Author Topic: My Experience Refinancing my Student Loans  (Read 10030 times)

OneCoolCat

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My Experience Refinancing my Student Loans
« on: April 19, 2015, 06:39:36 PM »
SoFi Referral code (we each get $100 if you use my link and accept refinancing):  https://www.sofi.com/refer/234/11233

I'm a recent law school graduate and came out with $50,000 in student loans.  Upon graduation and gaining employment I quickly began making payments on my student loans.  I was disturbed that despite making $500 payments my principal balance barely changed because of the disgusting 6.8% interest rate.  I did some legwork and came across some of the student loan refinance websites.  I applied to two, DRB and SoFi. 

I applied to SoFi because they are the big dog in student loan refinancing and was the first to come up from a google search.  SoFi's application was oddly simple and didn't require much time or information gathering.  If I recall I just submitted two of my most recent pay stubs, loan payoff, Passport, and transcripts.  They ran a soft credit search on me and I was initially dinged just two days after creating my account.  I received an email from SoFi explaining I was dinged because they couldn't confirm my address and that I had insufficient work experience.  I sent them an email asking why they weren't able to confirm my identity since they had my passport and that I thought my 7 years work experience, albeit part-time, would be sufficient.  A week later I received a call from a SoFi rep who agreed that my identity shouldn't have been an issue but apparently I made a mistake and said I had 0 years of work experience on the application, doh!  She reapplied me for the refinancing and I got approved a week later!  I wasn't too thrilled with the 5% fixed offer they sent me so I inquired what my adjustable rate would be and was told 4.05; all SoFi loans are eligible for an additional .25% autodebit decrease.  I ended up accepting the adjustable refinance offer and instantly set up the autodebit feature so my rate has been 3.805% for the past couple months which is awesome. 

The first thing I noticed is that my monthly payment has decreased.  I have also noticed a much larger portion of my payments go to principal which is a great feeling.

I also applied with DRB but their application process was much more detailed and they no matter how many times I applied they dinged me for having an incomplete application.  I recommend applying to both SoFi and DRB though and shop around for the better rate.  DRB was advertising better rates at the time I applied so I was a little bummed they didn't approve me. 

If anyone is interested in checking their SoFi refinance rate, you can use my referral code and we will each get $100 if you accept refinancing through them.  Definitely shop around the different lenders though because one of them may give you a better rate.  Also, this is really important, if you refinance government back student loans (i.e. Sallie Mae) you will lose government benefits such as Public Service Loan Forgiveness eligibility, IBR and PAYE eligibility, and certain loan deferment rights.  However, if you are like me and you think you will end up paying off your student loans within 10 years, are working in the private sector, and are not on an income-base repayment plan then student loan refinancing may be a good idea.  Explore your options, but if you decide to apply with SoFi you can use my referral code:

https://www.sofi.com/refer/234/11233
« Last Edit: August 11, 2015, 07:07:47 AM by OneCoolCat »

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #1 on: April 22, 2015, 03:31:37 PM »
I just found out that if someone were to have government backed student loans and they were to die, those loans are forgiven and the servicer wont go after their estate.  However, private servicers may go after the estate for the unpaid balance.  Just another drawback to refinancing that I wanted to mention.

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #2 on: April 24, 2015, 08:18:10 PM »
Another lender that I hear is pretty good about refinancing student loans is commonbond.  I hear they only refinance for students from a limited number of universities tough.  Here is a link (not a referral like):  https://commonbond.co/refinance-loan

Shop around, find whats best for you, if any.

Im open to questions

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Re: My Experience Refinancing my Student Loans
« Reply #3 on: April 24, 2015, 09:00:34 PM »
I understand government-backed student loans are not dischargeable in a bankruptcy.  Does that change if refinanced via a private lender?

Cathy

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Re: My Experience Refinancing my Student Loans
« Reply #4 on: April 24, 2015, 09:41:45 PM »
I understand government-backed student loans are not dischargeable in a bankruptcy.  Does that change if refinanced via a private lender?

It looks like, generally, refinanced student loans are still subject to the general rule of nondischargeability, although there are some edge cases.

11 USC § 523(a)(8) contains the general rule that a discharge from bankruptcy does not discharge an individual from certain forms of educational obligation, subject to the undue hardship test. The interesting part is that this statute actually applies to three different forms of obligation:
  • "an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution";
  • "an obligation to repay funds received as an educational benefit, scholarship, or stipend"; or
  • "any other educational loan that is a qualified education loan" as defined in 26 USC § 221(d)(1).

The first thing to note is that only the first of the three obligations requires any government involvement, and that branch also applies to loans made or insured by a nonprofit institution, not just the government. By itself, it doesn't look like branch (1) would be broad enough to cover a private loan used to refinance a government-backed student loan.

However, branch (3) is much broader and includes (generally speaking) any loan taken out to pay "qualified higher education expenses" (which means the cost of attending an "eligible education institution" minus some things), subject to some technical conditions, and also explicitly includes a loan taken out to refinance such debt.

So if the student debt was a "qualified education loan", then refinancing it has no effect on its special status relative to bankruptcy law. However, if the sole basis for the nondischargeability was one of the other two branches, then the refinancing may render it dischargeable in bankruptcy. This could happen, for instance, if a nonprofit institution made a loan to study at a foreign university which does not constitute an "eligible educational institution" within the meaning of 26 USC § 25A(f)(2)  (*). In that case, the original loan would be nondischargable under branch (1) discussed above, but after being refinanced, the new loan may be dischargeable. However, for the vast majority of student loans, refinancing will have no effect on discharge in bankruptcy.

There are many conditions and exceptions contained in the statute and this post is not intended as a comprehensive discussion of this topic, does not constitute any form of advice, and should not be relied on for any purpose.


((*) To be clear, some but not all foreign universities constitute "eligible educational institutions".)
« Last Edit: April 24, 2015, 09:55:53 PM by Cathy »

Rob

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Re: My Experience Refinancing my Student Loans
« Reply #5 on: April 24, 2015, 09:47:40 PM »
Does anyone know of a reputable refinancer that would allow payment via credit card? That extra 2% could be pretty beneficial. I don't have loans myself, but a friend is looking to refinance and I am tasked with helping her.

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #6 on: April 25, 2015, 07:30:56 AM »
Does anyone know of a reputable refinancer that would allow payment via credit card? That extra 2% could be pretty beneficial. I don't have loans myself, but a friend is looking to refinance and I am tasked with helping her.

That is a great question!  I used sofi and my servicer is Mohela and they do not allow you to make payments via credit card.  I believe Sofi will appoint a servicer to you because I know of others that have used Sofi that don't have Mohela as their servicer.  As far as I know, none of the Sofi servicers allow you to make extra payments via credit card.

I've been very interested in this as well, even thought of ways to make a backdoor payment via credit card, but I hit a wall. Some people mentioned the Target prepaid RedCard as a backdoor way of making extra payments via a credit card but I don't think it will work.  The idea was that you fund the redcard with a creditcard, then call the servicer and make a payment designated as debit from the redcard.  Im unclear of whether it would work though.

rafiki

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Re: My Experience Refinancing my Student Loans
« Reply #7 on: April 25, 2015, 07:49:02 AM »
Question: Were there any fees to re-fi with SoFi? Reading on their website it doesn't look to be the case, but were there any hidden (or obvious) refinance fees or charges you paid?

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #8 on: April 25, 2015, 09:35:25 AM »
Question: Were there any fees to re-fi with SoFi? Reading on their website it doesn't look to be the case, but were there any hidden (or obvious) refinance fees or charges you paid?

Another great question.  There were not any fees, express or hidden with Sofi.  I don't believe the other refinance companies have fees either but I cant say for sure.

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #9 on: April 26, 2015, 11:24:56 AM »
I made an extra payment this month.  Sofi will charge me the per diem interest since the last auto-debit payment.  Is that ok?

I heard n Dave Ramsey's show that you want to only pay principal on extra payments.  I don't think this is the same scenario as i'm not really prepaying interest, rather i'm only paying the interest accumulated through the date of payment (which means I wont pay it on my next periodic statement). 

Thanks!

Sibley

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Re: My Experience Refinancing my Student Loans
« Reply #10 on: April 27, 2015, 10:00:42 AM »
OneCoolCat - thanks for the the notice of how they do that. Mathematically, it shouldn't matter, but you can do an amortization schedule in excel to double check that your interest is working out correctly.

I just refi'ed recently, and will be making extra payments once I pay off the cc. Also helping a family member to refi with SoFi - they got screwed by one of the lesser known federal servicers. Hoping to get that sorted out next.

Blonde Lawyer

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Re: My Experience Refinancing my Student Loans
« Reply #11 on: April 27, 2015, 10:45:17 AM »
I just found out that if someone were to have government backed student loans and they were to die, those loans are forgiven and the servicer wont go after their estate.  However, private servicers may go after the estate for the unpaid balance.  Just another drawback to refinancing that I wanted to mention.

I believe, but would have to verify, that SoFi's also discharge on death.  My previous private loan did not.

Tami1982

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Re: My Experience Refinancing my Student Loans
« Reply #12 on: April 27, 2015, 10:59:35 AM »
Does anyone know of a reputable refinancer that would allow payment via credit card? That extra 2% could be pretty beneficial. I don't have loans myself, but a friend is looking to refinance and I am tasked with helping her.
I've been very interested in this as well, even thought of ways to make a backdoor payment via credit card, but I hit a wall. Some people mentioned the Target prepaid RedCard as a backdoor way of making extra payments via a credit card but I don't think it will work.  The idea was that you fund the redcard with a creditcard, then call the servicer and make a payment designated as debit from the redcard.  Im unclear of whether it would work though.

You don't use the red card to make the payment.  I mean, you can if they will allow you, but you use the Target Red Card bill pay option to make a direct payment just like your regular bank's bill pay option.  Gets around anyone not allowing you to use CC for payment.  I load my Target card once a month and pay all my bills that I cannot use the mileage card for (mortgage, student loan, car payment). 

Hope that's helpful!

Tami

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #13 on: May 02, 2015, 08:05:52 AM »
Does anyone know of a reputable refinancer that would allow payment via credit card? That extra 2% could be pretty beneficial. I don't have loans myself, but a friend is looking to refinance and I am tasked with helping her.
I've been very interested in this as well, even thought of ways to make a backdoor payment via credit card, but I hit a wall. Some people mentioned the Target prepaid RedCard as a backdoor way of making extra payments via a credit card but I don't think it will work.  The idea was that you fund the redcard with a creditcard, then call the servicer and make a payment designated as debit from the redcard.  Im unclear of whether it would work though.

You don't use the red card to make the payment.  I mean, you can if they will allow you, but you use the Target Red Card bill pay option to make a direct payment just like your regular bank's bill pay option.  Gets around anyone not allowing you to use CC for payment.  I load my Target card once a month and pay all my bills that I cannot use the mileage card for (mortgage, student loan, car payment). 

Hope that's helpful!

Tami

If I setup the Target Red Card's bill pay function to make a $1000 extra payment to my student loan servicer, the servicer will accept it and process it as a debit transaction?  Who ends up paying the transaction fee for swiping the credit card, the Target Red Card institution?

Tami1982

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Re: My Experience Refinancing my Student Loans
« Reply #14 on: May 02, 2015, 11:37:45 PM »
I don't know the exact verbage - but it's not a debit (like with a card) transaction.  If you use the bill pay function they do an ACH (?) transaction.  There are no fees for this as you are not using it as card.  It's exactly as if you were making a bill payment using your regular checking account's bill pay feature.  If your servicer is set up to accept electronic payments they do an electronic debit from the account, if your bank/ servicer is not connected they issue a paper check.  Just be sure in the memo part of the transaction to note it's a principal payment.  I've had one issue, but I just called and said it was a principal payment and it was noted on the memo and they reapplied it properly.   No issue since. 

If you are concerned it would be misapplied as an electronic transaction and want a paper check issued, just create the payee as an individual instead of a business.  Individuals are issued paper checks by default. 

Boom!  Load $1,000 from your CC onto the Target Prepaid.  Get your airmiles/rewards.  Pay your student loan bill with the Target bill pay option - utilizing the individual payee as to guarantee paper check.  Pay off CC w/ your checking account.  Voila! :) 

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #15 on: May 07, 2015, 09:11:48 PM »
I don't know the exact verbage - but it's not a debit (like with a card) transaction.  If you use the bill pay function they do an ACH (?) transaction.  There are no fees for this as you are not using it as card.  It's exactly as if you were making a bill payment using your regular checking account's bill pay feature.  If your servicer is set up to accept electronic payments they do an electronic debit from the account, if your bank/ servicer is not connected they issue a paper check.  Just be sure in the memo part of the transaction to note it's a principal payment.  I've had one issue, but I just called and said it was a principal payment and it was noted on the memo and they reapplied it properly.   No issue since. 

If you are concerned it would be misapplied as an electronic transaction and want a paper check issued, just create the payee as an individual instead of a business.  Individuals are issued paper checks by default. 

Boom!  Load $1,000 from your CC onto the Target Prepaid.  Get your airmiles/rewards.  Pay your student loan bill with the Target bill pay option - utilizing the individual payee as to guarantee paper check.  Pay off CC w/ your checking account.  Voila! :)

Sweet.  I see I can buy a unregistered Target Prepaid RedCard on eBAY for $18.  Some of the listings say you cant activate it in certain states so I will have to do more research to see if its possible in Florida.

Tami1982

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Re: My Experience Refinancing my Student Loans
« Reply #16 on: May 07, 2015, 09:25:30 PM »
Hold off on it - There was an announcement yesterday that Target may be no longer allowing loading with CC's  :(  We'll know for sure in the next day or so.  The interwebs will be all atwitter.

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Re: My Experience Refinancing my Student Loans
« Reply #17 on: May 07, 2015, 10:28:00 PM »
Just want to second my recommendation of SoFi, and I'm not even posting my referral link.  I've re-fied with them twice, once into a ten-year loan when I first graduated, and more recently into a five-year loan with a 2.63% interest rate.  Both times had a very easy experience, though I have a new servicer now (Mohela instead of TruStudent).  They're even sending me a bag of Ritual coffeebeans as a thank you.  Overall a very positive experience. 

Tami1982

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Re: My Experience Refinancing my Student Loans
« Reply #18 on: May 08, 2015, 12:13:20 AM »
I understand government-backed student loans are not dischargeable in a bankruptcy.  Does that change if refinanced via a private lender?

No. Pre 2008 private education loans were able to be included in bankruptcy, but the laws were changed and now all student loans are not dischargeable.  The private lenders (which were doing an incredible amount of predatory lending in recent years) now have all the protection of the federal loans, with none of the responsibility.   For example, federal loans can be discharged due to disability.  I know this, because I did it.  It is a three year process.  Private loans are under no obligation to honor that, and in fact, did not.  They are also under no obligation to do income based repayment, nor to offer you any reduction in payment.   

We never know what the future may hold, so use caution and think it through before refinancing out of a federally backed loan with protections to a private loan with none.  I certainly didn't think I would become permanently and totally disabled at the age of 24.  While the federal loans took time to discharge, they were fairly simple.  The private loans took a very complicated bankruptcy (the payments for the student loans were twice my disability income), six years, two law suits, and a trial to handle and an unimaginable amount of stress to myself and my family - whom they also harassed unceasingly trying to collect funds. 

Chances are most of you will be fine and have no issue, but I am sharing my personal story just so you go in possessing all knowledge with open eyes.  It's not one I share lightly. 

thingamabobs

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Re: My Experience Refinancing my Student Loans
« Reply #19 on: June 12, 2015, 02:55:04 PM »
just want to give my experience with DRB so far...

So finally go through all the paperwork for DRB and am in the processing of reviewing the loan terms. BTW, while you're still missing documents they call you every other day to remind you, and then once everything is in, they stop calling which is how you can tell that your file is complete and under review! They then send you documents through a “secure” email system, which apparently is so secure that if you forget your password they cannot reset it and has to send you a new link to a new email address to establish a new account. The other options are to fax the papers or to receive them by snail mail. And  they will call you every other day to see if you've reviewed these documents and have any questions regarding the offered rates.

So off the top of my head here’s what I was offered for $160K (6.5% currently) refi, since I can’t get back in to review the rates.

variable rates
5yr 2.79
10ys 2.99

The rates are good and I really want to refi but their service makes me concerned... no option for SoFi in my state.

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #20 on: June 12, 2015, 05:27:51 PM »
just want to give my experience with DRB so far...

So finally go through all the paperwork for DRB and am in the processing of reviewing the loan terms. BTW, while you're still missing documents they call you every other day to remind you, and then once everything is in, they stop calling which is how you can tell that your file is complete and under review! They then send you documents through a “secure” email system, which apparently is so secure that if you forget your password they cannot reset it and has to send you a new link to a new email address to establish a new account. The other options are to fax the papers or to receive them by snail mail. And  they will call you every other day to see if you've reviewed these documents and have any questions regarding the offered rates.

So off the top of my head here’s what I was offered for $160K (6.5% currently) refi, since I can’t get back in to review the rates.

variable rates
5yr 2.79
10ys 2.99

The rates are good and I really want to refi but their service makes me concerned... no option for SoFi in my state.

2.99 is a GREAT rate!  If you aren't going to take advantage of PSLF and you will pay off your loans then I would jump on it.

OneCoolCat

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Re: My Experience Refinancing my Student Loans
« Reply #21 on: August 11, 2015, 07:13:09 AM »
There have been a number of new student refinance lenders pop up.  Notably earnest.

I would apply to Sofi, DRB, earnest, LendKey, Citizens Bank and CommonBond if I were still looking to refinance.