Borrower Questions Answered: SoFi & Student Loan Refinancing

SoFi has been out on the road these past few weeks, visiting universities around the country and spending time with student loan borrowers.  We wanted to learn more about these soon-to-be graduates and their challenges with education debt, so that we can better serve them with our products.

One thing we discovered is that they wanted to learn a lot more about us, too.  Here were some of the most frequently asked questions – and answers – from our spring tour.

1.  If I consolidate my loans with SoFi, will my interest rate be an average of the rates on my original loans?
No, but it’s understandable where the confusion comes from.  The word “consolidate” actually has different connotations for federal versus private loans.  When you consolidate loans through the federal loan consolidation program, you combine multiple loans (federal only), and the resulting interest rate is a weighted average of the original loans’ rates.  Which means you don’t actually save any money.

When you consolidate multiple loans by refinancing them with a private lender, you’re given a new interest rate – ideally, a lower one. This can save you money on total interest, as well as potentially lower your monthly payments or shorten your loan term.  As an added bonus, with a lender like SoFi you can consolidate federal and private loans together through the refinancing process.

2.  So how do you calculate my new rate?
Lenders will typically use your credit score and other relevant financial information to calculate your interest rate.  Generally speaking, a better financial situation can lead to a lower rate.   To see some examples of real SoFi borrowers, their financial characteristics and what they saved, check out this infographic.  Still not sure if you’ll qualify?  Get in touch with us – we’ll help you find out.

3.  What happens to my rate if interest rates change?
If you have a fixed rate loan, prevailing interest rates won’t alter your rate throughout the life of the loan.  However if you have a variable rate loan, typically it will be tied to a specific rate (for example, LIBOR), and your rate will adjust along with it.  Generally speaking, variable rate loans tend to offer substantially lower interest rates than their fixed rate counterparts, but are better suited for borrowers who plan to pay off loans relatively quickly since rates will fluctuate over time.

4.  Where did the idea for SoFi come from?
CEO Mike Cagney and his co-founders came up with the idea for SoFi while attending Stanford Business School, where they saw a lot of their peers suffering because of what they felt was a broken student loan system.  When it comes to federal student loans, all students – regardless of school, course of study, credit score and other relevant information – get the same interest rates.  But if you’ve worked hard, gotten your degree, landed a great job and improved your financial status, you deserve better.  That’s what SoFi aims to provide.

5.  Is SoFi a bank?  How can you charge lower rates?
SoFi is not a bank; it’s an innovative marketplace that connects high quality alumni borrowers with investors.  We offer low rates because we’re able to cut out the middlemen and fees associated with traditional banking models, and because we’re confident you’ll repay the community that backed you.

6.  What’s the catch?
No catch, just great rates and additional benefits to help further your financial and professional goals.  We’ve already helped over 6,000 borrowers save an average of $[footer_average_savings]2 on their loans.  And with our latest round of funding topping $80 million, we’ve solidified our position as something much more than a student loan business.  We’re on a path to deliver a better model for financial services.

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5 thoughts on “Borrower Questions Answered: SoFi & Student Loan Refinancing

  1. ronique breaux jordan says:

    How do you connect with your organization? I am a graduate student finishing a portion of my studies..

  2. Hi,

    I am very interested in refinancing with SOFI. Could you please tell me what my payback duration would be? Typically, you have 10 years to payback the student loan(s). Is that the case if I refinance with SOFI? What is the longest payback period you offer?

  3. Arden Grady says:

    Hi Ronique – The best way to connect with us is to give us a call and speak with one of our loan specialists about your personal situation. You can reach us at 855-456-7634 during the following hours:
    Mon-Thurs 7am-8pm PT
    Fri 7am-4pm PT
    Sat-Sun 7am-2pm PT

  4. Arden Grady says:

    Hi Sam – Our payment durations range from 5-15 years with SoFi. You can find out more information about your options here:

  5. I appreciate you sharing this article.Really thank you!

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