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Updated on Thursday, April 23, 2015
Updated March 3, 2016
Disclaimer: Education Success Loans is not accepting new loan applications at this time. Check out other options here.
The Student Loan Finance Corporation offers Education Success Loans for borrowers looking to refinance their student loans.
If you’ve been struggling to make payments according to the current terms of your student loans, or can’t keep up with how many lenders you’re paying, then refinancing could be a good option for you.
Education Success Loans sets itself apart by offering a different type of loan – a hybrid that starts with a fixed interest rate, and ends with a variable interest rate. Let’s take a look at all the details to see if this is a good option for you.
The Pros and Cons
The pro is the repayment period – 25 years is on par with what income-based repayment plans offer. Extending your repayment term is an easy way of lowering your monthly payment.
However, be aware it also causes you to pay more over the life of the loan due to how much in interest you’ll be paying.
The other negative that goes along with that is all three loan options switch over to a variable rate at some point. This means your payments will likely increase. You need to make sure you can either 1) pay off your loans before the variable rate kicks in, or 2) are earning more money at that point in time to cover the increased payment.
According to its FAQ, “Limited deferment options may be available,” but, “There is no repayment forbearance option available with this loan.” If you have federal loans, be aware that refinancing with private lenders will eliminate the benefits that federal loans offer (forbearance, income-based repayment options, forgiveness, etc.).
Another positive to consolidating your student loans means owing less money to lenders. Consolidating and owing one lender will simplify your student loans.
What You Need to Qualify
Education Success Loans list the following requirements:
- You must be the legal age of majority of the state you reside in
- You must be a U.S. citizen or permanent resident
- You need a Bachelor’s degree or higher from an eligible Title IV school
- Your debt-to-income ratio (including housing) should be between 40%-43%
- You must earn $24,000 annually
- You have to have been out of college for at least 30 months before applying.
Refinancing is not offered to those that reside in AZ, IA, IL, or WI.
If you need to have a co-borrower apply with you, they are accepted.
There’s a minimum credit score needed to apply, but it’s not available to the public. Education Success Loans will look at other factors such as your credit history and DTI. You shouldn’t have any minor issues with your credit (late payments) within the last two years.
Additionally, you may be able to consolidate loans that are currently in forbearance or deferment. However, Education Success Loans will go into repayment immediately, though, so if you can’t afford to pay right now, you should wait.
Application Process and Documents Needed to Apply
The application process is straightforward, and after applying, you can expect to hear back within 3-7 days.
While you can apply online, you can also apply via fax or by mail. The application is available for download here. Note: Education Success Loans is not accepting new loan applications at this time.
When you apply to refinance, Education Success Loans will conduct a hard inquiry on your credit.
It’s likely you’ll need to provide pay stubs or tax returns to verify your income, and if any additional documentation is needed, the customer care team will notify you.
Who Benefits the Most from Refinancing Student Loans with Education Success Loans?
Considering the standard repayment for student loans is 10 years, and the max you can have a fixed rate for is 10 years, those that can pay off their student loans within that time will benefit the most.
If you’re having difficulty making payments right now, and have federal loans, try looking into the income-based repayment options available. You can extend your repayment term and still keep benefits such as forbearance and deferment.
The Fine Print
There’s no prepayment penalty or origination fee with the Education Success Loans.
If your payment is 10 days past due, you’ll be charged a late fee of 5% of the unpaid amount or $25, whichever is less.
If your payment doesn’t go through and it’s returned, you’ll be charged a $30 returned check fee.
Should you default on your loan, up to 25% of the principal balance can be assessed for collection efforts depending on where you live.
Remember that rates are variable after 1, 5, or 10 years, depending on the loan option you choose. Education Success Loans states that variable rates can be adjusted quarterly on the first day of January, April, July, and October. The interest rate is capped at 15%..
For this reason, and no cosigner release option, Education Success Loans earned an F transparency score.
Alternatives for Student Loan Refinancing
Not thrilled with the half fixed rate, half variable rate option? It’s not a common model when looking at student loan refinancing. It’s understandable to want a stable fixed rate so you can budget your payments accordingly.
SoFi* offers both fixed and variable rates. Its fixed rate APR range is 2.99% – 6.28%, and its variable rate APR range is 2.25% – 6.28% if you’re enrolled in autopay. It also offers a repayment term of 20 years.
If you need to refinance a larger amount, SoFi doesn’t have a cap on how much you can borrow, and it conducts a soft credit inquiry when you apply.
SoFi also offers Unemployment Protection, so if you fall on hard times and can’t make a payment, you might be eligible for forbearance. SoFi also helps borrowers with job placement.
Another good option is CommonBond*. It offers a hybrid loan option, but also offers fixed and variable rate loans. Its fixed rate APR range is 2.98% – 5.79%, its variable rate APR starts at 1.99%.
The repayment terms offered are the same as SoFi, though the hybrid option is only available on a 10 year repayment term. CommonBond also does a soft credit pull. The downside: only certain schools and programs are eligible under its refinancing program, though it is expanding.
Beware the Hybrid Loan Option
Take care when considering if a hybrid loan is going to improve your student loan situation. The low fixed interest rates look great, but keep in mind they can, and will, increase. We all hope to be more successful later on in life, but losing your job or changing careers and taking a pay cut can happen. Don’t put yourself in a situation you might regret a few years down the line.
There are other lenders who offer lower fixed rates if you have great credit, and it doesn’t hurt to apply, especially when those lenders are only conducting a soft credit pull. For lenders who conduct hard credit inquiries, be sure to shop around within a period of 30 days, as this won’t have as much of a negative impact on your credit score.
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