFi stacks up pretty well against the other lenders providing student loan refinance services.

To get all the details on SoFi, check the In-Depth SoFi Review.

Who Can SoFi Help?

The big limitation with SoFi is that they won’t help the borrowers who need the most help. If you lost your job or you have fallen behind on your current student loans, SoFi is unlikely to refinance your debt.

Instead, SoFi focuses on borrowers with stable jobs and decent credit scores. The higher your credit score and income, the more likely you are to get favorable interest rates and repayment terms from SoFi.

SoFi can offer low interest rates because they only lend to the borrowers likely to repay their debt.

The Risk of Choosing SoFi

Just because you can qualify to refinance with SoFi doesn’t mean you should refinance with SoFi.

For example, borrowers with high-interest federal student loans should think twice before choosing SoFi. Because SoFi is a private lender, it can’t offer federal perks like Income-Driven Repayment or Student Loan Forgiveness.

If you are only refinancing private loans, choosing SoFi is considerably less risky. However, you still want to make sure that the new loan terms are better than your current loan terms. For some borrowers, this means only refinancing certain loans.

The Benefits of Student Loan Help from SoFi

The headline benefit to choosing SoFi is a lower interest rate and possibly lower payments. If you are looking to spend as little as possible on interest, select a loan with a short repayment period when you refinance. If you want the lowest possible payment, choose a longer loan term, such as 20 years.

Another benefit of refinancing is moving loans with several different lenders to one location. If you have loans with lender A, lender B, and lender C, refinancing can move all of the debt over to SoFi.

If you are concerned about the impacts of inflation on your student loans, refinancing into a fixed-rate loan is one of the best ways to ensure inflation doesn’t mean higher student loan payments.

Finally, SoFi is trying to become the go-to financial institution for young people and recent grads. This means they have a huge incentive to provide excellent customer service.

Click here to learn more about SoFi and its current interest rate offerings.

Alternatives to SoFi

SoFi is far from the only lender that offers refinance services. Even though they are one of the best, it is wise for borrowers to investigate other lenders to find the best possible deal.

If you are looking for the lowest interest rate possible, these lenders advertise the best rates as of June, 2024:

RankLenderLowest RateSherpa Review
T-1ELFI5.28%ELFI Review
T-1Splash Financial5.28%*Splash Financial Review
3Laurel Road5.49%Laurel Road Review

If the goal is to get the lowest possible payment and lower your interest rate, a 20-year fixed-rate loan is probably the best choice. As of June 2024, the following lenders offer the lowest rates:

RankLenderLowest RateSherpa Review
1Splash Financial6.08%*Splash Financial Review
2Laurel Road6.55%Laurel Road Review
3ELFI6.64%ELFI Review
About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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