Advertiser Disclosure

College Students and Recent Grads, Reviews, Student Loan ReFi

SoFi Parent PLUS Loan Refinance Review

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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 3.89% to 7.62% APR and variable rates range from 2.50% – 7.12% 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%.

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 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.

SoFi

APPLY NOW Secured

on SoFi’s secure website

*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 3.67% to 7.25%, and variable APRs range start at 2.50%, 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.

CommonBond

APPLY NOW Secured

on CommonBond’s secure website

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 5.74%. Terms of 5, 10, 15, or 20 years are offered. You need a minimum income of $24,000 to qualify.

Citizens Bank (RI)

APPLY NOW Secured

on Citizens Bank (RI)’s secure website

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.

* We’ll receive a referral fee if you click on the “Apply Now” buttons in this post. This does not impact our rankings or recommendations You can learn more about how our site is financed here.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

TAGS: ,

Advertiser Disclosure

College Students and Recent Grads

What Is a Private Student Loan? Here’s the Must-Know Info You Need

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Shutterstock

College is more expensive than ever, and most students cover costs with a mix of savings, scholarships and federal student loans from the Department of Education. But what is a private student loan, and how does it fit into this picture?

Private student loans offer a way to cover a gap in funding if you don’t have enough after maxing out your available federal loans. But these private student loans differ from federal ones in major ways, so it’s crucial to understand what you’re getting into before signing on the dotted line.

Here’s what you and your family need to know.

What is a private student loan?

A private student loan is money you borrow from a private lender (such as a bank or credit union) to put toward your education. Most lenders require you to be enrolled at an eligible school to qualify for a loan.

Each lender sets its own criteria, which you’ll have to meet in order to get the loan. Some will let you borrow up to cost of attendance of your school, while others set annual borrowing limits.

If you qualify, many lenders will send the funds directly to your financial aid office to cover your tuition bill. Any remaining money will get sent back to you to use for living expenses or, if you don’t need it, to return to your lender. Note, however, that some lenders will send the funds directly to you instead, meaning it becomes your responsibility to use them for your tuition bill.

When you borrow, you’ll choose repayment terms, typically between five and 15 years. You’ll also likely get to choose between a fixed interest rate, which stays the same over the life of your loan, and a variable rate, which can start lower but might also increase over time.

Each lender could offer different rates and terms, so it’s important to shop around before a private loan to find the best one.

What’s the difference between a private and federal student loan?

As a college or graduate student, you can borrow private student loans from a banking institution, or you can take out federal student loans from the government. Here are the main ways in which private student loans differ from their federal counterparts:

  • Private student loans require a credit and income check. While anyone who qualifies for federal aid can borrow federal loans, private loans have stricter requirements. To qualify, you’ll need to meet certain criteria for credit and income — or apply with a cosigner who can.
  • You’ll probably need a cosigner. You can borrow federal student loans in your own name, but if you’re an undergraduate, you’ll probably need a cosigner (such as a parent or guardian) to take out a private student loan. Because their name is on your loan, the cosigner becomes just as responsible for repaying the debt as you are.
  • Private student loans have less flexible repayment plans. Federal student loans come with a variety of repayment plans, including income-driven repayment, graduated repayment, deferment and forbearance. Private lenders, on the other hand, usually offer plans between five and 20 years, which you select at the time of borrowing. Some lenders will let you postpone payments through forbearance if you lose your job or go back to school, but this isn’t guaranteed.
  • You might be considered in default after three missed payments. Federal loans come with a 270-day delinquency period before your loan is considered to be in default, but private lenders might put your loan into default status after just three months of missed bills.
  • Private student loans can have a fixed or variable rate. While federal Direct loans to undergraduates have a fixed rate of 5.05% for the 2018-19 school year, private loans can have either a fixed or variable rate — usually, the choice is yours. Rates typically range from around 4% to 13%, depending on your (or your cosigner’s) credit.
  • You won’t get your interest subsidized. Students with financial need can qualify for subsidized federal loans, which don’t accrue interest until you graduate and your six-month grace period ends. Private lenders don’t offer subsidized loans, so interest will start piling up as soon as you get the money.
  • Private student loans aren’t eligible for federal forgiveness programs. Programs such as Public Service Loan Forgiveness only work for federal loans, not private ones. That said, private loans may be eligible for some loan repayment assistance programs, which could be offered by your state or a private organization.

So if federal student loans have more flexible repayment plans and better interest rates, why borrow private student loans at all? The most common reason is because federal loans come with annual borrowing limits, so you might not have enough funding to pay tuition.

Unless yours is a rare case — for instance, if you’re a graduate student who could get better rates on a private loan and don’t need the federal protections — you’ll want to turn to federal loans first. Unfortunately, however, more than half of students borrow privately before exhausting their federal options.

What are the interest rates on private student loans?

The interest rates on private student loans vary from lender to lender. As of April 2019, some of the most competitive lenders offer fixed rates starting at 3.89% and variable rates starting at 3.00%.

Although this beats the current rate on federal loans, you or your cosigner would be unlikely to score these lowest interest rates unless you have excellent credit. On the other end of the spectrum, fixed rates can go up to 12.68%, and variable rates as high as 12.22% among our recommended lenders.

And don’t forget that these figures do change — in September 2018, rates ran as high as 14.24%. Interest this high could be a real burden for the 15% of graduates who carry private student loans.

As for deciding between fixed and variable rates, remember that the variable rate exposes you to the risk that rates (and possibly your monthly payment) could rise. If you’re confident you can pay your debt off quickly, a variable loan might be worth the risk, while if you’re planning a 10- or 15-year repayment, you might be safer with a fixed loan.

That said, you could always refinance your student loans for new rates and terms if you have the credit to qualify or have a cosigner who can do so.

What about repayment terms?

When you borrow a private student loan, you’ll get to choose your repayment terms. A 10-year plan is standard, but some lenders also let you opt for five, eight or 15 years.

You can use our loan calculator to estimate what your monthly payments would be on each plan. It might be tempting to choose a five-year plan and get out of debt more quickly, but it’s not worth it if you can’t keep up with the higher monthly payments. Meanwhile, on the flip side, a long term with lower monthly payments might appeal to you, but consider how much you’ll have to fork over in interest over the years. The calculator can reveal how much you could expect to pay over time — that said, you can typically prepay your loan without penalty if you suddenly come into some money.

Before you borrow, it’s also crucial to go over your repayment agreement. Some private lenders let you defer repayment while you’re a student and for six months after you graduate, while others require immediate payments or interest-only payments while you’re still in school.

Also make sure you know when your first payment is due so you don’t fall behind or go into default.

Learn what private student loans are before you borrow

Private student loans have both pros and cons for you as a borrower.

On one hand, they can be useful tools for paying for college and earning your degree. But on the other, as a downside, you’ll probably have to enlist a cosigner to qualify, and sharing debt doesn’t always go smoothly.

Plus, you might have relatively high interest rates, meaning you could end up paying back a lot more than you borrowed.

Whatever you decide, make sure you understand what private student loans are before you borrow any. That way, you can make an informed decision about borrowing before it’s too late.

And make sure to compare offers with multiple lenders so you can find one with the best benefits, rates, and terms for your private student loan.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

How to Get Rid of Private Student Loans: Forgiveness and Other Options

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Shutterstock

After maxing out their eligibility for federal student loans, many students and families turn to private student loans to pay for college. While private loans can help fill the funding gap, they can also become burdensome if you borrow too much or get saddled with high interest rates. That’s where private student loan forgiveness and other types of assistance come in handy.

If you’re wondering how to get rid of private student loans — and do it quickly — know that you do have options. And although none of them will wipe away your debt overnight, they could help you regain control of your finances. Here are eight different possibilities to explore:

1. Qualify for private student loan forgiveness programs

Although private student loans aren’t eligible for Public Service Loan Forgiveness, you can find some student loan forgiveness programs for private loans. National, state and private organizations will wipe away a large portion of your debt, or sometimes all of it, depending on your profession or location.

For instance, the National Health Service Corps Loan Repayment Program offers up to $50,000 in student loan assistance to healthcare professionals who work in an underserved area for at least two years. Likewise, the Herbert S. Garten Loan Repayment Assistance Program has a similar reward for eligible lawyers.

Many states, as well as some universities, also offer student loan repayment assistance for qualifying professionals. Some of the common eligible occupations include doctor, nurse, dentist, pharmacist and teacher. Check with your state to find out if it offers student loan forgiveness for private loans.

2. Find an employer with a student loan assistance benefit

Even if you can’t qualify for private student loan forgiveness programs, you might get a student loan assistance benefit from your employer. Some companies will match a percentage of your student loan payments to help you pay off that debt faster — for example, Fidelity and Aetna each offer up to $10,000 in student loan assistance to their employees.

According to Forbes, student loan matching was the hottest benefit of 2018. And with the student debt crisis continuing to weigh on the U.S., more companies might follow suit and introduce this benefit in the future.

If you are looking for a job or open to changing your employer, consider companies with this perk. They might help you make a bigger dent in your student loan balance than you’d be able to on your own.

3. Postpone payments through forbearance

While the government offers a number of flexible repayment plans for federal student loans, including income-driven repayment, private lenders don’t often have equivalent programs. On the other hand, some do allow you to pause payments through deferment or forbearance if you lose your job, return to school or run into financial hardship.

If you’re going through a financial rough patch, reach out to your lender to find out if you can put your loans on pause for a few months. This break from payments might offer the relief you need until you can get back on your feet.

Just remember that interest typically continues to accrue during a period of forbearance, so you might end up facing a bigger balance once repayment resumes.

4. Request a temporary interest-only payment plan

Along with temporary forbearance, some private lenders offer the option of interest-only payments. With this approach, you could postpone full repayment while still making small payments on interest from month to month.

Although you won’t be chipping away at your principal, you will pay down interest before it accumulates. These reduced payments could give you some breathing room until you’re able to enter full repayment.

5. Negotiate lower payments with your lender

Private lenders typically don’t offer income-driven repayment plans, but some might be flexible if you’re really struggling — after all, they don’t want you to default on your loan completely. So if you can’t keep up with payments, call your lender and find out if they can adjust your bills.

6. Refinance your private student loans for better terms

By refinancing your student loans, you can restructure your debt with new terms — typically between five and 20 years — and adjusted monthly payments.

You could opt for a short term, which might increase your monthly payments but will get you out of debt faster and save you money on interest. Or, if your bills are too burdensome, you could choose a longer term to lower your monthly payments.

You might also snag a lower interest rate, resulting in major savings over the life of your loan.

But while student loan refinancing has a number of major benefits, it’s not accessible to everyone. You’ll need to meet certain requirements for credit and income to qualify — or apply with a cosigner who can. And if you decide to refinance, make sure to shop around among multiple lenders to get the best deal available to you.

7. Discharge your private student loans through bankruptcy

Student loans are notoriously difficult to discharge through bankruptcy, but this route isn’t impossible. If you qualify for Chapter 7 or Chapter 13 bankruptcy, you could wipe away your private student loans.

You will have to prove your student loans are causing undue hardship, and the entire process could destroy your credit and cost you thousands in legal fees. But if bankruptcy is your only option, know that it could lead to wiping away your private student loans.

8. Apply for permanent and total disability discharge

Finally, experiencing a permanent and total disability might remove your obligation to pay back your student loans. Some lenders will wipe away your debt in this circumstance. If you’re unable to work due to a disability, reach out to your lender to find out if you could qualify for private student loan forgiveness.

How to get rid of private student loans

While options such as forbearance and interest-only payments can decrease your bills, they won’t help you get rid of your private student loans any faster. If you’re set on shedding your debt ASAP, your best bet (outside of private student loan forgiveness) is throwing extra payments at your student loans.

If you can find ways to increase your income or decrease your spending — or both — you can use the extra money to make additional payments on your debt. This will save you money on interest and move up the timeline on repayment.

But if your budget is too tight right now, lowering payments might be the best temporary solution to help you manage your private student loans without going into default.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

TAGS: , , , ,