SoFi Student Loan Consolidation
SoFi has grown into a massive company offering mortgages and investment services but SoFi continues to be a great student loan refinance option.
Article updated March 15, 2019 to reflect the latest interest rate information.
In the world of student loan consolidation and refinancing, SoFi is probably the biggest name and the largest lender.
In order for SoFi to grow, they had to evolve from a lender that focused only on high earners to a lender with a pretty high approval rate. The good news for borrowers is that many of the perks that SoFi used to target the Doctors and Lawyers of the world still remain. These premium perks include interest rates as low as 2.54%, job placement resources, and $150 for new customers who sign up.
We have seen a number of borrowers with less than perfect credit get approved with SoFi, and after shopping around and comparing rates, find that SoFi was the best option. As a result of SoFi’s ability to offer the best rate for a variety of borrowers, SoFi checks in at #1 in our student loan refinance lender rankings.
What student loan refinance options does SoFi offer?
SoFi offers both fixed rate and variable interest rate loans.
The fixed rate loans start at 3.899% and have a maximum possible rate of 8.074%. Borrowers can sign up for 5, 7, 10, 15, and 20 year repayment plans.
The variable rate loans are presently set at 2.54% to 7.115%, and they are tied to the LIBOR rate. The interest rate is capped at 8.95% or 9.95% depending upon the loans.
These rates are among the very best on the market. SoFi also excels at long-term fixed-rate loans in the 15-year and 20-year repayment lengths. Currently SoFi is a top-three lender in both the 15 year term and the 20 year term refinance categories.
SoFi, like most legit lenders, does not charge any application fee, origination fee, or prepayment penalties.
SoFi Refinance Rates
|Variable Rate Loans|
|Fixed Rate Loans|
Looking at all of the SoFi possible rates, there are a couple things to consider.
In almost every rate category the fixed rate loan has only a slightly higher interest rate than the variable rate loan. Given that we are in a rising interest rate environment, locking down a fixed rate loan makes sense. The one exception would be the 5 year loan, where the variable rate is considerably lower than the fixed rate.
One strange aspect of the current SoFi options is the close rates offered for the longer length loans. A 10 year fixed-rate loan starts at 4.349%, while 15-year starts at 4.649 and the 20 year loans start at 5.099%. With these current rate offerings, it makes little sense to opt for a 10 or 15 year loan when a 20 year loan has such a close interest rate.
When combining these two factors, it appears that most borrowers would be best off if they either opted for the 5 year variable rate loan, or the 20 year fixed rate loan.
Note: having a 20 year loan does not mean that a borrower must take 20 years to pay it off. Opting for the longer duration loan gives the borrower the flexibility of low minimum payments, but the loan can still be paid off aggressively by making extra or larger payments.
The SoFi Advantages
SoFi offers some of the lowest interest rates on the market and flexible repayment terms, but the advantages associated with SoFi go beyond the numbers.
Perhaps the biggest advantage is job placement program. SoFi actually hired the former Assistant Dean for Career Services at a top MBA school to lead its career services division. Their thinking seems to be that they will make more money by investing in borrowers who lose their job, rather than spending the money on collections.
SoFi also runs their customer support out of a California call center. Having the customer support team here in the United States doesn’t necessarily guarantee better service, but we do like to see them spending the extra money to make sure customers get the best treatment possible.
If you have the credit score and income to qualify for SoFi, it is a great option, but there is one warning that all borrowers need to carefully consider…
SoFi, like most other refinance lenders, is willing to consolidate federal loans with private loans. Though combining federal loans with private loans is a mistake for some, in other instances it is a good idea. The classic example would be high income earners with strong job security. The important thing for borrowers to realize is that the repayment plans and forgiveness programs of federal loans are eliminated upon private loan consolidation. Because there is no way to undo a consolidation or refinance it is critical to make a smart decision when weighing the federal perks vs. the lower interest rate on the private market.
If you are considering applying for consolidation with SoFi and want to make sure that your federal loans are not included, go to the federal student loan database. There you will be able to pull up a full list of your federal loans. If the loan is not on the list, you can be assured that it is a private loan.
How does SoFi work?
Borrowers specify the loans that they want consolidated or refinanced, SoFi pays them off, and then the borrower pays off their debt to SoFi. The goal behind consolidation and refinancing is to lower your monthly payments by qualifying for a lower interest rate or by spreading out the payments over a longer period of time. Doing both of these things can save you money over the short term and in the long run.
SoFi’s seems to have a goal of becoming the finance company for millennials. In addition to offering student loan refinancing, SoFi has expanded into the mortgage business, offers personal loans, wealth management, and life insurance. Helping people pay off their student loans seems to be SoFi’s way of securing long-term customers who continue the business relationship in more profitable areas such as wealth management. From a student loan borrower perspective, this is probably a slight advantage because it means SoFi has an incentive to keep customers happy even after they have refinanced their loans. These long-term goals would also explain why SoFi is able to keep their rates lower than most of the other lenders in the marketplace.
SoFi reviews from actual customers…
When this article was originally published, we could only base our opinion on the black and white terms of the SoFi loans. Since that time, dozens of customers and would-be customers have taken the time to leave their thoughts in the comment section.
What we have learned is that the SoFi customer satisfaction seems to revolve around whether or not the application was approved. Because of the originally tough underwriting criteria, many people have stopped by to share their disappointment with their denial. As one user summed it up, “people with high FICOs and high incomes sail right through while people with more moderate FICOs and incomes don’t seem to have the same experience.”
SoFi reviews from around the web…
Most of the SoFi reviews from other experts have reached similar conclusions. NerdWallet proclaims that SoFi shines due to their low interest rates and job placement services. They take issue with the fact that SoFi loans only come with a one year forbearance if you lose your job.
The Better Business Bureau gave SoFi an A+ rating, but there were a number of user complaints about SoFi. Some of the complaints dealt with SoFi’s mortgage and personal finance loans. Most of the student loan consolidation complaints were filed by consumers unhappy with a rejection. However, we were able to find one reviewer who had issue with the unemployment forbearance. Evidently, SoFi requires borrowers to register with their career services before approving an unemployment forbearance.
In short, the SoFi reviews are largely positive, but like any financial company, they are not without their warts.
SoFi Compared to Other Lenders
|Pros:||SoFi is the only lender who will help a borrower find a job, and they routinely have the lowest rates offered.||LendKey works with a large network of smaller credit unions and banks. As a result, many applicants get the best offer from LendKey.||Splash has the best new customer bonus right now, and they have unique 8 and 12 year repayment terms.||Because ELFI is backed by a bank rather than investors, ELFI rates tend to stay low and fluctuate less than others.|
|Cons:||SoFi has grown into a large company offering mortgages, personal loans, and investment services. They no longer focus entirely on student loan refinancing.||Going the LendKey route does require working with a local bank or credit union. For many, this is a plus, but it is an extra step.||Splash is a newer lender and the longest length loan is 15 years instead of the industry standard 20.||ELFI is one of the newest lenders in the marketplace. As a result we have limited head to head information.|
Should I apply for a SoFi loan?
The big concern with SoFi is getting past their credit check. SoFi has improved in this area over the years, but a successful refinance isn’t a sure thing for all borrowers. If you get approved, VIP treatment awaits you, but it will require a good credit score and debt-to-income ratio.
Your best bet is to have a backup plan or two in place. If you are going to apply for student loan consolidation, apply at several places at the same time. The credit reporting companies will consider this shopping around and it will not hurt your credit score. Our reviews of the major student loan consolidation companies should help out when it comes to putting together a backup plan.
With interest rates among the lowest on the market and the $150 new customer bonus, now may be the best time to apply.