[Yeti]

I searched but couldn't find anything directly on point.

I am seeking advice from those who have refinanced their student loans, or who know how to do so.

I have perfect credit and do not have any other debt.

I've heard a thing or two about SoFi and took a look, but it seems byzantine.

Can anyone provide guidance? Is it possible to refinance graduate, federal student loans to take advantage of current low interest rates? Does anyone have experience?

[Ensam]

I refinanced about $40k in 10 year loans to 5 year loans through SoFi and a 401k loan. Worked great, cut my interest rate in half. SoFi is picky though, I had a friend who just finished law school and they rejected her for lack of work history/verifiable income despite having perfect credit. I have less than perfect credit but solid work history with high income and they approved me no problem. Citizen Bank also seems to have pretty good rates right now.

The main risk you face is that you lose the protections the federal government gives you by switching to a private lender but if you can pay off your loans in a few years the risk is pretty minimal.

What strikes you as byzantine about SoFi?

[TheWisdomOfMyFather]

(12-18-2014 10:24 PM)Yeti Wrote:  

I searched but couldn't find anything directly on point.

I am seeking advice from those who have refinanced their student loans, or who know how to do so.

I'm sitting on around $85,000 of federal student loans - graduate school - at about 6%. I would like to refinance my loans, if possible, to pay at a lower interest rate, as low as possible. The current loan is financed through Navient / Sallie Mae.

I have perfect credit and do not have any other debt.

I've heard a thing or two about SoFi and took a look, but it seems byzantine.

Can anyone provide guidance? Is it possible to refinance graduate, federal student loans to take advantage of current low interest rates? Does anyone have experience?

Hi Yeti,

I have significant experience regarding this issue because I just went through it. Hopefully, our continued discussion will help you. First, to answer your initial question, yes, it is possible to refinance graduate, federal student loans. Second, I have four questions for you: (1) what type of graduate school program (believe me, it matters); (2) is your FICO score higher than 700; (3) do you currently have a job in your graduate field; and (4) do you need a "grace" period or deferment period at all, or are you currently in repayment?

Explaining each in reverse order:

When you consolidate/refinance federal student loans (like Perkins, Stafford, GradPLUS), you may lose the federal government's built-in "grace" period and deferment protections.

Consolidation/refinance firms like SoFi have somewhat burdening requirements, like a steady job or job offer in your graduate field, with the addition of strong monthly cash flow.

If your FICO score is higher than 700, oftentimes private lenders will incentivize you with a lower interest rate.

If your graduate program was in law/finance/medicine, private lenders will often be more forgiving of significant debt because of your earning potential.

I refinanced with a private lender, not SoFi. If you have a significantly high credit score, as well as a high salary, it can often be better to go with a boutique bank that specializes in wealth management for wealthier clients. Indeed, some of these boutique banks will offer to refinance your loans at an absurdly low interest rate (I received 3.0%) just so they can begin building a banking relationship with you (this is particularly true in high earning fields, like law/finance/medicine).

I look forward to our continued discussion. Let me know if you have any additional questions.

[lurker]

You not only lose the federal grace period and deferment protections, you also lose federal programs such as income-based repayment protections and debt forgiveness.

[Yeti]

(12-19-2014 12:10 PM)lurker Wrote:  

You not only lose the federal grace period and deferment protections, you also lose federal programs such as income-based repayment protections and debt forgiveness.

That's the catch. I don't think that I'll refinance. IBR is such a valuable program that I don't want to lose it, at least for now, even if it means paying higher interest.

I think that refinancing (and losing IBR and debt forgiveness) could be good for those who are sure that they'll have to pay off the entirety of their loans, and have a high enough income where they can pay off their loans in five or 10 years.

I'll probably make more money anyway if I invest my money in index funds. That, coupled with the advantage of IBR and loan forgiveness, mean that I won't refinance.

Thanks for the advice.

[iknowexactly]

(12-19-2014 12:10 PM)lurker Wrote:  

You not only lose the federal grace period and deferment protections, you also lose federal programs such as income-based repayment protections and debt forgiveness.

This is HUGE. My life would be TOTALLY fucked if not for IBR Income Based Repayment.

Do NOT discount this, I don't know the details of your life but basically with IBR if, for any reason your income goes down a lot, you can stay in compliance , sometimes even paying nothing per month, and the clock still ticks towards 25 year discharge as long as you stay on top of it.

Some people are really hooked in to the system, and can with relative confidence say "I will never be needy, and I know 100% I can pay this back."

I wasn't that confident, have not been the financial success story that of course everyone else in America is, right? - and am lucky to have IBR.

[redbeard]

I recently refinanced my student loans through SoFi. It was an A+ experience and I would it especially if you are in a similar situation. I heard about SoFi through Mr. Money Moustache, and although they've grown, it's more or less the same.

My situation is textbook SoFi:

-Young, few years out of college
-Great credit score, after years of having credit cards and never paying interest
-Engineering degree & job, high income
-High amount of debt in private and federal loans

The application process was extremely simple and took maybe fifteen minutes. After submitting my paperwork and necessary documents, I was given a rate quote. My refinance interest rate was lower than my private loans but higher than my federal loans, so I decided to only refinance my private loans. This leaves my federal loans still applicable for IBR, which is very important as iknowexactly points out.

At the end of the day I was given ~ 2% discount in interest rates and a sign up bonus. This was a no brainer, and I accepted.

If you are even thinking about refinancing, I suggest you give them a call. The customer service was spectacular and called me every few days to check on my application, or to see if I had any questions regarding the terms and conditions.

I did have one issue, but they solved it immediately. Mr. Money Mustache advertises a $300 referral bonus. I followed the instructions, but did not get the cash. A week after refinancing, they sent me a questionnaire about my experience. I let them know that I never got the referral bonus. A customer service representative called me directly, we troubleshooted the problem, and I had the cash in my account by the end of the week.

Let me know if you have any questions. There is a referral program that would get me some kickback but it only pays out $100 to the refinancer, so MMM's $300 bonus is a better deal. Happy refinancing!