SOFI refinance experience

[JMC2010]

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So I am going through the SOFI refinance for my 250K of student loans and I thought others might be interested in the experience.

The process is pretty simple as it's all done online. It just took me a while to gather the courage to switch to a variable rate loan. You go on their website and go through a simple application where they check your credit score and then they show you the ballpark interest rates they can offer you. If you like what you see then you upload some paycheck stubs and proof of employment, etc. Click submit and then it takes a week or two and it's done. They then pass everything off to Trustudent which is the actual servicer of the loan.

A couple of hiccups along the way. It just so happened that all of this was being finalized at the end of June and around the 4th of July holidays. My student loans were on autopay to be paid on the first of the month with my old servicer. I left them like that because I didn't want to have a late payment and wasn't sure when my old provider would be paid off. This was a mistake. Naturally SOFI sent the 250K check to my old provider on June 30th which I didn't see online until July 2nd after my 3K payment was already taken out of my checking account. So basically my old student loan service took 3K out of my bank account when my balance was zero dollars. Awesome. Figured I could fix this with a simple phone call to the student loan folks. Nope. They had already passed the money on to the government and they said it would take approximately 6 mos to get a refund. Their official recommendation was to file a claims issue with my bank to have the money refunded...so i'm in the middle of that now. Reportedly I should have the money back within 10 days.

The second issue is that when Trustudent contacted me they had my interest rate listed as 3.41%. I called them and told them SOFI had given me 3.25% and they looked it up and apologized and said they will change it. Hopefully that was just an honest mistake but the skeptic in me wonders...

 

[MSmentor018]

i am looking into refinancing too. I've never heard of these guys. is this for private loans only? defaulted?
how is this different than consolidating or interest based repayment (other than a variable rate)?
what's the catch?
thanks

 

[JMC2010]

i am looking into refinancing too. I've never heard of these guys. is this for private loans only? defaulted?
how is this different than consolidating or interest based repayment (other than a variable rate)?
what's the catch?
thanks

I don't have any private loans, I refinanced all of my federal stafford and grad plus loans, all of which were in good standing. I had previously consolidated all of my loans under the special direct consolidation offered by the government, but the interest savings were minimal...it may have knocked 0.25% off the total interest i was paying. I have never participated in the income based repayment plans.

My understanding of the general concept of SOFI (Social finance) is that there are investors out there hungry for relatively low risk returns in the 3-6% range and certainly there are many folks with student loans looking for better interest rates. I believe SOFi only caters to people with graduate degrees which I imagine are usually pretty diligent about paying off loans.

You do not have to choose a variable rate with Sofi. I think the fixed rate they offered me was in the 5% range (depending on the repayment length). Considering my loans were at ~7% that would have been a considerable savings as well. However, interest rates are at historic lows right now and that fact coupled with my desire to pay very aggressively (My goal is to pay off loans in 3 years) is why I chose to go with a variable rate loan (and also that I qualified for a 3.25%). I also calculated several scenarios, ie. interest rates sky rocket up 2% in a year vs. stay flat vs worst case scenario vs fixed rate loans at 5% and generally i found that I would save money in most cases over my 7% federal interest rates with an aggressive payment plan on a variable rate loan. Those savings were generally in the 10k-30k range which i decided was well worth refinancing.

I was also comforted by the fact that if things get out of control (Libor rates start skyrocketing) I can refinance for free with Sofi to a fixed rate loan. Also interest rates are capped at 8.9 % on most of the variable rate loans.

 

[JMC2010]

Oh and I should give credit to the White Coat Investor as I initially read about SOFI on his website

 

[The White Coat Investor]

I have a total financial conflict of interest here, of course, but if you refinance with Sofi through links on my site, you get an extra $300 off your loan and I get paid as well. You can read more here:

http://whitecoatinvestor.com/refinance-your-medical-school-loans-at-a-lower-rate/

Here's a link to SoFi that gives you (and me) the special deal:

http://www.sofi.com/whitecoat

 

[MSmentor018]

I have a total financial conflict of interest here, of course, but if you refinance with Sofi through links on my site, you get an extra $300 off your loan and I get paid as well. You can read more here:

http://whitecoatinvestor.com/refinance-your-medical-school-loans-at-a-lower-rate/

Here's a link to SoFi that gives you (and me) the special deal:

http://www.sofi.com/whitecoat

for all the advice you've given, go ahead and get paid! I am going to look into this. thanks

 

[JMC2010]

I think it is best to wait. While sofi does have some deferment options I doubt they are interested in 3 years of deferment. You will qualify for a better interest rate also with an attending salary.

 

[DocEspana]

Maybe not the best thread for this, but are the residents here hesitant to bank on the PSLF. The department of education has pretty much said that *almost* (emphasis mine) whatever the Fed does with the program, it will honor forgiveness for those already paying towards it.

Do people just not believe they can pull off <7 years without crossing into a for profit employer? Or is there a lot of non federal loans being taken out?

 

[JMC2010]

I think you will find a mixed response. I fall into the category that doesn't believe PSLF will be honored for high income earners. Either way I prefer to pay off rapidly and not chance it.

 

[DocEspana]

I think you will find a mixed response. I fall into the category that doesn't believe PSLF will be honored for high income earners. Either way I prefer to pay off rapidly and not chance it.

For what it's worth, the DoE came out and said that the master promissory note is a contract and that the PSLF as currently stated is a part of that contract that won't be invalidated.

But you totallly cut funding and then all of the "we won't do this because you'll sue us" stuff will go out the window.

 

[MSmentor018]

Maybe not the best thread for this, but are the residents here hesitant to bank on the PSLF. The department of education has pretty much said that *almost* (emphasis mine) whatever the Fed does with the program, it will honor forgiveness for those already paying towards it.

Do people just not believe they can pull off <7 years without crossing into a for profit employer? Or is there a lot of non federal loans being taken out?

that was a question i had and there's a discussion on this forum somewhere. in short, pslf does not qualify if you work for a contract group......and that's hard to dodge these days

 

[Mbekweni]

Just realized an additional "tax" on those planning on using IBR and the PLSF loan forgiveness program. Incremental income is taxed at the higher rates as you earn it, so the benefits of putting that money pre tax into a retirement account get magnified even more. Each additional $100 for me would be subject to 28% federal tax, 9.3% California state tax, 15% IBR loan repayment calculation for a total of 52.3%. Of course my real tax rate including all deductions would be much lower, but that ridiculous number really does identify the need for high earning physicians, especially those with loans, to think about tax strategy. Keeping that extra 52.3% of the income I work hard for, plus putting it to work while I'm young and have more time for compound interest will likely make a big difference in retirement. Extra motivation!

 

[DocEspana]

Just realized an additional "tax" on those planning on using IBR and the PLSF loan forgiveness program. Incremental income is taxed at the higher rates as you earn it, so the benefits of putting that money pre tax into a retirement account get magnified even more. Each additional $100 for me would be subject to 28% federal tax, 9.3% California state tax, 15% IBR loan repayment calculation for a total of 52.3%. Of course my real tax rate including all deductions would be much lower, but that ridiculous number really does identify the need for high earning physicians, especially those with loans, to think about tax strategy. Keeping that extra 52.3% of the income I work hard for, plus putting it to work while I'm young and have more time for compound interest will likely make a big difference in retirement. Extra motivation!

Edit: misread your posts point. I get it now. But since I went through the trouble of looking it up, let me make this quick comment on why I'm really hoping for pslf (though budgeting as if I won't have it)

IRB drops a tax bomb on you, PSLF doesn't. So the foregivebess amount is tax free.

 

[Mbekweni]

Indeed. Minimize taxes and loan payments now with pretax retirement contributions, minimize tax later by 10year PSLF instead of 20-25 year PAYE vs IBR forgiveness.

 

[The White Coat Investor]

In general, don't refinance before you're about done with residency. Personally, I think PSLF will be grandfathered for those currently making IBR or PAYE payments. No guarantees, of course. Keep in mind that most EM jobs are NOT 501(c)3s.

 

[JMC2010]

So SOFI listed my 'interest rate' as 3.25% on my Final Disclosure paperwork. I was surprised when the servicer Tru Student told me my interest rate is 3.41%. Turns out 3.25 + current libor rate of 0.16 is how they come up with 3.41%. If you dig in the fine print of the SOFI paper work you will find this clause. I found it a little bit shady and let them know that. Regardless, with autopay I get a 0.25% reduction in my interest rate for a final rate of 3.16% so I can't complain too much.

 

[old_boy]

I'm still a resident and I refinanced approx $100k with SOFI (after much thought and careful deliberation). I have some other income streams (moonlighting, real estate business) however in addition to residency salary so my income is a bit higher than the typical resident. I'm at just over 4% variable with SOFI (10 year term), was at 7.2% consolidated with the federal government. I have some other low-interest student loan debt as well that I did not refinance as it's at just over 2%.

I found SOFI fair to deal with. Their paperwork requirements were straightforward. Their timetables were wrong (they quoted 3-4 days on their website for approval, which was off, the process took about 2-3 weeks). Never-the-less, they were pleasant to deal with on the phone and via email, and I would recommend them.

Note that I'm taking on significant interest rate risk with a variable loan and their poorly defined financial hardship waver is likely to be less generous than the feds. That being said, the federal government was not the ideal bed partner either, particularly at 7.2%. My consolation loan changed servicers several times over the past 3 years, and they made errors that took mounds of paperwork and phone calls to correct. Not to mention that 7.2% SUCKS.

Like the Fed loans, SOFI lets you pay early without penalty. Although my term is 10 years, I'm already making extra monthly payments as income allows. I anticipate paying off this loan within the next 4 to 5 years, maybe sooner (hopefully before interest rates significantly increase). The amount of money I'm saving on interest was worth the risk for me.

 

[Groove]

I got rejected, lol.

 

[JMC2010]

I wonder why they rejected you...debt-to-income ratio too high? That's what they quoted to one of my co-workers.

 

[Erichi]

Just wanted to through my two cents into the mix here on refinancing.

I surveyed Earnest, Sofi and LendKey to refinance my 6.5% FedLoan in March of 2016. I have good credit (~700-750) and a decent, stable income.

I ended up going with Earnest because they offered me the lowest rate (4.04% fixed, 5 years after the autopay discount). This ended up saving me several thousand dollars compared to the FedLoan piracy.

I attempted to get Sofi to match the offer I received from Earnest because of the fact that SoFi offers a slightly higher, $300 bonus from Mr. Money Mustache. The referral bonus for Earnest is only $200. However, the interest rate for SoFi would have been 5% fixed. They wanted to see a copy of the loan agreement between Earnest and myself, which I sent them. But they ultimately called me back and told me they could not match the offer.

LendKey’s interest rate estimate was closer to 5.5% for my profile for some reason so I didn’t even complete an application because I didn’t want them to run a credit check.

Each company has their own algorithm and I suspect that if you profile is slightly different, any one of these companies could be the one offering you the best deal. I strongly suggest not blindly taking the advice of any one here on this forum as to which of these companies is best – do your own research!! One must balance the need to get as many offers and quotes as possible against the possible dings on your credit for each full-scale application that you complete. Remember, having your credit history run 1-3 times per year is about normal and will not be held against you.

If you do go with Earnest, here is the $200 bonus referral (that is, we each get $200 if you use this):

www.meetearnest.com/invite/erich13