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Student Loan Consolidation vs. Student Loan Refinancing

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Student Loan Consolidation vs. Student Loan Refinancing

I haven’t met a single person with student loans who doesn’t want them gone as soon as possible. It’s hard enough to start a career or raise a family, and when a large chunk of your income is going toward student loans every month, it can feel downright impossible.

To help ease the burden of student loan payments, many borrowers opt to consolidate or refinance their student loans. Both options have the potential to help you pay your student loans off quicker and pay less interest along the way, but there’s a lot of confusion around how they work, how they differ, and whether they’re right for you.

By the end of this post you will understand both options and have a good idea whether one, or both, are right for you.

The terms student loan consolidation and student loan refinancing are often used interchangeably, but they actually mean two very different things, and they have very different sets of pros and cons. Lenders often add to the confusion by using the term consolidation when they’re actually talking about refinancing.

So before we dive into the specifics of each option, let’s first clear up what they are.

Student Loan Consolidation: The Basics

Student loan consolidation refers specifically to the federal student loan consolidation program, a process through which you can combine one or more federal student loans into a single Direct Consolidation Loan. You cannot use this program with private student loans. Refinancing, on the other hand, is done by private lenders. Unless you’re dealing directly with the U.S. Department of Education, you’re talking about refinancing, not consolidation.

We’ll get into the details below, but the primary reason to consolidate your federal student loans is to qualify for beneficial income-driven repayment plans you wouldn’t otherwise be eligible for. And the major downside is simply that consolidating won’t get you a lower interest rate, which is often a big point of confusion.

The Benefits of Student Loan Consolidation

Given that consolidation won’t improve your interest rate, why should you consider consolidating your federal student loans? How can it benefit you?

Here are three of the biggest reasons to consider consolidating your federal student loans.

1. You can qualify for better income-driven repayment plans

The government offers a number of income-driven repayment plans for federal student loans, and these plans are a real bargain for three main reasons:

  1. Your monthly payment is determined by your income, which means it will decrease during periods where your income is low.
  2. They all offer some kind of forgiveness as long as you make the required payments for a certain number of years.
  3. If you work for a qualifying nonprofit or government organization, these repayment plans qualify you for Public Service Loan Forgiveness, which takes even less time and offers more forgiveness.

The catch is that only Direct federal student loans are eligible for some of these repayment plans. Federal Family Education Loans (FFEL), which were all given out prior to 2010, are only eligible for income-based repayment (IBR), which is certainly good but often not as beneficial as Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE).

So, if you would otherwise be eligible for those better repayment plans, you can consolidate your FFEL loans and turn them into Direct Loans, thereby opening up your eligibility. And keep in mind that you can consolidate a single loan all on its own, so you don’t need multiple FFEL loans to take advantage of this.

If you wouldn’t otherwise be eligible for those repayment plans, or if you already only have Direct Loans, then consolidation won’t help you here.

2. You can lock in low, fixed interest rates

Prior to July 1, 2006, most federal student loans were issued with variable interest rates that reset each year. Since then, all federal student loans have been issued with fixed interest rates.

If you have older loans with variable rates, consolidating them now can lock in a relatively low, fixed interest rate.

For example, according to Nelnet, variable rate federal student loans currently have interest rates ranging from 2.05% to 3.80%, depending on the type of loan and year of disbursement. By consolidating and locking in those low rates, you can ensure that your loans won’t get more expensive over time if interest rates rise.

3. You can get your loans out of default

If your federal student loans are in default, which typically means that you have missed payments for 270 days, you can consolidate your loans to get out. This can be an incredibly effective way to avoid the negative consequences of default, such as your loan immediately being due in full, taxes and wages potentially be garnished, and a big hit to your credit report, among others.

The catch is you can typically only use it once in your lifetime. So you should be confident that you won’t default again in the near future before proceeding. Otherwise, you may want to consider alternative ways to get out of default, such as rehabilitation.

The Downsides of Student Loan Consolidation

While all of the above are good reasons to consider consolidating your federal student loans, here are four things to watch out for.

1. You Won’t Get a Better Interest Rate

Consolidating your federal student loans won’t improve your interest rate. In fact, it’s likely that your interest rate will increase by just a tiny bit.

When you consolidate, the interest rate of your new loan is the weighted average of all of the loans included in the consolidation, rounded up to the nearest ? percent. What that means is that at best you’ll end up with the same combined interest rate that you had before, and at worst your interest rate will increase by about 0.125%.

You can use the following calculator to see what your interest rate would be after consolidation: FinAid Loan Consolidation Calculator

FinAid Loan Consolidation Calculator

The bottom line, though, is that student loan consolidation is NOT a route to a better interest rate. You need to refinance if that’s what you’re after, and we’ll talk more about that below.

2. You won’t be able to target your highest interest loans first

If you have two federal student loans with very different interest rates, you can pay them off faster and save yourself money by putting extra payments toward the loan with the higher interest rate first. But if you consolidate those two loans together, you end up with a blended interest rate and lose the ability to pay off the higher-interest loan quicker.

In this type of situation, it can make a lot of sense to consolidate those loans separately. Doing so would preserve the condition of having one high-interest rate loan and one low-interest rate loan, and would therefore allow you to keep prioritizing the high-interest rate loan.

3. You’ll lose any progress you’ve made toward qualifying for loan forgiveness

One of the benefits of enrolling in an income-driven repayment plan is the opportunity to have some of your student loan balance forgiven. Basically, with each plan you have to both be enrolled in the plan and make your minimum payment for a certain number of years. If you still have a balance at that point, it will be forgiven.

Here’s a quick overview of how long it takes to earn forgiveness with each repayment plan:

  • Income-Based Repayment = 20-25 years
  • Pay As You Earn = 20 years
  • Revised Pay As You Earn = 20-25 years
  • Public Service Loan Forgiveness = 10 years

Keep in mind that Public Service Loan Forgiveness is the only program that offers tax-free forgiveness. In all other cases, the amount of money forgiven would be considered taxable income.

If you’re already enrolled in an income-driven repayment plan and have made progress toward forgiveness, consolidating your loan means you’re likely starting over from scratch.

Depending on how much progress you’ve already made, and whether you could qualify for quicker forgiveness after consolidating, this might be a reason to avoid it.

4. Watch out for Parent PLUS loans!

Parent PLUS loans are federal student loans taken out by parents, and they are not eligible for the most generous income-driven repayment plans, even after consolidation.

What that means is that you need to be very careful NOT to mix Parent PLUS loans with other loans when consolidating. You should always consolidate them separately, if at all, to make sure that your other federal student loans remain eligible for the best income-driven repayment plans.

When Student Loan Consolidation Makes Sense

In general, federal student loan consolidation can make a lot of sense when you have one or more FFEL loans and your debt-to-income ratio is high, meaning you stand to significantly benefit from one of the more generous income-driven repayment plans.

It may also make sense if you have older, high-interest, variable rate loans and want to lock in a low, fixed interest rate.

Just be careful not to mix high-interest loans with low-interest loans, and not to consolidate Parent PLUS loans with other student loans. And make sure you’re not giving up on significant progress you’ve already made toward forgiveness on your current loans.

How to Consolidate Your Student Loans

If you’d like to consolidate your federal student loans, you can start the process here: Direct Consolidation Loan Application.

Student Loan Refinancing: The Basics

Student loan refinancing refers to the process of taking out a new private student loan to replace one or more existing student loans. You can refinance both federal student loans and private student loans, and there are specific pros and cons to each that we’ll talk about below.

The Benefits of Student Loan Refinancing

1. You can get a lower interest rate

The main reason to consider refinancing your student loans is the opportunity to lower your interest rate. A lower interest rate likely means lower monthly payments, a lower lifetime cost, and a quicker path to being debt-free.

Of course, refinancing doesn’t guarantee a lower interest rate. You still have to go through an approval process, during which the lender will evaluate your financial situation and offer you a loan, or not, based on the information they find. Some people go through this process only to get an offer that’s worse, or at least not much better, than the loans they already have.

The people who are most likely to get a better interest rate than what they have now are people who:

  1. Have high-interest rate student loans, and
  2. Have a credit score that’s significantly higher than when they took out their current loans.

If that’s the situation you’re in, you may benefit significantly from refinancing.

2. You may find a new private loan with better protections than your old private loans

For many years, most private student lenders offered very few protections to their borrowers. For the most part you had to make every payment on time and in full or you were in real trouble.

But that’s started to change. Newer lenders like SoFi and CommonBond have started offering greater protections, such as unemployment protection where your payments are forgiven during periods of unemployment, and disability protection where payments are forgiven during disability.

If you have older private student loans, refinancing may offer greater security. Every lender is different though, so you should carefully read the terms and conditions and compare each offer to see what kinds of protections are available to you.

The Downsides of Student Loan Refinancing

As tempting as it is to grab that lower interest rate, there are some big potential downsides to refinancing your student loans that need to be considered.

Here are four of the biggest.

1. You may lose federal student borrower protections

Refinancing your federal student loans is a big decision that needs to be made very carefully. You’re giving up a lot in the refinancing process, and in some cases you’re better off with the protections offered by federal student loans than you are with a lower interest rate.

Despite some improvements to borrower protections, private student loans still offer significantly fewer protections than federal student loans. Specifically:

  • They are not eligible for income-driven repayment plans
  • They do not offer the opportunity for forgiveness
  • They do not offer deferment
  • Many still do not offer things like unemployment or disability protection

2. Variable rates can be a tease

Some lenders will offer an incredibly low interest rate to entice you to refinance without emphasizing that the rate is variable and that it can change in the future.

If you have the money to pay your loans off quickly, taking advantage of a teaser rate like this can be a good idea. But if it will be a while before your loans are paid off, you should be careful about signing up for a variable interest rate loan that you may not be able to afford several years down the line.

3. Fees could eat away at your potential savings

Some lenders will charge application fees, origination fees, prepayment fees, and all kinds of other fees that can really add to the cost of the loan.

Just keep an eye out for fees when reviewing your refinance options. The more you have to pay, the less attractive that lower interest rate will be.

4. It could take you longer to pay off your loan

In some cases, refinancing will extend your loan repayment period. This may feel like a win given that it lowers your monthly payment, but it can end up costing you more over the long term, even with a lower interest rate.

When Student Loan Refinancing Makes Sense

So, when should you refinance your student loans and when should you take a different route?

In most cases, the answer is pretty simple if you’re talking about refinancing your private student loans. If you can get a better interest rate by refinancing, it will usually make sense to do it. You should always compare all the details of the loans, including the protections they offer and other fees involved. But given that lenders have generally improved their standards over the past few years, it will usually make sense to refinance your private student loans to get a better interest rate.

It’s a lot more complicated if you’re considering refinancing your federal student loans. You shouldn’t give up those protections lightly, especially if your budget is tight and any change in your situation might make it difficult to afford your payments.

Generally, refinancing your federal student loans makes the most sense if you meet all of the following four conditions:

  1. You have high-interest federal student loans
  2. You have excellent credit that will qualify you for the best refinancing deals
  3. You have a high, stable income that makes it unlikely you’ll run into trouble paying off the loan
  4. You don’t qualify for Public Service Loan Forgiveness

If that’s you, then refinancing can be a great move. Qualifying for a lower interest rate could help you pay your loans off sooner, and you have little risk of running into financial trouble.

If that’s not you, you may be better off sticking with your federal student loans, even at a higher interest rate.

Where to Find the Best Student Loan Refinancing Deals

It always makes sense to shop around before making any decision to refinance, just to see what offers are available and how they compare. You can look at interest rates, borrower protections, application fees, and other requirements, and even get pre-approval from certain companies.

MagnifyMoney has a comprehensive page that makes it easy to compare many of the leading lenders and get a sense of what’s available to you.

Here are our top three picks. Each of these lenders has earned an A+ MagnifyMoney transparency score for excellent transparency and ease of use.

SoFi:

  • No origination fee or prepayment fee
  • Fixed interest rates range from 3.35% to 7.125%, and variable interest rates range from 2.815% to 6.740%
  • Flexible repayment terms
  • Strong borrower protections relative to other private lenders

Earnest:

  • No origination fee or prepayment fee
  • Fixed interest rates range from 3.35% to 6.39%, and variable interest rates range from 2.57% to 6.19%
  • Customizable loan terms where you choose the interest rate/length of loan combination
  • Unemployment protection

CommonBond:

  • No origination fee or prepayment fee
  • Fixed interest rates range from 3.35% to 7.12%, and variable interest rates range from 2.81% to 6.74%
  • No maximum loan amount and flexible loan terms

You can also check out your local credit unions, since they are member-owned and often offer loans with favorable terms and conditions.

Consolidation vs. Refinancing: Which One Is Right for You?

Student loan consolidation and student loan refinancing are very different processes with very different pros and cons. Each one can be the right choice, depending on your situation, and in some cases you may want to use both.

In the end, it’s all about your specific loans and the specific goals you’re trying to achieve. Use the information above to weigh pros and cons and make the right decision for yourself.

Matt Becker
Matt Becker |

Matt Becker is a writer at MagnifyMoney. You can email Matt at matt@magnifymoney.com

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SoFi Parent PLUS Loan Refinance Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Senior Couple Talking To Financial Advisor At Home

Updated August 21, 2017

Are you a parent who wanted to help your child finance his or her education, and ended up taking out more loans than anticipated? Many parents find themselves in a precarious situation as they try to plan for retirement and while balancing student loan debt.

If you’re looking to save on the amount of interest you’re paying, SoFi’s Parent PLUS loan refinance program may be right for you.

Details of the Parent PLUS Loan

You can refinance a minimum of $5,000 under SoFi. Fixed rates range from 3.35% to 6.75% APR and variable rates range from 2.815% – 6.490% APR (these rates assume you enroll in autopayment).

Terms of 5, 7, 10, and 15 years are available. Variable rates on terms of 5, 7, and 10 years are capped at 8.95%, while the 15 year term is capped at 9.95%.

An example payment looks like this: if you refinance $10,000 on a 5 year term with a fixed APR of 5.49%, your monthly payment will be $190.97 and you’ll pay a total of $11,457.93 over the life of the loan. If you refinance $10,000 on a 5 year term with a variable APR of 4.2%, your monthly payment will be $185.07 and you’ll pay a total of $11,104.43.

How Does the Parent PLUS Loan From SoFi Compare to a Federal PLUS Loan?

The interest rate for Federal Direct PLUS Loans disbursed on or after July 1st, 2015 and before July 1st, 2016 is 6.84%. During much of the 2000s, interest rates were higher. Currently, interest rates are fixed – variable rates are unavailable.

Most people are looking to refinance to save money, and SoFi offers very competitive rates compared with the Direct PLUS Loan, especially on variable rates.

While there are no fees to refinance, you should calculate your estimated savings before going through the process. Be aware if you do refinance, you’ll lose out on certain benefits that come with having Federal student loans, such as deferment, forbearance, and various repayment options.

PLUS loans made to parents are eligible for the Graduated or Extended Repayment Plans, and Direct PLUS loans are also eligible for forgiveness. In some cases, PLUS loans can be discharged due to the death of the borrower (or student).

Private loans often don’t extend these same benefits. In fact, SoFi explicitly states on its legal page that this loan “is not discharged in the event of death or permanent disability of the borrower or student on whose behalf the loan is taken out.”

Eligibility Requirements

You must be a U.S. citizen or permanent resident and employed to be approved. SoFi is unable to lend in Nevada, and variable rates aren’t offered in Illinois, Ohio, or Tennessee. The loans must have been used to obtain at least a Bachelor’s degree with an eligible school as well.

There are no specific credit score requirements as SoFi tries to take a broader view of borrowers. It focuses on income and credit history instead.

Application Process and Documents Needed

The application process to refinance a PLUS Loan with SoFi is easy and can be done completely online. The application takes around 15 minutes to complete, and you’ll know whether or not you qualify by going through the pre-approval process first. During this portion of the application, a soft credit inquiry is used. If you decide to move forward with the loan offered to you, a hard credit inquiry will be used.

You’ll be asked to upload a few documents, so it’s a good idea to have the following ready to go:

  • Proof of residence – ID with matching address, otherwise a utility bill dated within the last 60 days is okay
  • Proof of income – most recent pay stubs
  • Proof of citizenship – a passport or birth certificate can be provided
  • Verification of loans – most recent loan statements for the loans you’re refinancing

Once you submit this documentation, SoFi’s review team gets to work on evaluating your loan. If no other documentation is needed, reviews can take anywhere from 2 to 3 weeks to complete.

The Fine Print

There isn’t an origination fee or application fee, and there are no prepayment penalties. Rates are determined on a number of factors, including the term you choose, your income, and your credit history.

There are late fees associated with the loan. The Parent PLUS Refinance program is currently offered through SoFi’s lending partner, Mohela, and it assesses any fees owed. When you receive the paperwork for the loan, the fees can be found under the disclosures.

Repayment Assistance Options

If you’re struggling to repay the loan after refinancing with SoFi, we recommend you contact a representative and make them aware of the situation. The worst thing you can do with any loan is not make a payment.

SoFi offers unemployment protection on a case-by-case basis, during which payments can be paused for a period of 3 to 12 months.

Pros and Cons of SoFi Parent PLUS Loan

Pro: SoFi offers much better rates than the 6.84% fixed rate that comes with Direct PLUS loans. If you have a higher interest rate – around 8% – you’ll stand to benefit even more.

Con: As we mentioned, refinancing means losing out on benefits associated with Federal student loans. If you’re not as concerned about needing repayment assistance, the savings might be enough to make refinancing worthwhile.

Pro: SoFi also offers variable interest rates, whereas the most recent Direct PLUS loans don’t. Variable rates can be tricky, though – SoFi says rates may change on a monthly basis. If you value stability and peace of mind, variable rates may not be for you. If you’re trying to pay off your balance quicker, and a lower interest rate would help, then it might be worth considering this option.

Con: You may have to extend the repayment term to get a lower monthly payment, as SoFi offers terms up to 15 years. Unfortunately, this increases the amount of interest you’ll pay over the life of the loan. It’s important to use a calculator to estimate how much your savings will be to make sure refinancing is worth it. For example, if you have less than 5 years remaining on your loan, refinancing may not save you a lot of money.

Pro: SoFi offers unemployment protection, and you can also take advantage of SoFi’s career assistance program. If you or your child is experiencing trouble finding employment, it will connect you with its network of alumni and give you tools and tips to succeed in your job search.

*referral link

Other Parent PLUS Refinance Alternative

If you don’t qualify with SoFi, you can try these lenders that also offer refinancing options:

CommonBond: Fixed APRs range from 3.35% to 7.12%, and variable APRs range start at 2.81%, and terms offered are 5, 10, 15, and 20 years. CommonBond also has hybrid APRs. Only a 10 year term is offered with this choice; it starts off as fixed for 5 years, and changes over to variable for 5 years. There are no origination fees or application fees, no prepayment penalty, and CommonBond actually allows you to transfer your loan to your child (which isn’t allowed with Federal loans). You can borrow a maximum of $500,000.

Citizens Bank: Citizens Bank refinances Parent PLUS and Direct PLUS loans through its Education Refinance program. The minimum amount you can refinance is $10,000 and up to $90,000 for Bachelor’s degrees and below, $130,000 for graduate and doctoral degrees, and $170,000 for professional degrees. For a Bachelor’s degree and above, you must have made 3 consecutive monthly payments to refinance. For anything less than a Bachelor’s degree, you must have made 12 consecutive monthly payments. The loan you’re refinancing must be in repayment status and can’t be enrolled in an Income-Based Repayment plan. Fixed APRs start at 6.64%. Terms of 5, 10, 15, or 20 years are offered. You need a minimum income of $24,000 to qualify.

Be sure to shop around as there are other lenders out there that will refinance Parent PLUS loans – you want to make sure you’re getting the best rates and terms available to you so you can save the most. Shopping around within 30 days will only count as one credit inquiry, so your credit won’t get penalized heavily. Take advantage of this and lessen the burden of student loan payments so you can focus on saving for your future.

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Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Laurel Road (formerly DRB) Student Loan Refinance Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Students throwing graduation hats

Updated August 14, 2017

Laurel Road (formerly know as DRB – rebranded on June 15) is a division of Darien Rowayton Bank that offers a highly competitive student loan refinance product. In addition to a competitive interest rate, Laurel Road offers some decent loan perks that sets it apart from others.

According to Laurel Road, someone who refinances $100,000 has the potential to save up to $15,000 over the life of a 10 year loan. And in special circumstances like disability or financial hardship, the bank might completely forgive loans or allow for partial payments. Read on for the ins and outs of a Laurel Road loan to see if it’s the right refinance for you.

Loan Details

Laurel Road will refinance up to 100% of Federal, private and Parent PLUS loans. The minimum amount you can refinance is $5,000 and loan terms are available for 5, 7, 10, 15 and 20 years.

Fixed interest rates are available from 3.95% to 6.99% APR. Starting variable interest rates are available from 2.99% to 6.42% APR. If you choose a variable interest loan, the rate will fluctuate throughout the loan term depending on market conditions. Only consider variable interest if you can pay off your student loan refinance quickly. Otherwise, you might be taking too much interest rate risk since your interest has the potential to increase over time.

The interest rates above include a 0.25% discount for using auto-pay. You just need to set up automatic payment from any checking account in order to get the auto-pay discount.

[Look into refinance options on our table here.]

Loan Qualifications

You must be a working U.S citizen or permanent resident with a degree from an accredited U.S. school program to be eligible. In terms of creditworthiness, Laurel Road does not disclose its underwriting requirements. The requirements can change over time. However, Laurel Road is targeting people with good credit.

To have the best chance of approval, your existing student loans should be in good standing. You should be able to demonstrate affordability and have limited negative marks on your credit report.

A cosigner is not required to be eligible for refinancing although you’ll probably need one if you only meet the minimum credit score or income requirements above. Laurel Road does not have an official co-signer release program. However, a representative of Laurel Road confirmed to MagnifyMoney that Laurel Road will consider a co-signer release upon request of the borrower on a case by case basis.

Laurel Road will ask for documents to backup the details of your application like photo ID, pay stubs, proof of graduation and student loan pay off statements.

Fees & Gotchas

Laurel Road is very transparent with fees. There are no fees for origination or loan prepayment. There’s a late fee of 5% or $28 (whichever one is less) for payments that are over 15 days late. Laurel Road also charges $20 for returned checks or electronic payments whether it’s due to insufficient funds or a closed account.

Pros and Cons

Low interest is the major pro of refinancing with Laurel Road. Loan benefits like forbearance, deferment and loan forgiveness are other advantages. Laurel Road may forgive loans if you die or if you can prove a significant reduction in income due to disability. Hopefully these situations don’t occur, but it’s good to know you and your family is covered if it does.

On a less morbid note, Laurel Road offers full or partial forbearance of payments if you can prove that you’re going through financial hardship. You may also qualify to pay just $100 per month while you complete a full-time post-graduate training program like an internship, fellowship or residency. If you graduate less than 6 months before refinancing, Laurel Road may allow you to defer payments for up to 6 months.

There aren’t many disadvantages of going with Laurel Road other than it not having an official co-signer release program with explicit qualification terms. This may be a turnoff for cosigners since your loan will likely appear on his or her credit report until it’s repaid.

Student Loan Refinance Alternatives

How does Laurel Road stack up to other available student loan refinances?

SoFi has a higher rate cap for fixed interest and a higher starting rate cap for variable interest than Laurel Road. SoFi currently offers variable rates from 2.815% APR and fixed rates from 3.35% APR(if you sign up for autopay). However, the SoFi refinance does come with a benefit comparable to Laurel Road called unemployment insurance. If you’re laid off, SoFi will pause your payments and help you find a new job.

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CommonBond has similar rates to Laurel Road. Fixed interest rates are available from 3.35% APR and variable interest rates are available starting at 2.81% APR (if you use autopay). Although to qualify for the CommonBond refinance you must have obtained a degree from one of the graduate programs on its eligibility list. On the other hand, Laurel Road will refinance any loan (graduate or undergraduate) from an accredited program in the U.S.

Who Will Benefit Most From This Refinance?

The Laurel Road refinance may work out really well for people who need to complete a post-graduate training program before finding a job in their profession. Since Laurel Road allows for reduced payments in this circumstance, you’re given some leeway until you can earn your full professional salary. Still, you should compare the benefits of any Federal loans you have to the benefits of a refinance before making a decision.

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Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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LendKey Student Loan Refinance Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

LendKey Student Loan Refinance Review

Updated August 8, 2017

Could you imagine trying to find the best student loan refinancing rate from community banks and credit unions on your own? How would you do it? Would you call every bank and credit union and ask for help? What a nightmare.

LendKey has relationships with 300+ community banks and credit unions all over the United States. LendKey* can issue loans to residents in any of the 50 states. This keeps you from having to pound the pavement by your lonesome. LendKey’s website will show you the best rate for refinancing your student loans.

Since 2007, LendKey has been a one stop shop for student loan refinancing. It also offers other types of loans. But for the sake of this review we’ll be focusing on how LendKey takes care of graduates looking to improve their debt situation. Fixed APRs range from 3.15% – 7.26%. Variable rates start as low as 2.58%. (All of these rates include the auto-pay discount). LendKey is one of the top four lenders in MagnifyMoney’s survey of where to refinance your student loan.

Who can benefit from using LendKey? Anyone hoping to refinance their student loans should consider LendKey. It is easy to apply:

If you’re on the fence about refinancing, here are some of the benefits to be gained:

Lower Payments

Refinance your way to a more manageable monthly payment.

Lower Rates

Spend less on interest by getting a lower rate than the aggregate of all individual student loans.

Simplified Finances

Making payments on multiple loans to multiple institutions at different times of the month can be quite the hassle. It’s much easier to remember just one payment. Many lenders even let you consolidate both private and federal loans.

Different Repayment Options

Different lenders offer different repayment options. It’s wise to explore all the options to determine what makes the most sense for your particular situation.

Pros of Using LendKey

A Unified Application Process

This is hugely important. With LendKey, you’re not shuffled through tons of screens on different domains – all using different logons and different (confusing!) user interfaces. Within 5 minutes, a person can navigate through LendKey’s application process. This means after 5 minutes, you can see how much you can save by refinancing. You can even choose what loan you want.

Cosigner Release Available

Yes, you can secure a low interest rate and then cut loose your cosigner. Once you prove you are responsible – LendKey no longer needs a cosigner tied to your account. This may help convince a cosigner to work with you initially. They won’t need to be on the hook for long. Once you’ve made 12 full and consecutive on-time payments, your cosigner may be released. LendKey does a credit check and examines your income to see if you are free to go it alone.

No Origination Fee

This is helpful since it means you are free to shop around without feeling committed.

Further Interest Rate Reduction

1% interest rate reduction once 10% of the loan principal is repaid during the full repayment period. This is subject to the floor rate.

0.25% ACH Interest Rate Reduction

Many lenders reduce interest rates by a quarter percent for borrowers who agree to automatic payments.

Federal and Private Loans Can Be Consolidated Together

However, you lose some federal benefits in doing so. Things like free insurance (provided with federal loans if you are killed or severely disabled), public service forgiveness and military service forgiveness as well as income-based repayment plans. Grace periods will likely be omitted when writing the new consolidated loan.

Over 40,000 Borrowers Serviced

As of January 2016, 40,000 people have used LendKey’s services.

Excellent Customer Support

According to cuStudentLoans (which LendKey owns so take this with a grain of salt), 97% of customers are satisfied. Customer support comes out of New York and Ohio. Phone support is available each day from 9AM to 8PM EST.

For what it’s worth, I called into support 5 times at random. The support I received from the sales team was really great. Even the gentleman with only 6 months of experience was quite knowledgeable.

Eligible Schools

This list of eligible schools is 2,200 and growing. Chances are your school is on the list. However, LendKey doesn’t encourage students to submit eligibility requests as other student loan refinancers do.

Return Policy

Yes, you can ‘return’ your loan. LendKey offers a 30 day no-fee return policy to allow you to cancel the loan within 30 days of disbursement without fees or interest. That’s pretty incredible.

Cons

LendKey Doesn’t Give You the Complete Picture

LendKey doesn’t help a lot with stacking institutions against each other. I suppose this is meant to not to play favorites. However, it would be nice to be able to read about each institution within the LendKey interface. I’d still advise opening up another tab to research the banks you are considering.

The Fine Print You May Miss

Since LendKey is a loan matchmaker, there isn’t a lot of fine print on the site. This means a person still needs to review the fine print of each institution before finalizing his or her loan as mentioned before. LendKey does a fantastic job of getting you 90% of the way. But that last 10% of fine print is between you and your lending institution. Read through everything before signing up for a new loan.

I read the Better Business Bureau complaint log for LendKey. There are only 11 complaints in the past 3 years. SoFi (a competitor) has 18 and another competitor, Earnest, has no complaints. These complaints were mostly small misunderstandings between the LendKey support team and the borrowers.

The Application Process

There are four steps to the simple application process. Step 1 is for estimating monthly payments for a private student loan. It’s simple. You identify the amount you’d like to borrow and fill in a radio button indicating your credit is fair, good, or excellent. The last part is where you enter which state you live in. This is because many programs are state specific. Step 1 takes 1 minute.

Step 2 takes 2 minutes. This is the step where you compare the rates and offers available to you. Choose what works best for your unique situation.

Step 3 again only takes 1 minute. This is the actual application. As mentioned earlier in this article, this process is done through the LendKey interface. And don’t worry, information inputted into LendKey is safe (privacy policy).

Step 4 takes 10 minutes. This is the step where a person verifies identity, school, and income (screenshots/pictures work so there’s no hassle with scanning!). You will know if you are approved during this step.

As with any company, there are competitors. Here are two worthy rivals also worth considering:

Alternatives to LendKey

SoFi

SoFi stands out with a job placement programs, free wealth management for borrowers and even a dating app. More importantly, SoFi has low interest rates, with variable rates starting at 2.815% and fixed rates starting at 3.35%.

SoFi

APPLY NOW Secured

on SoFi’s secure website

Earnest

If you have a low credit score but have potential to earn a good income, Earnest will treat you well. Earnest looks beyond a simple credit score. The application process examines employment history, future earning potential and overall financial situation.

Earnest seems to take a very personal approach to each customer. A customer states an amount they can pay each month and Earnest will give them a loan, accordingly. Earnest also lets borrowers skip a payment each year. This could come in handy if money gets tight around the holidays. Just keep in mind, this can increase your future payments to compensate for the missed on.

Fixed interest rates start at 3.35% and variable interest rates start at 2.57%.

However, Earnest isn’t available for all US residents.

Final Thoughts

LendKey runs a fantastic student loan refinancing division. The company offers many, many customizable options with very few downsides. With no application fee, it’s worth seeing what this student loan refinancing powerhouse can do for you.

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Will Lipovsky
Will Lipovsky |

Will Lipovsky is a writer at MagnifyMoney. You can email Will at will@magnifymoney.com

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Reviews, Student Loan ReFi

Review: LendKey Private Student Loan

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

mortar board cash

Updated August 8, 2017

Most private student loans can’t compete with Federal loans when it comes to interest rates. Private loans are typically more expensive, especially if longer repayment periods are offered. (You’ll pay more in interest over the life of your loan.)

However, LendKey provides a different solution. It’s a marketplace that offers you a chance to browse private student loans offered by credit unions and community banks. These institutions usually have better interest rates than big banks. As another bonus, credit unions offer a more personalized banking experience, and tend to be more lenient when it comes to credit history.

If you’ve had a rough time finding a private student loan lender who will work with you, then you should give LendKey a shot.

How Does LendKey Work?

It’s important to understand that LendKey itself is not a lender. It’s a portal you can use to find a lender. Filling out one application (on LendKey’s website) enables you to view all the private loans you’re eligible for from community banks and credit unions that have partnered with LendKey.

Unfortunately, because there are hundreds of banks listed with LendKey, it’s impossible to say what the specifics of each loan are. On its website, LendKey says variable interest rates start as low as 3.89% APR (with autopay).

Eligibility Requirements

You must be a U.S. citizen or permanent resident to apply for a private student loan through LendKey. You must also be pursuing an undergraduate or graduate degree at an eligible school. You can check to see if your school is eligible in the first section of the application.

Be prepared to join a credit union or community bank if you choose to move forward with a loan offered. Most institutions require that you become a member during the application process. This is standard for credit unions and community banks that have specific membership requirements.

Application Process

The LendKey application process has three steps:

  1. Check your eligibility: You can fill in preliminary information to see if you’re eligible to apply for a loan.
  2. Apply for a loan: If you want to move forward with any loan option presented, you can do so in this step. This requires you to fill out personal information such as your Social Security number and identification information.
  3. Submit documents: LendKey requires you to submit proof of identity (photo ID, such as a Driver’s License), your school transcript, and other documents as needed.

Overall, the application process should take around 15 minutes or less to complete. LendKey will then review the information you’ve provided and give you a decision.

If your credit history isn’t the best (or isn’t very lengthy), you can apply with a cosigner. This gives you a better chance of getting the best interest rates possible on your private student loan. Some lenders affiliated with LendKey may actually require you to apply with a cosigner. Be aware that a hard credit inquiry will be used when you apply.

[What happens when a borrower defaults on a co-signed loan?]

The Fine Print

LendKey claims that there are no origination fees associated with any of the private loans offered by the credit unions or community banks it has partnered with. That doesn’t mean there aren’t any fees; late fees may still apply.

Additionally, a search for credit unions that use the LendKey application revealed one that does charge an origination fee. On The Great Lakes Credit Union page, a 2.5% fee is listed. It states there is an “upfront fee” which “is charged one time at loan disbursement.” As you can see on the page, “Powered by LendKey” is at the bottom.

We strongly recommend reading through the fine print of the organization you choose should you find a loan through LendKey. Don’t be afraid to ask about fees before signing anything.

The disclaimers are also nearly hidden at the bottom of LendKey’s site as you need to click on “Some Disclaimers” to review them.

Pros and Cons of LendKey

There are many advantages to applying for a loan through LendKey:

Pro: After paying back 10% of your loan principal, you’ll be eligible for a 1% interest rate reduction. This is only applicable to those who have entered full repayment status (after your grace period has ended).

Pro: You’re also eligible for a 0.25% interest rate deduction if you enroll in automatic payments. Most lenders offer this.

Pro: Most of the lenders that partner with LendKey don’t charge origination fees for private loans.

Pro: If you apply with a cosigner, a release is available after a certain amount of consecutive payments have been made. For most lenders, this period is between 24 to 48 months.

Pro: Most loans offered through LendKey seem to come with a 30-day return if you decide you don’t want to take the money. No fees or interest will be charged.

Pro: The application process is simple. Instead of having to shop around for loans individually, you have one company that will do it for you. This is much more convenient for you and takes less time.

Pro: LendKey has extensive customer service hours. You can call 888-549-9050 Monday through Friday from 9AM – 8PM ET.

There are several disadvantages to LendKey as well:

Con: You’re dealing with a number of different lenders, and it may be difficult to choose the best from a large list. You should do your own research on the banks LendKey matches you with.

Con: There are possible origination fees even though LendKey claims its lenders don’t charge upfront fees. You should call and confirm if you go with a loan that says its origination fee is 0%.

Con: Many of the individual lenders have loan pages that state the only options for repayment are interest-only or a minimum of $25 per month while in school. This means your loans are never in deferment, unlike Federal student loans.

Con: One large negative to consider with any private student loan is the lack of inherent benefits that come with them. Federal student loans give you more options when it comes to repayment plans and flexibility during tough financial times. It’s worth calling and asking if repayment assistance is offered before you go through with any of these loans.

Con: Some institutions may not offer fixed rates. Variable rates may be lower, but they’re subject to change, which can make it difficult to budget for your student loan payment in the future. Fixed rates offer stability as they’re locked in for the life of your loan.

Other Private Student Loan Alternatives

Some states may not have as many private student loan choices as others. If you can’t find a loan that fits your needs, you may have to look elsewhere.

Citizen’s Bank: Fixed APRs range from 5.74% to 11.90%, and variable APRs range from 3.19% to 11.14%. You can choose to repay your loans on terms of 5, 10, or 15 years, and the maximum amount you can borrow is $90,000.

SunTrust Custom Choice Loan: Fixed APRs range from 4.751% to 11.500% and variable APRs range from 3.001% to 10.050%. A 7 and 10 year repayment term is available, and if you borrow over $5,000, you can choose a 15-year term. The minimum amount required to borrow is $1,001 and the maximum amount is $65,000. SunTrust also offers a 1% reduction on your principal loan balance if you graduate with (at minimum) a Bachelor’s degree.

It’s worth mentioning that you should exhaust your federal loan options before considering private student loans. Fill out the FAFSA and see how much you’re eligible for. Private student loans should only be used to bridge the gap if federal loans aren’t enough to cover your tuition.

Conclusion

LendKey is a great tool to use if you want to see what your local credit unions and community banks can offer you in terms of private student loans. There’s no application fee, but you should double check origination fees on any loan recommended to ensure you’re not left paying extra for a loan.

It’s also a good idea to shop around for private student loans as you want to get the best rates available. As long as you apply to multiple lenders within a 30-day period, the credit bureaus will count those inquiries as one inquiry. There’s no reason not to apply with more than one lender as one could offer you better rates, saving you thousands of dollars over the life of your loan.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Student Loan ReFi

Should You Refinance Your Student Loans with a Credit Card?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Using a balance transfer credit card can be a great way to lower the interest rates on your debt to help you save money and pay your debt off faster. Most people only think about doing a balance transfer with high-interest credit card debt, but recently I’ve been considering a 0% interest balance transfer credit card to help me pay off my student loan.

After making my final credit card payment to be credit card debt free, I started thinking about how I could use a balance transfer offer extended by my creditor to help pay off other types of debt I still have. Since the highest interest debt I have remaining is my student loan, this is what I’m considering refinancing with a 0% interest balance transfer. My student loan only has a remaining balance of about $6,000, which means I could transfer the entire balance to the credit card and pay it off before the promotional rate expires, if I pay it off aggressively.

Of course, there are lots of reasons why you could choose to refinance or consolidate your student loans. I was curious whether or not a balance transfer could be a viable option as well.

Here are some of the pros and cons you should consider before deciding to refinance your student loans with a balance transfer credit card.

Benefits of Refinancing Student Loans with a Balance Transfer Credit Card

There are several benefits you could take advantage of by refinancing your student loans with a balance transfer credit card.

A Lower Interest Rate

One of the main reasons people choose to refinance student loans is to lock in a lower interest rate. For example, my student loans are at 6.8%. If I do a balance transfer to a 0% interest credit card, I could save hundreds of dollars on interest through the end of the 0% interest rate period on the balance transfer.

But keep in mind that not all balance transfers are created equal. You might get all kinds of different balance transfer offers from companies trying to entice you to sign up for a new credit card, or even transfer a balance to a card you already have. Some of these transfer offers will be better than others. You might encounter offers that have a 1% to 3% interest rate for a certain period of time, usually 12, 18, or 24 months. But the best balance transfer offers have a 0% interest rate, obviously saving you more on interest than the others.

Pay Off Student Loans Faster

Transferring student loan debt to a credit card can save money, but only as long as you get the balance transfer paid off before the promotional interest rate expires. This time limit is a big motivation for people to pay extra on their student loans to make sure the balance transfer is paid off before it expires. If you struggle with being motivated to make extra payments, the reality that your interest rate may spike up to 15% or more after a few months may be just the motivation you need to get serious about paying off debt. It’s worked well for me in the past when I’ve transferred high-interest credit card debt to a 0% balance transfer credit card, helping me to pay off $5,284.18 much faster than I would have otherwise.

Drawbacks of Refinancing Student Loans with a Balance Transfer Credit Card

Although using a balance transfer to help pay off your student loans sounds like a great way to save money and pay your debt off faster, there are some potential downsides you should be aware of.

Balance Transfer Fees

A lower interest rate makes balance transfer credit cards an attractive option for those looking to refinance debt, but you need to consider more than just the interest rate before deciding to refinance your student loans with a balance transfer credit card. Make sure you consider the balance transfer fee that many credit cards charge. This can eat away at the amount of money you save on interest. Luckily, some credit cards do have a cap on this fee at $50 or $75, which can be helpful if you plan to transfer a large balance that would otherwise result in a fee higher than that cap. But at that point, it could be difficult to get your student loan transfer paid off before the promotional interest rate on the balance transfer expires.

There are balance transfers without fees, but your options may be limited. If you find a no-fee, 0% interest transfer option you qualify for, it’s almost a no-brainer to use it to pay off other debt.

Potential Loss of Savings on Interest

As mentioned, it’s imperative that you pay off your entire balance transfer before the promotional interest rate expires in 12, 18, or 24 months. If you don’t, the high interest rate after the transfer expires will quickly negate any interest savings you earned by doing the transfer in the first place. In fact, you may end up paying more in interest than if you’d skipped the balance transfer in the first place.

You May Not Qualify

In order to use a balance transfer credit card to refinance your student loans, you first have to qualify for one. In order to qualify for many balance transfer credit cards you must have a credit score of at least 680.

Applying Could Ding Your Credit Score

If you don’t already have a credit card with a balance transfer offer available, you may need to apply for a new card. Anytime you apply for a new line of credit, it will ding your credit score slightly. This may or may not be an important factor depending on what your score is and if you plan to apply for any other credit cards or loans in the near future.

Loss of Federal Student Borrower Protections

A final and very important consideration to think about before you decide to refinance your student loans with a balance transfer credit card is the loss of student loan protections you may have. If you are refinancing federal student loans, you will lose the protections that are offered to you as a borrower, such as:

  • Income-driven repayment plans
  • The opportunity for student loan forgiveness
  • Deferment or forbearance
  • Discharge upon permanent disability or death

Some credit card companies may be willing to work with you in an emergency situation, but chances are high that even in those situations the flexibility offered to federal student loan borrowers is far greater. In some cases, you may be better off not refinancing your student loans in order to maintain your borrower protections.

With most low or 0% interest balance transfer credit cards, you can’t miss a payment or pay late. If you do, your promotional interest rate may be void and you will be subject to the regular interest rate, which could be 15% or more depending on the card and your credit score.

Despite these drawbacks, doing a balance transfer to help pay off your student loans can be a good idea if your goal is to get out of debt quickly while saving money on interest.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

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Student Loan ReFi

Why I Refinanced My Student Loans — Twice

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

Refinancing your student loans can be a great way to accelerate debt repayment or free up some of your monthly budget. I recently refinanced my student loans for a second time, which was a strategic move to improve my overall financial health.

Here’s why I think this can be a smart idea, if you do it at the right time in the right way.

What Is Student Loan Refinancing?

If you’re new here and wondering what refinancing even is, allow me to explain. When you refinance your student loans, you essentially apply for a new loan so that a new lender will buy out your current student loans and give you a new loan with better terms.

“Better” terms depends on what your goal is. For many people, getting a better loan means getting a lower interest rate. If you want to save hundreds of thousands of dollars of interest over the life of your loan, refinancing is a great way to do that. You can structure your loan to pay it off faster at a lower interest rate. This might mean higher monthly payments than you’re used to but a much lower cost of your loan overall.

If you’re having trouble paying your student loans and your monthly payment is too high right now, you can also refinance your student loans to lower your monthly payment. So if you’re on a 10-year plan now, you could refinance to a 15- or 20-year plan to spread out your payments until you get on better financial footing.

Why I Refinanced Twice

About a year ago, I refinanced my federal student loans with SoFi because I wanted to get a better interest rate and pay off my loans faster. My student loans totaled $33,000 with an interest rate of 6.8% with 15 years left on the loan. My monthly payment was around $295 a month. I dropped over a half a percentage point in the interest rate to 6.25% and chose to pay off my loans in 7 years, which increased my monthly payment to about $485. Had I stayed with this loan, I would have saved almost $12,000 in interest fees over time.

I paid my monthly payments dutifully every month, but when my husband and I recently sat down to plan an aggressive debt payoff using the snowball method, we realized that I had been a bit too aggressive with my initial refinance.

Essentially, we wanted to throw as much money as possible at our high-interest debt. Our student loans were at manageable interest rates compared to our credit cards, and we wanted to restructure things a bit to free up more cash.

After receiving a refinance advertisement from College Ave in the mail, I decided to see if I could refinance my student loans and my husband’s graduate school loans with them. It had been only a year or so since my first refinance, but I was still interested. For the record, I tried twice previously to refinance my husband’s loans with SoFi, but they didn’t like his current salary as a medical resident, and they said I was not a qualified co-signer.

Well, luckily College Ave thought I was, so I was able to refinance both my student loans and my husband’s graduate school loans with College Ave. Our interest rates remained the same but I was able to customize a payoff plan that works well with our current debt snowball.

Basically, I chose a plan that allowed us to make graduated payments, so my payments for the next two years are significantly lower than they used to be. That gives me two years to knock out some of our credit card debt without worrying about having large student loan payments.

The Benefits of Student Loan Refinancing

In addition to getting longer or shorter payoff periods and better interest rates, there are other reasons why you might choose to refinance your student loans. For example, if you co-signed your student loans with your parents, sometimes student loan refinance companies will let you get a new loan entirely in your name, getting your parents off the hook.

Many people also refinance their student loans to be more organized. If you have several different student loans and bills with a mixture of interest rates, consolidating your student loans allows you to finally have one monthly bill with one interest rate in one place. This helps reduce the possibility of being late on your payments.

Things to Watch Out for Before You Refinance

While I’m obviously an advocate of refinancing, it’s important to know the downsides as well. The main downside is that if you refinance to a private company from having federal student loans, you lose a lot of the flexibility and perks of the federal student loan system.

Not all private lenders have as many repayment options as federal loans have, and most of them do not offer the perks that come with income-based repayment. For example, my husband’s medical school loans are under the income-based repayment plan called REPAYE, where the government is subsidizing his interest payments (several hundred dollars a month). This is not a perk I was willing to give up, but I was happy to refinance his private graduate school student loans to another private lender with better terms.

It’s Easier Than You Think

I know that switching student loan providers might sound like a complicated process, but with all the online financing companies available now, it’s easier than ever. The process to apply to refinance my student loans took less than 20 minutes both times.

Just make sure to have some identification documents on hand, like your driver’s license and Social Security card, to keep the process running smoothly. After my application was approved, it took about two weeks for my student loans to be completely moved over. Plus, since my new servicer paid off my own loans, that counted as a “payment,” which freed up even more cash this month.

Ultimately, student loan refinancing can be a strategic tool you can use when it comes to bettering your finances and getting out of debt faster. As long as you understand the process, ask to make sure you’re aware of any possible fees, and double-check that the process runs smoothly, you could be well on your way to financial freedom just by adjusting your interest rates and your payments on your student loans.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Reviews, Student Loan ReFi

4 Best Parent PLUS Loan Refinance Options

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

mortar board cash

Updated August 21, 2017

Are you a parent who is still repaying student loans taken out to help your children finance their education? While rising student loan debt totals are concerning for graduates, Parent PLUS loans can be troubling for those in their 40s and 50s trying to plan for retirement.

If you’re in this situation, you should consider refinancing your PLUS loans to lower your interest rate and make the loan more affordable. Direct PLUS loans have had interest rates ranging from 6 – 8% over the last few years, and many refinance programs have rates as low as 2% – 4%. Refinancing can save you hundreds of dollars per month.

Below are the best Parent PLUS refinance programs currently available. We encourage you to check each one out to see which suit your needs the most. You should shop around with each lender with whom you think you can qualify. All credit inquiries made within a 30-day period count as one inquiry in the eyes of the credit bureaus.

A Word of Warning on Refinancing

Thankfully, most student loan refinance programs and Parent PLUS refinance programs don’t have fees associated with the loan, so you don’t need to worry about paying origination or application fees. However, you should do the math to make sure refinancing is worth the paperwork.

If you extend your repayment term, you’ll have a lower monthly payment, but you’ll pay more over the life of the loan due to the amount of interest that will accrue. Additionally, if you’re trying to retire sooner rather than later, extending your term might not be in your best interest.

Ideally, you should find a lender willing to refinance your loan on similar terms with a lower interest rate. If your current loan balance is $10,000 and you have an 8% APR with 5 years remaining, and you refinance to a 5.99% APR with 5 years, you’ll save $568.95 on interest.

Beyond interest rates, you should also be aware that refinancing your Federal Direct PLUS loan means giving up several benefits specific to Federal student loans. Private lenders don’t offer the same repayment assistance, though some lenders are more flexible than others.

For example, you’ll no longer have access to different repayment plans, such as the Graduated, Extended Repayment Plan or Income-Contingent Repayment. Your loans won’t be eligible for forgiveness under the various Federal student loan forgiveness programs. You’ll also lose out on the benefit of forbearance and deferment, which temporarily allows you to pause payments in the event you experience financial hardship.

If you haven’t been struggling with paying back your PLUS loans, then losing these benefits might not concern you, but it’s a factor you should consider. Otherwise, if you experience difficulty making payments, you should reach out to your lender to see if any other payment arrangements can be made.

SoFi Parent PLUS Refinance Program

SoFi is one of the leaders in the student loan refinance industry, and it offers refinancing specifically for Parent PLUS loans.

  • You can refinance a minimum of $5,000 up to the cost of attendance
  • Fixed APRs range from 3.35% – 6.75%
  • Variable APRs range from 2.82% – 6.49% with autopay
  • No application or origination fees, and no prepayment penalties
  • Soft credit inquiry with pre-approval; hard inquiry once you accept the loan
  • Should have good credit, but it also takes your employment and credit history into account

SoFi

Citizens Bank Refinance Program

Citizens Bank doesn’t offer a separate Parent PLUS loan refinance program like SoFi does, but you can refinance any student loan under its Education Refinance Loan.

  • There’s a minimum of $10,000 with a maximum up to $170,000 depending on the type of degree your child received
  • Fixed rates: 6.64% APR to 7.14% APR (with autopay)
  • 5, 10, 15, and 20 year terms available
  • No origination, application, or disbursement fees and no prepayment penalty
  • Hard credit inquiry
  • You need a minimum annual salary of $24,000
  • You can apply with a cosigner

Citizens Bank

Laurel Road (formerly known as DRB) Parent PLUS Refinance Program

Laurel Road also offers a Parent PLUS refinance program with low interest rates.

  • A minimum of $5,000 is required to refinance and there’s no maximum amount
  • Variable rates: 2.99% – 6.42% (with autopay)
  • Fixed rates: 3.95% – 6.99% (with autopay)
  • Terms of 5, 10, 15, and 20 years are available, though you can request a specific term under 20 years
  • Also offers a hybrid loan (mix of fixed and variable rates), but you must inquire about it
  • Child needs to have graduated college and be professionally employed
  • No origination fee or prepayment penalty
  • Available in all 50 states
  • Hard credit inquiry used

Laurel Road

CommonBond Parent PLUS Refinance Program

CommonBond is dedicated to making the refinance process as simple as possible for students, and has recently introduced a refinance program specifically for Parent PLUS loans.

  • The maximum amount you can refinance is $110,000
  • Fixed APRs range from 3.35% to 7.12%
  • Variable APRs from 2.81% to 6.74%
  • Hybrid APRs (5 years at fixed, then 5 years at variable) are offered
  • No application or origination fees, and no prepayment penalties
  • 5, 10, 15, and 20 year terms available (hybrid loans offered on a 10 year term)
  • Temporary loan forbearance is available if certain requirements are met
  • Soft credit inquiry first, then hard credit inquiry if you accept the loan

CommonBond

Keep in mind some lenders, such as SoFi, CommonBond, and DRB, offer the option to transfer your PLUS loans to your child. The Direct PLUS loan doesn’t offer this choice. It’s a great option to have if your child can handle making the payments.

There are many Parent PLUS loan refinance programs being created in wake of the success private lenders have had with refinancing regular student loans. Keep an eye out for them in case you’re not eligible for these. You can also check with your local credit union to see if they have any options available, but be sure the math works out in your favor, as some aren’t offering the best rates. Don’t forget – it’s worth shopping around for the most savings!

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Reviews, Student Loan ReFi

Kentucky (KHESLC) Student Loan Refinance Review: Fixed APR as Low as 3.99%

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Kentucky (KHESLC) Student Loan Refinance Review

Kentucky’s student loan refinance program is operated by the Kentucky Higher Education Student Loan Corporation (KHESLC). Although the KHESLC primarily services Kentucky residents, this student loan refinance is open to residents of some other states, as well.

At present, there are over 40 million Americans repaying student loan debt. So it’s safe to say, finding the most efficient way to tackle student loan debt is at the top of many minds. Refinancing your student loans can get you a lower, fixed interest rate and consolidate multiple student loans into one easy payment.

Lenders like LendKey and SoFi have led the pack in student loan refinance products by offering some of the lowest rates around. More state-run student loan refinance programs are popping up as well to answer the call of borrowers who want to refinance their education debt for interest savings.

In this post we’ll cover:

  • The KHESLC loan terms
  • Eligibility requirements
  • Student loans you can refinance
  • Pros and cons

KHESLC loan terms

The KHESLC refinance offers fixed interest rates starting at 3.99% APR. KHESLC also offers a rate reduction of 0.50% if you make payments through auto-pay. Factoring in this discount, the lowest rate KHESLC will offer is 3.49% APR.

The loan terms are 10, 15, 20, or 25 years. The minimum amount you can refinance is $7,500.

The KHESLC refinance has no fees, including no prepayment penalty or origination fees.

Eligibility requirements

This refinance is open to residents of Alabama, Georgia, Indiana, Kentucky, Mississippi, Missouri, Ohio, Tennessee, Virginia, and West Virginia.

To qualify, you must be employed for the past 12 consecutive months, and you need a credit score above 670.

A co-signer is not required unless you can’t meet income and credit requirements. However, applying with a co-signer even if you do qualify on your own can get you a lower interest rate.

Loans that you can refinance include private student loans, graduate or parent PLUS loans, Stafford Loans, and Perkins Loans. Students can refinance their loans together with parent PLUS loans. This means parents can add their parent PLUS loans to their children’s refinance to hand over the payment responsibility.

KHESLC borrower protections and benefits

The KHESLC is a private student loan refinance. Private student loans often come with limited benefits and protections to support borrowers in times of need. However, KHESLC is noteworthy in this area. For the interest rate, you can get a 0.50% rate reduction just for using auto-pay. That’s a nice perk.

Besides a competitive interest rate, KHESLC offers:

  • Death and disability benefits
  • Forbearance
  • Graduated payment plans
  • Co-signer release

If you pass away or become permanently disabled before your loan is paid off, you and the co-signer can be released from the debt. If you’re a parent borrower and your child who benefited from the loan passes away before it’s paid off, you can also be released from the outstanding debt.

Besides the protections in tragic situations, the KHESLC refinance has a forbearance option. If you experience a period of hardship, you can request a temporary break from payments. You can get a maximum of 36 months in forbearance throughout the life of the loan term.

There’s also a graduated repayment plan that gives you a reduced payment at first and then increases the payment by 10% every two years. Before taking advantage of this perk, understand the implications of paying less up front. Paying less can lengthen your loan term and, ultimately, increase the cost of your loan.

Lastly, KHESLC allows for co-signer release. You can apply for co-signer release after you make 36 on-time, regularly scheduled payments on the loan. However, you will have to go through a credit review at the time of the release to confirm you meet eligibility criteria.

Should you refinance federal student loans?

We usually go through the typical federal student loan disclaimer when discussing refinances because understanding what you forfeit with a refinance is important.

In this case, KHESLC offers some borrower benefits and protections that can make the decision to leave your federal student loans behind less drastic.

Some major federal loan borrower benefits include forbearance, deferment, income-based payments, and loan forgiveness. Forbearance and deferment can put a pause on your student loan payments temporarily if you’re unable to pay due to economic hardship. KHESLC also offers this option.

Income-based payment plans cap your monthly payment based on your family size and income. If you’re in an entry-level job or underemployed, an income-based program can help make your monthly payments manageable.

Keep in mind, the same downside applies here as with the KHESLC graduated payment plan. Lower initial payments can stretch out your loan term. Although, for federal loan income-based plans, after making payments for 20 to 25 years any remaining student loan balance can be forgiven.

Lastly, Public Service Loan Forgiveness is a program that will forgive your federal student loans sooner than later. To qualify, you must make 120 monthly student loan payments while working in an approved public service position. It should take you around 10 years to get forgiveness. You may want to hold off on refinancing federal student loans if you’re considering public service.

You can compare what federal student loans have to offer against private student loans here.

Pros and cons

Pro: Low and fixed interest rates. The starting interest rate offered by the Kentucky refinance is as low as the student loan refinances offered by some of the most competitive lenders. We’ll talk about a few of these lenders below.

Con: Limited eligibility. This student loan refinance is only open to residents of 10 states. If you live outside of these states, unfortunately, you’re out of luck.

Pro: The borrower benefits and protections. Altogether for protections, there’s deferment, co-signer release, graduated payment, and the death and disability benefit. If you choose to refinance your federal loans with KHESLC, you can take comfort knowing there are still some backup protections in times of trouble.

Con: Forfeiting federal student loan perks. The KHESLC benefits are nice, but there are federal loan benefits like forgiveness that you would no longer have access to if you refinance.

Pro: The parent PLUS loan refinancing opportunity. Parents with parent PLUS loans can hand over the responsibility of payment to their children. Children can refinance parent PLUS loans together with their other loans using the Kentucky refinance.

Who will benefit from the KHESLC refinance?

Ultimately, borrowers who will benefit most from this refinance will be those who live in the 10 states where the refinance is offered. That’s a given. With location restrictions aside, the borrower benefits are impressive. The starting interest rate is impressive as well.

In fact, it’s right on target with other top student loan refinances available. The top 4 student loan refinances at this point are CommonBond, Earnest, LendKey, and SoFi because they offer the lowest interest rates. Starting fixed interest rates from these lenders range from 3.15% to 3.50% APR.

Of course, the lowest rates offered by all lenders are given to those who are the most creditworthy. Applying with a co-signer will give you a better chance at qualifying for a low rate with KHESLC.

You can also take the time to strengthen your credit score before applying to obtain a competitive rate with KHESLC or any other lender. Be sure to shop around with multiple lenders when looking for a refinance to get the best deal.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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Reviews, Student Loan ReFi

Review: North Dakota’s Deal One Student Loan Refinance Program

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

student loans college

If you don’t know much about North Dakota, it has some interesting quirks. It’s the largest producer of honey and sunflowers in the U.S. It’s home to the largest scrap metal sculpture in the world. In the past year, it has had both the largest population growth and the biggest economic contraction of any U.S. state.

North Dakota is also home to the only remaining state-owned bank in the country. The Bank of North Dakota (BND) collects all state tax revenues to redistribute into various programs. One of those programs is the Deal One Loan, which gives residents the chance to refinance their student debt at competitive interest rates.

Who Qualifies?

You must be a resident of North Dakota to qualify for this loan option. This means your primary residence has had a physical address in the state for at least the past six months. On top of being a state resident, you must also be a citizen of the United States.

If you are able to refinance by yourself, your credit score must be 700 or higher. If you cannot qualify solo, you can also look at getting a co-signer who has a minimum credit score of 600.

Co-signers can be released after 48 straight months of on-time payments as long as you meet the current credit score requirements at that time. It’s important to know Bank of North Dakota looks at your complete credit history when determining your eligibility.

The final criteria for qualifying is the loan itself. If your loan is in repayment or a grace period, you qualify, but if it is delinquent or in default, you cannot refinance through this program. Most loans are eligible, including federal, state, and private loans for both undergraduate work and graduate school. However, you cannot currently be attending school if you want to use this refinancing option.

[Look into refinance options on our table here.]

Terms

The length of the term on your loan will depend on how much you are refinancing.

If you owe…Your term will be….
Under $10,00010 years
$10,001-$20,00015 years
$20,001-$30,00020 years
$30,001 or more25 years

While terms vary depending on how much you owe, interest rates are the same across all terms. Currently, fixed interest rates sit at 4.36%, while variable interest rates are at 2.35%. If you choose to go with a variable rate, the maximum variable interest rate is 10%. If you sign up for automatic payment, you can decrease your interest rate by 0.25%.

There are no application or origination fees with a Deal One Loan. However, if you are more than 15 days late on a payment you will have to pay a late fee. The late fee will be 6% of the missed payment amount, as long as 6% doesn’t exceed $15.

It is also important to note that when you refinance federal loans, even at the state level, you will be giving up access to certain advantaged repayment options like REPAYE, IBR, and other benefits. Always make sure any refinancing program is worth forfeiting these programs for.

While these federal benefits will be lost, BND does offer some deferment and forbearance options of their own. If you find yourself unemployed, disabled, in a state of financial difficulty, or deployed as an active duty member of the armed services, you may qualify for partial or full deferment or forbearance.

These special exceptions do have guidelines, but are generally handled on a case-by-case basis.

Pros and Cons of Refinancing with BND’s Deal One Loan

Pros

  •       No application or origination fees.
  •       Extremely competitive rates, especially on longer loan terms.
  •       BND does allow for some form of forbearance on deferment in extreme circumstances.
  •       Co-signer release is available.

Cons

  •       Only available to residents of North Dakota.
  •       Late fees will be assessed.
  •       Credit score criteria may be high for some new graduates.
  •       You will lose access to advantaged programs if refinancing federal loans.

Application Process and Documents Needed

You can apply for a Deal One Loan online. Before you start the application process, make sure you have the following documentation and information:

  •       The lender’s name, current balance, loan type, account number, and interest rate of any loans you are attempting to refinance.
  •       Your Social Security number and driver’s license number.
  •       The names, addresses, and phone numbers of three separate references who live at three separate addresses.

If you do not qualify for the loan based on your own credit score, you will be provided with information to give to a co-signer at the end of the application process. The co-signer will use this information to create their own account and apply to co-sign your loan.

After you have finished the application, you will need to send in the Authorization for Release of Student Loan Information via email, fax, or snail mail. This form allows BND to confirm that the loan information that you submitted was accurate. You may also need to sign a Federal Student Loan Benefits Waiver.

After BND has confirmed and approved your loan, you will need to sign some paperwork to accept the refinancing offer. You will be given one more chance after this to change your mind, and will be required to sign the Loan Final Disclosure. Then, BND will pay off your existing loans.

How It Stacks Up

As far as state-run refinancing programs go, the Deal One Loan has some of the lowest interest rates around. The only states that compare are Kentucky, Iowa, and Rhode Island.

Kentucky’s Advantage Education Loans only offer fixed interest rates. Those rates are low, though, starting at 3.99%. However, those who are closer to the qualification line of a 670 credit score are more likely to see rates closer to 7.99%. You cannot be eligible for both North Dakota and Kentucky’s programs. Advantage Education Loans are only available to residents of Kentucky, Georgia, Mississippi, Missouri, Ohio, Virginia, and West Virginia.

Iowa’s Reset Refinance Loans do compete with North Dakota on interest rates, but they do so with a few caveats. The first is that the longer your term, the higher your interest rate will be. This means rates are only truly competitive with North Dakota on their five-year product. On that product, the interest rate is 4.25% for Iowa residents and 4.50% for non-residents, but only if your credit score is 830 or above. Reset Refinance Loans also come with a financing fee, which puts North Dakota clearly ahead.

If you are refinancing with a co-signer, Rhode Island’s RISLA Refinance Loans come in at a respectable 4.49% fixed interest rate, but, again, this is only for five-year loans. If you apply without a co-signer, that rate jumps up to 5.74%. While this program is open nationwide, North Dakota residents will still have an advantage by staying loyal to their own state’s program.

Overall, if you’re a resident of North Dakota and want to refinance after considering the loss of advantaged programs from your federal loans, staying with your own state program or shopping the private sector is likely the best way to go.

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Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne at brynne@magnifymoney.com

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