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 3.40% to 7.38% APR and variable rates range from 2.63% – 7.32% 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.”
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 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 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 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.
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 3.20% to 7.25%, and variable APRs range start at 2.57%, 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 (RI): Citizens Bank (RI) refinances Parent PLUS and Direct PLUS loans through its Education Refinance program. The minimum amount you can refinance is $1,000 and up to $90,000 for Bachelor’s degrees and below, $110,000 for graduate and doctoral degrees, and $180,000 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 7.03%. 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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