Sofi prepayment

10 Mandatory Questions & Answers For Everyone Interested In Student Loan Refinancing

January 29, 2016

Today’s installment of our Afraid To Ask: TFD’s expert interview series, is all about questions one might have about the process of refinancing and consolidating student loans. The Afraid To Ask series is meant to provide a deeper insight into a variety of subjects, and shed light on topics people are sometimes ignorant about (myself included in every topic I cover!).

This week I interviewed Christina Kramlich, Senior Director of SoFi. (SoFi is a lender that provides student loan refinancing, mortgages and other types of loans, such as parent and personal loans.) She runs operations for SoFi Wealth, the new wealth management initiative within SoFi. Previously, she co-led Marketplace Investments and Investor Relations for SoFi, which she joined in early 2012, and she continues to raise funds for investment products developed by SoFi in her current role. Prior to SoFi, she held several business development roles at a variety of startup companies, including the first online credit card company, NextCard, which went public in 1999. Christina also advises a few startups and is on the board of Project Glimmer, a nonprofit focused on providing gifts for at-risk teens and young women across the US. She is an all around informed and engaged individual, invested in strengthening the financial education of young people. Check out our interview below!

Can you tell us a little bit about what student refinancing actually is?

If you’ve taken out loans to invest in your education, then you’re likely aware that those loans can come with some pretty hefty interest rates, and paying off the debt can feel daunting at times. Student loan refinancing can be a powerful way to efficiently conquer your debt, helping you save money on interest, make lower monthly payments, pay off loans sooner and/or simplify your monthly bill.

Through private student loan consolidation, you will receive a new (hopefully lower) interest rate, based on your current financial picture. At SoFi, if you have strong monthly cash flow and track record of meeting your financial obligations, you could get a lower interest rate and see substantial savings — in fact, the average SoFi borrower saves $14,000 over the life of their loan.

Is everyone an eligible candidate for student loan refinancing?

Refinancing is a great solution for working graduates who have high-interest, unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans. At SoFi, we look for candidates who are financially responsible in order to provide the lowest rates possible.

The general rule of thumb for any kind of refinancing is that the better shape your finances are in, the more likely you are to qualify for a lower rate. Most lenders look for a good credit score. Here’s a big point of differentiation at SoFi. SoFi actually doesn’t consider your FICO score, but we do look at your employment, monthly cash flow and borrowing history to determine if you qualify. We’re able to offer significant savings and flexibility to US citizens or permanent residents who have graduated from more than 2200 Title IV accredited university undergrad and graduate programs.

Can you consolidate/refinance Federal and/or Private loans?

A discussion about student loan refinancing student loans would be incomplete without addressing the considerations for refinancing federal loans – after all, the vast majority of the $1.2 trillion in outstanding education debt is made up of federal loans. Most private lenders will only consolidate and refinance private loans, but SoFi accepts both private and federal loans.

The main thing to understand is that when you refinance federal student loans through a private lender, you lose some of the features and benefits that come along with those loans. If you think you’ll need benefits like deferment or forbearance, special repayment plans like REPAYE, or the Public Service Loan Forgiveness Program, you might be better off keeping your loans with the government. But if you don’t need them, and your priority is saving money, then refinancing federal loans could be a great option for you.

What is the difference between consolidating and refinancing?

When a private lender consolidates your loans, what they are really doing is refinancing your loans, with the goal to lock in a lower interest rate. Student loan refinancing is different than Direct Loan Consolidation, which is a government program that allows you to combine multiple federal education loans into a single loan with a new interest rate, which is a weighted average of your original loans’ rates. When you consolidate through the government, you have the option of extending your payment term, which can lower your monthly payments -– but it also costs you more in interest over the life of the loan. The option may make sense if you need the lower payments today, but it’s always good to be aware of how changing the terms of your loan will affect your bottom line. Only federal loans are eligible for Direct Loan Consolidation, so if your current loans are through private lenders, this likely isn’t an option.

What are some benefits of both?

With Direct Loan Consolidation, you can consolidate federal loans into one loan, so this means one interest rate and one bill to pay each month, and you can still take advantage of certain federal programs like deferment (the temporary postponement of loan repayment), and income-driven repayment such as Pay As You Earn, or PAYE, and Income-Based Repayment, or IBR.

If you qualify for student loan refinancing, you’ll likely benefit from a lower rate based on your current financial picture and you’ll end up saving money over the life of your loan. Many lenders also offer other benefits, like forbearance options in case of sudden financial hardship and customer service resources – at SoFi, we offer those as well as free career services like unemployment protection and an Entrepreneur Program to help our members launch businesses and additional benefits like social and educational events.

What is a rate, and how do you go about getting one/finding out what yours is?

After you qualify to refinance, you may be given a range of loan options to choose from, for example fixed vs. variable interest rates and shorter vs. longer terms. Your “rate” refers to how much interest you’ll accrue based on those term options. Fixed rate student loans typically have a rate that stays the same throughout the life of the loan, which can be a higher rate than variable rate student loans, but your payments will stay the same over the life of the loan. On the other hand, variable rate student loans typically have a rate that’s tied to another “index” rate, for example, the prime rate or LIBOR, and can have a lower initial rate than fixed rate student loans, but payments (and total interest cost) change based on interest rate changes. With a variable rate, the longer it takes you to pay off the loan, the more opportunity there is for interest rates to rise, taking your loan’s rate with it.

Many lenders make it easy to find out your rate through an easy online pre-qualification process. At, just a few pieces of information and a couple of minutes are enough to determine if you qualify and what your rate would be.

Is getting approval for loan consolidation or refinancing difficult or time-consuming?

It doesn’t have to be! SoFi’s application is completely online and with just a few pieces of information you can find out in minutes if you’re approved and what your rate will be. When you’re looking for the right lender for you, also consider things like customer service availability (you might have questions that need quick answers!) and benefits that will make your overall experience more pleasant. Don’t forget to double check for any fees you might be charged, like origination fees or prepayment penalties — at SoFi, we charge neither.

How does SoFi differ from other loan consolidation/refinancing providers?

For qualified applicants, SoFi offers competitive rates and a range of options so you can optimize your monthly payments, lifetime cost of your loan, or payoff speed, and we don’t charge origination fees or prepayment penalties. Beyond those great rates and terms, we strive to offer our members support through community events (think networking, education panels, and volunteer-oriented events), career services, and unemployment protection. SoFi can help you find a job if you lose yours -– we’ve helped more than 165 of our members find new jobs already. We also have a unique Entrepreneur Program, which allows qualified members to defer their student loan debt and access SoFi resources like mentorship and investors so their student debt doesn’t get in the way of pursuing their dreams. Worth noting, too, that more than 400 organizations and companies offer SoFi as an employee benefit, so there might be additional discounts to take advantage of. If your employer doesn’t offer SoFi, ask your HR department! Helping employees pay off their student loans is becoming an increasingly popular benefit.

Does student loan consolidation/repayment affect my credit score or health?

Responsible repayment of debt usually has a positive impact on your credit score, though it’s worth noting that SoFi doesn’t look at FICO scores because we feel they’re not the most comprehensive or accurate way to gauge someone’s overall financial wellness. If you do qualify for a lower interest rate through refinancing, it can be a great way to ease the burden of your student loan debt and start focusing on your financial future.

To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score, but if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and can impact your credit score.

Are there any additional resources I should be made aware of? People to call for help or a consultation?

We have a lot of great resources on, including a Student Loan Calculator and our Student Loan Refinance:The Smart Borrower’s Guide, and borrowers can access live customer service support 7 days a week to chat with our team about their questions.

Christina is a financial advisor and a registered representative and holds FINRA Series 7, 62, 63 & 66 licenses. She is actively pursuing her CFP designation.

Not to be a downer, but it’s also important to remember that federal loans can be discharged if you pass away. Although it’s not something fun to think about, life can change in an instant and you wouldn’t want to leave that burden of debt for someone else to repay (co-signer, spouse, etc.). I’ve done a ton of research on refinancing since I am considering doing it, and there are a lot of expert opinions out there that recommend never refinancing federal loans with a private lender. Refinancing does however seem to be a great option for private loans.

nah, SoFi forgives debt upon death. So does DRB. Source: have refinanced with both companies.

There is also the option of bumping up life insurance to cover your loans if, for some reason, you refinance with a leader who does not discharge at death. I’m not a big believer in tons of insurance, but it’s an option. (Further reading:

Good to know, thanks! Just out of curiosity (if you don’t mind answering), how much did refinancing save on your monthly payment?

I refinanced all my federal student loans with SoFI, and i’ve done it twice! It was a great choice and I don’t regret it.

This was a great read – such an interesting/helpful interview! Thanks for sharing TFD!

I loved seeing this article because my fiancé used SoFi to refinance his 100k + student loan…I know they were super patient with him as he asked 2048884 questions hah

I refinanced my student loans with Sofi in January 2015 and have been very happy with it. My rate went from 6.5 to 3.6 (variable) and has only increased to 3.8 since then. I chose variable because I am aggressively paying it off. I have had no issues, problems, or surprises with them. Highly recommend!

Best Student Loan Refinance Companies

In the nearly ten years since I graduated college (!), the face of student loan debt has changed quite a bit. In my college days, we mostly joked about our loans. My classmates and I would look at our total debt number in comparison to our major and say, “Yeah, we’re going to be paying that off well into middle age…” or “We’ll probably have kids in school and still be paying these loans off.”

Now that there legitimately are many parents paying off their loans while putting their children through school (sometimes referred to as the “Sandwich Generation”), that joke doesn’t quite seem so funny. Nor does it seem so funny when facing my own 20 year repayment plan.

So why did my classmates and I joke about such a serious subject? Quite frankly, it was because that seemed to be the only thing to do. There was no way myself nor my friends could afford to pay for college out of pocket – and not getting a degree was simply not an option. We felt stuck in a situation that we couldn’t control and figured we’d deal with that bridge when we crossed it.

Well, the bridge has now been crossed.

So now we have a situation in which younger students are thinking twice before jumping into such a large financial decision…but there are still many others who are already tied into the debt and need a way to pay it off faster. Besides the obvious tactics of trying to cut costs and earn more, there is another even more efficient way to pay down this debt faster: refinancing the loans to cut down on the money paid into interest.

I’ve recently been through this process myself. I’ve known for a long time that there were ways to lower my interest rate but I simply never made the time to do it. I’d push it further and further down my to-do list until finally one day I just did it. The results were surprising – and I’m not just talking about numbers.

Refinancing my student loans made me feel (surprisingly) empowered. I’ve been laden with this debt for so long that I’ve sort of made peace with it. This debt was a price I paid for my education, an education that has benefitted me greatly. But the funny thing is, even when we have obligations that we make peace with, that doesn’t mean we can’t optimize the way we handle them.

If you’re ready to optimize your obligations and make the switch from passive student loan payer to active student loan slayer, then exploring your refinancing options is a great place to start. Here is a list of companies that focus on student loan debt refinancing.

Student Loan Refinance Companies

This is a list of companies I personally explored the option of student loan refinancing with. However, as student loan debt continues to grow, you may find that more companies like this pop up. Here are a few things to think about when evaluating any student loan refinancing company:

Do you trust this company and want to work with them? You’ll be with them for a long time so be sure this is a company you’re comfortable with. Contacting them and interacting before applying is a great way to test this.

Many companies offer fixed and variable rates – but it’s important to remember that variable rates come with more risk as they can increase at anytime at the discretion of the lender

When refinancing a federal loan, you will lose protections such as the Income Based Repayment Plan, deferrals and forbearance, and more. Find out if the company you’re applying with has similar protections such as economic hardship and unemployment forbearance programs.

And finally, remember that refinancing a loan doesn’t always equal a lower payment – the goal is to lower your interest rate so you can pay less on the loan or loans over time. In some cases, this can increase your payment if the loan comes with a shorter repayment term (such as 3 or 5 years) than you currently have. Could certainly be worth it – but make sure you can afford the change.

And now, let’s take a look at a few of the current top student loan refinancing companies:

Credible isn’t a lender, but rather a marketplace for lending that allows you to compare your rates to your peers and receive offers for better rates from various lenders. Offers through Credible can come from Citizen’s Bank, CommonBond, cuStudentLoans, Education Success Loans, RISLA, and SoFi.

Eligible loans: Federal and private loans

Rates: Will vary per lender

Fees: None, but there could be fees from the lender you choose

Bonuses: You can receive multiple offers at one time to make for easier comparison

General Lending and Peer-to-Peer Platforms

SoFi is a non-traditional lender that offers help with student loans as well as other debt; and you can sign up as a borrower or an investor. SoFi evaluates applicants based on more than their credit score, also taking things like employment history into consideration.

Eligible loans: Federal and private loans

Rates: Variable as low as 2.66% and fixed as low as 3.63% (both with AutoPay)

Fees: No fee to apply, no origination fee, and no prepayment penalties

Bonuses: Unemployment protection, .25% savings through AutoPay, career services

Upstart is another non-traditional lender that takes into consideration your area of study, academic performance, and more when evaluating your application. Upstart offers multiple types of loans and is available for both borrowing and investing.

Eligible loans: Various debt types are eligible for refinancing

Rates: Fixed rates as low as 6% (required repayment time of 3 years)

Fees: No fee to apply but there is an origination fee; no prepayment penalty

Bonuses: Potential hardship program if you become unemployed

Pave isn’t primarily for student loan refinancing. Rather they offer loans to cover whatever financial assistance you need in your lifestyle. (It could be a good option for student loan refinancing if the rates they offer are lower than your current rates.) Also available for investors.

Eligible loans: Various debt types are eligible for refinancing

Rates: Fixed rates as low as 6% (required repayment time of 2-3 years)

Fees: No application or prepayment fees; there is an origination fee of 1-2%

Bonuses: Flexible grace period of 3-6 months

Specifically for Graduate Degree Holders

Common Bond offers loans for students as well as loan refinancing for young professionals with graduate degrees from a variety of schools and programs. It is also available to investors. If your graduate school or program is not on the list of eligible schools, you can email [email protected] to suggest adding your school to the list.

Eligible loans: Federal and private loans

Rates: For refinancing, variable as low as 2.65% and fixed as low as 3.625% (both with AutoPay)

Fees: No origination or prepayment fees

Bonuses: Financial hardship forbearance available, Academic forbearance available, .25% savings through AutoPay, Grace period of 30-60 days

You probably already know about Wells Fargo, one of the largest banks in the US. However, Wells Fargo also has a specific lending category for the refinancing of private student loans (not federal).

Eligible loans: Private loans

Rates: Variable rates as low as 3.75% and fixed rates as low as 7.24% (both with discount)

Fees: No application fee, origination fee, or prepayment penalty

Bonuses: .25% savings through automatic payments through Wells Fargo, .25% savings for customers of qualifying Wells Fargo checking accounts, or .50% savings for customers of the Wells Fargo PMA Package

DRB (Darien Rowayton Bank) is a traditional bank based in Connecticut that also has a student loan refinancing division. This refinancing is specifically for multiple different bachelors and masters program graduates as well as for parents who took out loans to help their children finance a bachelor’s degree.

Eligible loans: Federal and private loans

Rates: Variable rates as low as 2.63% and fixed rates as low as 3.5% (both with discount)

Fees: No origination fee or prepayment penalty

Bonuses: .25% savings through EFT (Electronic Funds Transfer from a DRB checking account)

Charter One is a division of RBS Citizens (Citizens Financial Group) and dedicated to refinancing student loans with a product they call the Education Refinance Loan. With Charter One, you can actually combine various savings offers to your loan.

Eligible loans: Federal and private loans

Rates: Variable as low as 2.55% and fixed as low as 4.99%

Fees: No application or origination fees

Bonuses: .25% savings through automatic payments through Charter One and .25% savings for customers of other qualifying accounts with them

Special Note: The Difference Between Refinancing and Consolidation

One particularly confusing aspect of student loans is understanding the difference between student loan refinancing and student loan consolidation. In fact, in researching these companies, I sometimes found it difficult to remember which kind of company I was looking at since the marketing language is so similar. As you research these companies and any new ones that may come up, make sure you know the difference between refinancing and consolidation:

  • Consolidation could lower your monthly payment, but not necessarily by lowering your interest rate – consolidation is simply combining all loans into one and may or may not decrease your rate
  • Consolidation could in fact extend your repayment period in order to lower your monthly payment – which could cause you to pay more in interest over the life of the loan and cause you to remain in debt for a longer period of time
  • Refinancing is the act of obtaining a new loan at a lower rate, which saves you money over the life of the loan. But again, remember that this could increase your monthly payment (though it will also decrease your time in debt).

In general, if your goal is to pay less on interest and pay your loans off faster, refinancing is going to be what you’re looking for. However, there may be times when consolidation can help you achieve this as well – just be sure to check for the repayment period and interest to see if one or both are less than what you currently have.

What do you think? Are you ready to empower yourself and optimize your student loan debt repayment? With these companies above, you’ll lose no money by seeing if you qualify for lower rates that can save you money – a win/win situation!

NOTE: Some links in this article have referral codes that allow us to get paid a small referral fee when we send new users to a partner site. With that said, we never recommend any product or service unless we think it is trustworthy and has the potential to help our readers.

This post was published by Shannon, Community and Customer Support Manager for » ReadyForZero. ReadyForZero is a company that helps people get out of debt on their own with a simple and free online tool that can automate and track your debt paydown.