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Updated on Tuesday, May 12, 2015
Looking to refinance your student loans, and live in Wisconsin? You may have already heard that UW Credit Union can refinance your student loans for you. If simplifying your payments and possibly lowering your interest rates is what you’re looking for, read on to find out what UW Credit Union can offer you.
When you refinance with UW Credit Union, you can consolidate $5,000 to $150,000 of student loan debt – both federal and private. The repayment term is 15 years, and you have the option to make interest-only payments during the first 2 years of your loan.
There are two loan options: variable and fixed rate. The variable rate starting as low as 1.89% APR, though rates can change quarterly. UW Credit Union specifies the cap is 15%.
The fixed rate ranges starting from 3.14% APR.
If you borrow $20,000 at a fixed rate of 7.49% APR for 15 years, your monthly payment will be $185.29.
You can receive the typical 0.25% interest rate deduction if you enroll in automatic payments as well.
Your interest rate is determined by your credit score, credit history, and type of school you attended. You can have a cosigner if your credit isn’t up to par. There is a cosigner release after 36 consecutive timely payments.
Longer Repayment Terms
Keep in mind that while a longer repayment term lessens your monthly payment, it increases the amount you’ll ultimately pay over the life of the loan.
In our above example, borrowing $20,000 at 7.49% APR for 15 years gives you a monthly payment of $185.29. You’ll make 180 payments, which equals $33,352.20. That means you’re paying $13,352.20 in interest!
Of course, you can always pay extra on your loans – there’s no prepayment penalty associated with UW Credit Union’s student loan refinance program. Just keep that in mind before you fall for the lower monthly payment and are content to stick with it.
If you’re in a rough spot right now and need that lower monthly payment, that’s fine, but do your best to pay extra when your situation improves.
A Word on Refinancing Federal Student Loans
If you’re refinancing Federal student loans, you need to be aware you’ll lose some important benefits associated with federal loans. For example, deferment, forbearance, forgiveness, and any income based repayment plans typically go out the door when you refinance.
If you’re in the military, you also lose out on an interest rate deduction under the Servicemembers Civil Relief Act for both Federal and private student loans taken out prior to enlisting.
In addition, most Federal student loans are fixed rate loans. While lower interest rates on variable rate options look attractive, know it means your payment could increase at any time. Fixed rates mean stability, even if they’re a tad higher.
Make sure refinancing your federal loans is worth the tradeoff. You can use UW Credit Union’s refinance savings calculator here to see what rates you’re eligible for, and how much you’ll save.
The Fine Print
As mentioned, there are no prepayment penalties with this loan, and there is also no origination fee.
If you’re late on a payment, you’ll have to pay 5% of the amount past due, or $10 – whichever is less.
If your payment fails to go through for any reason, you’ll have to pay a $15 fee.
UW Credit Union does receive an F for it’s lack of transparency and no soft pull to view rates before applying.
UW Credit Union has a list of eligibility requirements to look over before you apply to refinance with them:
- You have to be a member of UW Credit Union to get your student loans refinanced
- You must be age of majority in your state of resident when you apply (usually 18)
- You must be a U.S. citizen or permanent resident with a Social Security number
- You need a yearly salary of $25,000 (variable rate only)
- Your debt-to-income ratio should be “reasonable” (likely around 35%)
- You should have built up at least 5 years of credit history (student loans excluded)
Wondering what’s needed to become a member? You have to be associated with the University of Wisconsin System (any of the 26 branches) or Madison College in some way, whether you’re a student, faculty, staff, or alumni. You can also live or work within 5 miles of a branch.
Documents Needed to Apply
Before you begin the application process with UW Credit Union, you’ll want to have the following documents and information handy:
- Personal Information: You’ll need your Social Security number, the address of your school, your address, and driver’s license number.
- Employment Information: You’ll be required to list your current employer, so have the address and phone number ready. You should also know your annual salary.
- Contact Information for Nearest Relative: This relative can’t be your cosigner (if you apply with one), and he or she can’t live at the same address as you. Have his or her phone number and address ready.
- Student Loan Information: You should have your most recent student loan statement scanned in (or have a PDF copy).
- Cosigner Information: If you’re applying with a cosigner, you’ll need the same information for him or her as you need for yourself.
The application process takes place with Cology, a company partnered with UW Credit Union to process the student loan applications.
Be aware Cology uses a hard credit inquiry when you apply, so your credit score may be affected.
Additionally, UW Credit Union states it may take 2 – 4 weeks to complete the application process. It has an entire timeline you can view so you know what to expect.
Who Benefits the Most from Refinancing With UW Credit Union?
Unless you’re a member of UW Credit Union already, you’ll likely receive better rates elsewhere (and with less stringent eligibility requirements).
There are other online lenders who don’t require 5 years of credit history, and you won’t need a cosigner to apply with them, either.
These lenders are worth taking a look at even if you’re a member of UW Credit Union.
What Are the Other Alternatives?
SoFi can be a great option for eligible applicants – it has a specific list of schools and programs it services. The maximum repayment term is 20 years instead of 15, and there is no origination fee. Fixed rates range from 2.99% – 6.09% APR (UW’s starting rate is higher), and variable rates range from 2.25% – 6.09% APR. If you have more than $45,000 in student loan debt, you’ll be happy to know SoFi has no maximum loan amount.
Is your college not on SoFi’s list? Citizens Bank can be a good option for those not eligible for SoFi. It also has a maximum repayment term of 20 years, and its fixed rates range from 2.99% – 8.49% APR. Its variable rates range from 2.25% – 6.09% APR. The maximum loan amount is $90,000 for undergraduates and up to $225,000 for graduates. There’s no origination or prepayment penalty with Citizens Bank, either.
Look Out For Yourself
The number one thing to keep in mind when refinancing your student loans is to look out for yourself. You want to ensure you get the best rates available. As you can see, other lenders clearly have better terms than UW Credit Union, so don’t assume the first approval you get is the best (even if it’s from a credit union).
You should shop around to get the best rates available. Shopping around in the span of 30 days or less, or looking for lenders that initially use a soft pull of your credit, will do the least amount of damage to your score.
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