A SoFi Review: Slick Technology vs. your Student Loan (or Mortgage)

sofi-riverAlmost two years ago, I started getting reader emails asking me if student loan refinancing was a good idea, and if a company called SoFi was a good place to do it. Never having carried such a loan myself I wasn’t sure if I was qualified to answer, but other emails were coming in reporting positive results with the company. So it seemed like a reasonable business to me, but maybe not suitable for the main page of this blog since it only applies to a certain slice of readers.

Since then, things have changed quite a bit. I ran into a SoFi employee at a financial blogger conference one night, and over a beer he gave me a much clearer picture. I read about the history of the company and then talked to cofounder Dan Macklin about what they are up to now.  It started to get more interesting and I put the idea into my list of draft articles. More emails came in so I figured we should ask the readers about their own experiences via informal quizzing on Twitter and Facebook. There is also a detailed discussion of experiences right here on the MMM Forum. Out of those who successfully refinanced,  the results look good.

(Update: as of  2020, I also recommend you check out Credible.com (NMLS No. 1681276) for both student loan and mortgage refinancing quotes in order to see your own personalized prequalified rates. They are competing heavily in these markets, with great results for you. At the time of writing, they are also still offering the $300 re-fi bonus on student loans, which SoFi has discontinued. (See their mortgage disclosure here)

Why Would you Refinance a Student Loan?

I don’t get excited about lower monthly payments, loan forgiveness, or any other financial frills. I also don’t think anyone should borrow money for a wedding, vacation, or car, regardless of the rate. But for any debt you are currently stuck with, I do want you to end up with the lowest possible interest rate. You combine this with the making the largest possible monthly payment to destroy the loan in the shortest possible time, and thus escape from your Debt Emergency very quickly and move on to build real wealth.

You can then go on to optimize small details like “should I pay off my mortgage?” if you are an expert on interest rates versus expected investment returns, but at the end of the day you get wealthy by working hard, earning lots, and spending much less than you earn. Truly large investment gains become easy once you have a large, positive net worth.

How SoFi has Expanded its Usefulness

The company name derives from the words Social Financing, because the company was originally born on the idea of allowing alumni of Stanford and a few other elite universities to fund the student loans of the next generation of students. It was a novel concept at the time, although for a relatively small audience.

But as the company has grown and found success, it has expanded both the source and destination of its funding. Nowadays, instead depending on alumni to write checks, the company has tapped into the current wild surplus of institutional investor money looking for somewhere to invest.  And SoFi’s goal is to connect YOU to this money, via a very modern and simplified interface.

They have also expanded their program to include graduates from a much larger number of universities (over 2200 when I last spoke to them), and started offering mortgages as well.


Fig.1: The SoFi Business Model. Money is easy these days, but this only helps you if you use it to buy freedom from debt, not new cars and fancy weddings.

This business model appeals to me, because I am fascinated by the current low-yield environment. There are trillions of dollars of institutional money swarming around trying to find a good return, while US government bonds pay almost nothing. This has driven up stock market valuations and also brought a surplus of investors to companies like Lending Club in search of cashflow. In general, it is a poor time for value-oriented investors, but a good one for borrowers.

I have also been frustrated with the perpetually low-tech environment of lending. Although I now maintain a peaceful balance sheet with no debt, I’ve gone through at least ten mortgages and refinancings over the past 15 years, and every one was more trouble than it needed to be. Sometimes I’d find myself sitting in a bank employee’s cubicle slowly reciting figures while she typed them into boxes of some rusty old Windows XP application. Other times I’d be signing and scanning paper documents and using various hacks to send them in the antique “Fax” format to bankers who didn’t even have a way to open a PDF.

Student loan refinancing was even worse – the private market for loans was undeveloped, which means there were few options open for many graduates. Thus, many are still stuck with rates above 6% despite rising income and credit worthiness. Much like the taxi industry before Uber arrived and started steamrolling things, the lending industry was ripe for a massive and convenient overhaul, and SoFi has been working on its small revolution since they began in San Francisco in 2011.

With tens of thousands of borrowers and billions of dollars funded so far, they are off to a good start. And it is a big market to grow into: US student loan debt is now measured in the trillions, and some are calling it a bubble. While it may become a problem on a national scale, hype like that doesn’t matter to you – you’ll be eliminating your own student loan within a very short time.

So How Does It Work?

250-20I got myself a SoFi account just to see what the user experience is like. Their system asked about my income, employment and educational status. I even found my own Canadian university in their list of approved schools. From there, you would go on to submit a scanned copy of your diploma, information about your existing loan, and then hand it off to SoFi staff to do the fussy work of verification.

I had no student loan debt to refinance so I pretended I had a mortgage on my house and started a mortgage refi application instead. The whole application took me less than 5 minutes.

With a test case of $50k down on a $250k mortgage, I saw rates of 3.245 to 3.495%. As you might guess, rates increase for larger loans and smaller downpayments, but the premium for these bigger loans was remarkably cheap.

Loans – includng mortgages – from SoFi carry no origination or other typical lender fees, which is a refreshing change and a major factor in your overall borrowing cost. Their 10% down mortgages also require no Private Mortgage Insurance (PMI) which could provide a massive savings in certain cases: PMI generally sucks and should be avoided.

But the most interesting part to me is that you can then slide your loan amount and downpayment back and forth to strategically get the best rate for your own situation. Considering a smaller downpayment so you can keep cash in reserve to buy a rental property next year? You can instantly see how much that will cost you. Comparing 15 to 30 year and fixed to ARM? All that data is right there and it adjusts in real time.

This felt like Justice to me. After years of harassing my bankers to give me dozens of hypothetical rate quotes to help me decide how to structure my mortgages, now the data is all properly presented to me on my own computer screen, rather than filtered through a pipeline of slow-talking human mouths connected by Low-Fi telephone line. So much more efficient!


Some US student loans currently come with niceties that you will lose if you refinance. The Public Service Loan Forgiveness program lets you off the hook if you hold a qualifying job and make your loan payments for 10 years, and this works well for certain people who love their jobs.

On the other hand, my own freedom-oriented personality type would wither under such a long-term job obligation: I’d rather earn as much as possible, devote as much of it as possible to debt elimination and investing, then be free to choose any job from beach bum to tech company CEO without regard to how it affects my loans.  This is why I care mostly about low interest rates.

Also, SoFi is not for everyone. They are deliberately leaning towards the better end of the credit score spectum, which means a good experience for those who qualify but a (thankfully quick) rejection if you don’t.

Share your Own Experience:

I had to draw heavily on reader experience to write this post, but there is surely more to learn. If you have experience with SoFi or an alternative, please share it in the comments below. The goal for all borrowers should be maximum flexibility at minimal cost, and collectively we have a good amount of knowledge in this area. Eliminate debt and prosper!

  • Kyle May 6, 2015, 11:57 am

    I just refinanced in December, as was very happy with the whole process. I’ve saved around $1000 in interest already, lowering my rates from 6.55% to about 4%.

    I wrote a review of the whole application process in the forums here: http://forum.mrmoneymustache.com/reader-recommendations/my-experience-refinancing-student-loans-with-sofi/

    • Chloe May 7, 2015, 11:19 am

      I agree with you and MMM that SoFi is miles ahead of anyone else when it comes to using tech to simplify the process. I refinanced with SoFi in 2013 and it was the best decision I’ve made. I was able to lower my interest rate by 4%, remove a cosigner (and drastically improve their credit), lower my monthly payment, and decrease the life of my loan. I don’t work in the public service field and I didn’t plan on switching careers so for me, it was a no brainer. If you’re looking to refinance student loans and you value transparency and convenience, definitely look into SoFi.

      • Peggy January 17, 2016, 5:30 pm

        I just looked at their list of eligible schools and unfortunately my daughter’s alma mater isn’t on the list. My son is fortunate in that we live in a state where as long as he goes to a state school or tech school his tuition is paid for (doesn’t include books but can’t complain about that) until he’s 25 since my husband falls into the disabled vet category. He didn’t start right out of high school so just finished his first semester of his freshman year at 21 but he will finish before the cutoff. I was hopeful for her to refinance with SoFi.

        • Bryan Ray March 3, 2016, 6:49 pm

          Take a look at Credible.com. They’ll gather quotes from several lenders and help to streamline your application process. I refinanced and consolidated $90k at 2.7% variable a few months back. I have been very happy. I did have a credit score above 800 with all three bureaus, though, so my results may not be typical of people with shorter histories.

    • Free Money Minute May 8, 2015, 5:11 am

      It is great that you lowered your rate! Now kick it into overdrive and eliminate the debt. It would be much better to have a 0% rate on no debt.

    • SabrinaGee December 29, 2015, 9:23 am

      I sort of found my way to this site after following Dave Ramsey for years. Now I will be a permanent fixture here. Great philosophoy on $$.
      Just started the refi through SoFi. Thanks for the tip! Balance $28,555 (started out as a $22k loan, by the way; interest adding each month)
      Sallie Mae: $28,555
      – Interest: $271/month (deferred until January 2017)
      – Rate 12.75%
      – Minimum payment: $371.38
      – Payoff Estimate: January 2027
      SoFi: $28,555
      – Interest $121/month
      – Rate 4.25%
      – Minimum payment: $371
      – Payoff Estimate: January 2023
      Loan estimator says this change will save $17k over life of the loan. I did not confirm mathematically, but close enough for me.
      Lesson learned: I will never have student loans again. These things are awful. Never, never again.

  • Danny MoreBucks May 6, 2015, 11:58 am

    This is a timely article. I’ve had a few people ask me about student loan refinancing. Hopefully everyone is committed to a short payoff period, but there are graduates of professional degrees that have a long road ahead of them. I’ll be sure to send them your way for the promotion.

    • FinanceClever May 6, 2015, 7:40 pm

      No kidding this is a timely article! We have received some inquires about student loans. Since we have never had such a thing, our knowledge is rather limited. SoFi seems like a good thing worth exploring. Thanks again MMM!

      • RetiredToWin Alex May 8, 2015, 6:31 am

        I too had no experience with student loans, so when I worked up my own blog article on how I paid for going to college 3 separate times I was mute on the subject. Still, I’d like to see more emphasis on the tactics I did use to get through 3 college programs without owing anything at the end.

        Pulling from a “strategy menu” of scholarships, grants, campus work, community college coursework, state university tuition residency qualification, credit transfers, credit by examination, and in one instance a life experience credit program worked for me. I am confident that anyone seriously working those funding/cost reduction strategies would wind up needing to finance a much smaller portion of their college expenses.

        And less debt is always a better option. ;)

        • FinanceClever May 11, 2015, 8:42 am

          Very true Alex, the best way to go is to avoid loans altogether if possible. While college cost are high here in the U.S., there are also a wide variety of grants, scholarships, assistantships, and so on. This is a positive side that many people don’t see because they spend too much time complaining about the high costs of attending college. And as we all know, complaining for the sake of complaining doesn’t lead to anything good. Scholarship and assistantships were my main allies to stay out of debt through undergrad and grad school, and of course hard-work and frugality didn’t hurt :)

          In fact, hard work and frugality are exactly what people need to get out of debt. Along with helpful things such as SoFi and personal finance sites :)

  • tom May 6, 2015, 12:05 pm

    We are in the process of refinancing student loans through DRB. Our experience has been pretty painless, but long.

    A couple things to know and understand.

    1) The timeline they give you to approve the loan is NOT accurate. It took almost 3 weeks to get approved after all documents were submitted. They advertised it would take 3-4 days.

    2) You will not get the lowest rate. The lowest variable rate they were advertising was 1.9%. We have great credit, great debt to income, history, all of that. We were offered 2.7%. I called to complain and get it reviewed, and they told me I was considered Tier 1… their highest Tier level for credit scores and lowest rate category. I was thinking “fantastic” they’ll review and lower the rate. No such deal. They said I still didn’t qualify for a 1.9%. That must be reserved for people with, literally, perfect credit. We did, however, get offered the lowest fixed rate of 3.7%

    That last comment leads me to a question for you kind folks:

    Variable or Fixed? It’s a 5 year refi. The difference between the variable rate and fixed rate is $15/mo… or $900 savings over 5 years. Rates (3-mo LIBOR) look like they will rise, but maybe not very quickly. Rates adjust every quarter.

    • Sibley May 6, 2015, 2:14 pm

      I did SoFi, and went with 5 year variable, but plan on paying it off in less than 2 years. If I didn’t have that plan, I’d have gone with fixed. Really comes down to your risk tolerance.

    • Raggy May 7, 2015, 8:31 am

      I refinanced with DR Bank, I had a great experience:

      1) I got the lowest rate available (~2.75% on a 15 year loan) – I have a high FICO score and income and no other debt (they seem to care about debt coverage ratios, so my monthly payment wound up being about 6% of my salary)

      2) The low interest rate saved me about $100/month in interest expense, it also lowered my principal payment by about $800/month, it was a great cashflow benefit (yes, I choose to invest the excess with the expectation that I will earn more than 2.75%).

      3) My friend, being a proper mustachian, refinanced with a 5 year term and got a rate below 2%.

      4) It did take them 3 months to process my loan, although this included Thanksgiving & Xmas in 2013/2014

      DR Bank was truly lifechanging, I’ve had colleagues with similar experiences with SoFi

  • BCBiker May 6, 2015, 12:12 pm

    An important new update is that Darien Rowayton Bank (DR Bank) is refinancing med school loans for residents based on expected salary after training and with small required payments during residency.

    I am with everyone else on not liking debt but without a generous and able family, every doctor is going to graduate with a couple hundred thousand dollars in federal student loans at 6.8% interest in the United States. Compounding several hundred grand at 6.8% over a 3-7 year residency is quite depressing! This is a debt emergency that even the most Mustachian of folks will not be able to extinguish so mitigating it with a lower interest rate is the best one can do.

    I hope SoFi gets into this market too! (I hope you are reading this!) :) Contact me via my blog and I will be your first customer.

    • Debt Hater May 6, 2015, 2:02 pm

      BCBiker, have you ever checked out Common Bond? They offer extremely competitive rates but they specifically target those with MDs, etc.

      • BCBiker May 6, 2015, 2:29 pm

        The issue with most refi companies is that residents have an atrocious debt ratio, despite being incredibly low-risk borrowers. Thus, residents do not qualify for loans that are underwritten traditionally. That is why DRB has broken the mold and created a novel way of underwriting: calculating debt ratios using the anticipated salary after training, because these are relatively predictable based on specialty. No other company does this as far as I know.

        • Debt Hater May 6, 2015, 7:57 pm

          True I didn’t think of that. That’s when doctors would need the help the most – before they are making their huge salaries.

          Those few years of residency really cause the interest to start piling up. SoFi and others would probably reject those doctors just from looking at their income to debt ratios. Interesting to see that from DRB!

          I was thinking of trying to re-finance my loans again with them to try and get an even lower rate myself.

          • BCBiker May 7, 2015, 8:51 am

            I don’t suggest that anyone should feel sorry for us because we will ultimately be fine and far better off than average, because ultimately our income catches up with our debt (as long as one doesn’t get addicted to BMWs and 10,000 square feet more than you need of house).

            If a doc is in fact a Mustachian, the curve of our stache is just a little different than the rest of ya.

  • BrendanJ45 May 6, 2015, 12:28 pm

    I applied for So-Fi about 18 months ago and was declined. I had a credit score of about 700 and a few late payments for student loans on my account from 3-4 years back when I’d been unemployed between undergrad and grad school.

    • Tricia Dunlap May 7, 2015, 6:32 am

      I applied to SoFi in May of 2014 and was turned down (debt-income ratio was off despite good credit score). I kept plowing $$ into my CC debt (also a legacy of law school) and re-applied to SoFi in November, 2014. The second time around I was approved at 3.91%. I’ve cut my interest rate almost in half. My SoFi refi went through in December and I’ve saved almost $2k in interest already.

      I suggest you reapply as it’s been long enough that they may approve you this time, so long as all your payments have been on time since they declined you.

    • Tetsuya Hondo May 7, 2015, 7:27 am

      If you have a federal student loan, you can always set up a forbearance for a short period of time due to financial hardship. All you have to do is call. I didn’t have to do anything other than tell them that I didn’t have income at the time and then they turned off the payments for a few months until I turned them back on. I didn’t affect or show up on my credit score. The only downside is that you continue to accrue interest in the meantime. Still, that’s better than missing payments and impacting your credit score.

      • Tron May 7, 2015, 11:39 am

        I too was declined, surprisingly. I have a strong income and have for 8 years, and have a fairly low debt-ratio (my loans will be paid off soon anyway) and my credit is flawless.

  • skunkfunk May 6, 2015, 12:36 pm

    Make that 2 good opportunities unavailable in Oklahoma! Lending Club and SoFi do not offer services here.

    Oh well, at least our housing is cheap here!

  • Ramona May 6, 2015, 12:52 pm

    The lure of a $300 bonus was enough to quit putting off looking at a student loan refi. The application itself was quick, mostly because I didn’t make it past the “how much are your loans” question before being told I was ineligible. No detailed reason given. I have good credit, I make good money, have 8 years at my current employer…. declined. Seemed strange to me. So, I figured, what the heck, I’ll give the mortgage a shot. Declined, but given the reason they aren’t approved to do business in Tennessee. They should probably make that plain before you fill out the application. Perhaps when you select TN from the drop down menu? Overall, not thrilled with the paltry experience I had with SoFi.

    • Ohio Teacher May 6, 2015, 5:04 pm

      I had the same experience. I am not really comfortable with the fact that the company just collected a slew of data on me and my wife only to tell me that they don’t do mortgages in this state. From what I’ve been reading, do they do mortgages in any state? In any case, why even have Ohio in the drop down menu and, further, have all of the counties of Ohio in the drop down menu? I get that they are planning for the future, but it is possible to have a current list of states in a prominent place on the website or alert the applicant in some other way.

      • Ryan May 7, 2015, 10:59 am

        For what it’s worth, there is a list of what states they can originate mortgages in on their main mortgage page.


        SoFi is licensed to originate mortgages in Alabama, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Maryland, Minnesota, New Hampshire, New Jersey, North Carolina, North Dakota, Pennsylvania, Rhode Island, Texas, Vermont, Virginia, Washington, Washington, D.C., Wisconsin, and Wyoming.

        • Nikki May 7, 2015, 12:09 pm

          I applied for a loan in DC and was denied. No reason was given. I called and the person didn’t have any further information available, but thought I might get an email within 48 hours. So far, nothing, but it’s only been about 24. I have good credit, good income, and am baffled – I would’ve loved to use this for a mortgage refinance.

        • Tom May 8, 2015, 10:51 am

          I was curious about their mortgage rates, and I’m a Delaware citizen. I didn’t find them to be very competive (Over 5% on a 30 year fixed).

    • Katie Ostrich May 7, 2015, 2:26 pm

      It took a little digging, but this looks like the page to read before applying for student loan refi, apparently, loans have to be at least 10,000 to qualify:

      • Graham G. May 11, 2015, 7:57 am

        Yea… what a bummer. I was legitimately thinking of doing this but too bad I’ve been splurging on loan payments lately and knocked it down under the 5 digit threshold. Whoops…except not. :)

    • Jenny March 20, 2016, 8:58 am

      I was just rejected for a mortgage refi. I have a credit score of 789 and no late payments. There denial letter didn’t actually list a reason for the denial. I’m thinking it might be because the balance of my mortgage is only a little over 100K

      • JackieVB March 13, 2017, 11:58 am

        Re-fi < 100,000: I was filling out the online application for mortgage refinance and it flagged me for my remaining balance. It wouldn't let me proceed because the amount cannot be less than 100,000 – so I suspect you are right.

  • Druid May 6, 2015, 12:53 pm

    I have a credit score in the mid 700’s and got approved for a 5.5 percent fixed 5 year. My rate would drop by a half of a percent, but I would end up with a more aggressive payment schedule. I plan to pay off my loan student loans in 3 years, but a half a point drop is not worth the loss of flexibility due to high minimum payments.

    I start at my future job in two months so that might of impacted my riskiness. Thanks for the recommendation but maybe the good rates are reserved for people making high salaries(mine is 60k starting)?

    • Sarah May 7, 2015, 11:47 am

      I doubt that impacted your rate. My credit score is also mid 700’s and I’ve been at my current job for five years. I also was offered the 5.5% fixed for five years. My federal loans are at 6.55, so it’s not worth the trouble.

  • Laura May 6, 2015, 1:13 pm

    Hey MMM!

    I’m moving to Canada soon (woohoo!) and have some US student loans I’ll be looking to refinance there. It doesn’t look like either SoFi or DR Bank has options for Canadian borrowers (understandable, as their cost of college is SO.MUCH.CHEAPER). I was wondering if Mr Frugal Toque or some Canadian readers had any recommendations for where I could look to refinance – looking for low interest rates and no prepayment penalties.

    • Caitlin MF March 11, 2017, 9:16 am

      I have the same question! I went to an independent liberal arts & sciences uni in BC, Canada so I Started with a loan of $32, 000 in June 2014 and now it’s at $17, 000 w. Loan from dad (no interest rate) and putting extra cash towards it. I make 40k/yr but my investents are with Wealth simple”s medium portfolio and make 4-6%.

      I use it like a higher interest saving account for some money until I learn more about investing to get closer to 10-12% on investments…

      Anyway, my point being: does anyone know of refinancing options for Canadians. Our government loan rate is currently 5.35% with current low rates.

  • Dan May 6, 2015, 1:16 pm

    Note that they only handle owner occupied mortgages, not investment properties. Not that this is unusual, just worth noting.

  • siredge May 6, 2015, 1:18 pm

    Did you contact SoFi about what it takes to be an investor in debt they originate?

  • James May 6, 2015, 1:26 pm

    I’m looking to refinance our house right now and so applied, the APR came in quite a bit higher than other quotes I’ve been receiving. Seems if I’m willing to put up with the hassle of a mortgage broker and their crazy numbers I can save some serious money.

  • Amanda May 6, 2015, 1:47 pm

    Looks like the mortgage portion is also not available on properties in Oregon. Bummer. I know I’m paying too much right now, but not enough too much to make it worth the outrageous origination fees and BS process of a traditional refi circus. Would be great to be able to take advantage of this when they expand to allow it.

    • Robin May 7, 2015, 2:26 pm

      Amanda, if you’re in the Portland area and ever want to meet up with local Mustachians, we have a group. We (usually) get together once a month for a pot luck. We’re meeting this Sunday, actually, at Laurelhurst Park.

      • Guy Awesome May 8, 2015, 12:54 am

        Robin, how do I connect with your Portland group?

        • Matt May 9, 2015, 9:20 am

          Me too! My wife and I are avid Mustachians and Portlanders and would love to join!

  • Debt Hater May 6, 2015, 1:59 pm

    I refinanced my private student loans loans back in 2014 with SoFi and have nothing but positive experiences with them. I did not refinance my public student loans though. I was able to bring my interest rate down from 6.5% to 5.49% and set up an auto-debit that gives a 0.25% interest rate break.

    It’s easy to apply an extra payment to the principal on top of the auto-debit through their 3rd party that they use to service the loans. They even sent me a pecan pie for Thanksgiving (I signed up around that time)!

    It’s definitely not for everyone though, as they will likely only accept those making a decently high income and people with good credit scores. For those looking for alternatives there’s also Citizens Bank, Earnest, and Darien Rowayton bank. Common Bond is great for those with a Masters, PhD, or any sort of professional degree.

    • Leah August 9, 2015, 11:01 am

      Thank you for this response. I was thinking of refinancing with SoFi but I too just want to refinance my private loans, not federal loans.

  • Curious May 6, 2015, 2:03 pm

    I’d be curious to hear about whether people were asked to have a co-signer. Last time I applied, they asked for a co-signer. I had like $50K in debt and $65K in income at the time. They wanted a co-signer. Since then, income has gone up and debt has gone down. So we’ll see.

    • Blonde Lawyer May 6, 2015, 5:56 pm

      I did not need a co-signer. At the time I had $85k in individual income and $72,000 in student loans to refinance plus another $5000 in student loans I was not refinancing. I had been at my job 3 years at the time. Part of why I refinanced was to get rid of my co-signer!

    • Kat May 8, 2015, 8:50 pm

      I was asked to have a cosigner. I was in my first year of work though in an educational field (speech pathology). I make $77k with ~36k to refinance. With a co-signer my rate is currently 3.815% (started with 56k with interest from 6.8 to 7.2%), after 8 months I’m down to 15k; not sure they’ll want us if we applied for a mortgage through them :P!

  • Sibley May 6, 2015, 2:12 pm

    I refinanced my student loans in March with SoFi. The process was pretty smooth, and customer service was very helpful in sorting out my confusion and Navient’s screwups. If it makes sense for your situation, go for it.

  • Travis May 6, 2015, 2:17 pm

    I have good fixed rates on my student loans with three of them at 4% and one at 2.125%. The lowest rate they quoted on pre-approval was 4.74% which is for a 5 year payment plan which would effectively triple my current payment while increasing my rate. While they sound like a decent option for most they don’t appear to be so for me but will keep them in mind for the future.

  • EL May 6, 2015, 2:21 pm

    It makes sense that they are entering this space, as the student loan debt will soon reach 2 trillion. Its unbelievable that nothing is being done to protect the student loan borrowers from these shady government lenders. They are deliberately robbing extra principle payments and applying the money towards future interest. Its a big problem and I’m glad companies like SoFi and others are stepping up to help others get better rates.

    • david May 6, 2015, 4:09 pm

      “hardly better” with “nondeductible-interest” rates you mean?

      • Kyle May 6, 2015, 5:29 pm

        The interest on Sofi loans is deductible, as long as your income allows for it.

        • David May 7, 2015, 8:03 am

          Good to know that perk is kept! I think a lot is being done to reign in government loan practices. I’m not sure if the rates in the post are realistic, based on my own experiences trying to refinance and the other comments I’m reading. I much rather prefer MMM’s advice to pay the debt off as quickly as possible and focus on working hard and making extra income to throw at the debt.

          • kyle May 7, 2015, 12:56 pm

            I’d rather have a lower rate while I pay off the loan as fast as possible.

  • Blonde Lawyer May 6, 2015, 2:27 pm

    I had a really great student loan refinance with SoFi. I got so sick of telling my story that I ended up writing a blog post about it. I linked it to my name here. I’m saving at least $17,000 in interest over the life of my loan. Regarding the referral program, if I refer people, I get a cash deposit in my checking account. They don’t credit it to my loan. I end up paying it back on my loan anyway but the program isn’t currently set up that way. I don’t know for sure how it works for the referred borrower but I thought it was the same. MMM’s link is great because the usual one (like the one on my blog) is $100 for me and a $100 for you. $300 for you is a sweet deal!

    They seem to be growing quite quickly. Shortly after announcing their mortgage program they also announced a personal loan program. At first I thought “hmm, this doesn’t lend to financial responsibility” but then I realized people already stuck with high interest debt could take one of their low interest personal loans to pay it off. This would be great for people with high interest credit card debt especially. It seems like MMM’s link is just for the student loan refi. I have a bonus link in my blogpost for people interested in the personal loan program too. It’s $100 to each of us.

  • Blonde Lawyer May 6, 2015, 2:29 pm


    Have you looked into investing with them? Once my loans are paid off it is something I might be interested in doing.

    • Mr. Money Mustache May 6, 2015, 2:49 pm

      Yeah, in fact my first thought when hearing about the company was to treat it like the Lending Club experiment – invest in the loans. But after hearing about the ultra-low rates that the borrowers pay, I switched to the other side.

      Lending club has high rates (even after adjusting for defaults), so Mustachians do well to invest there, but not borrow. SoFi has low rates but only to people who have virtually zero default risk (when I spoke with Dan in November, the company had not experienced even a single default). Low enough to make it actually worth borrowing for certain people.

    • 1WattLightbulb May 7, 2015, 1:46 pm

      According to the article below from 10/2014, you need to have a net worth of over $1 million (excluding your primary residence) or make $200k per year.


      • Tim March 2, 2017, 9:16 am

        That’s if you want to become an investor. Full quote below:

        “For the record, if you want to become an investor in SoFi mortgages, you need to be an accredited investor, which generally means you need to have a net worth of over $1 million (excluding your primary residence) or make $200k per year.”

  • DJ May 6, 2015, 3:02 pm

    You can’t just blow off Public Student Loan Forgiveness. For those of us who (regrettably) sold our souls for student loans and have public jobs, we come out better off to take the forgiveness. Ten years of minimal payments will equal less than half of the value of the original loan. The reduced repayment options barely cover the interest, leaving more cash for savings.

    I will only end up paying ~$22,000 total out of $45,000 plus interest in loans. The difference to be forgiven has been accruing in my government Thrift Savings Plan. 10 years in federal service can also equate to a partial deferred retirement if you separate (retire) from service early. Its making the best of my situation, but if I could do it again I would not get the loans in the first place…

    • Jonny Utah May 6, 2015, 6:55 pm

      I don’t know, you’re going to voluntarily work in a lower paying job for 10 years to save yourself $23,000? That is $2300 a year. I’d look into maximizing my income rather than staying in debt for 10 years.

      • Tasha May 7, 2015, 6:59 am

        I agree, generally, but the issue is not as simple as you’ve made it out to be. Firstly, that “lower paying job” you are talking about could actually be in the six figures. I work for the federal government, have climbed my way up the ladder over the past four years, and now make $105k, four years out of school. Plus I get four weeks of paid vacay, 5% matching, telework, and awesome insurance coverage all while working a strict 40 hours a week. Oh, AND my student loans will be forgiven in 6 more years.

        Let’s also look at the value of the deferred pension. In 6 years my salary will have automatically bumped up to 122k. With ten years of service, my deferred retirement benefit at that salary will be $12,000 a year for the rest of my life once I hit 60. To replace that I’d need at least $150,000 (assuming we draw it down to zero over 30 years). Assuming the goal is to pay off and retire early in 5 years instead of 10, that means I’d have to make an additional $35,000 a year pre-tax PLUS another however much to pay off my student loans faster. In my case I’d need to pay an additional 4k a month to pay off my student loans in 5 years. Lucky for OP, his situation is not as dire.

        Third, the OP said 45k PLUS interest. Since his current payments (~$185/mo) don’t even cover interest, the amount he will have forgiven will be around 90k. To pay that off in five years he’d need to pay $700 a month and make and additional 11,088 a year pre-tax.

        So between the two benefits, OP would need to find a job making $46,000 more a year than what he’s already making (assuming he makes what I do as a fellow public servant) and hold that bad boy down for five years. Aka, he’d need to make $151,000.

        Jobs that pay that much often require longer hours or years of working in the field and multiple promotions–aka time. Assuming he works 60 hour weeks for that 151k paycheck for five years then retires early, he gains 2.5 years of retirement (from a straight number of hours perspective: retire at 5 years w/ 60 hour work weeks v. 10 years @ 40) but had a much lower quality of life for the five preceding years!

        So in reality, you’re tell OP to bust his ass for 5 years to retire 7.5 years early (remember that extra 2.5 is crammed into the 5 years due to longer work weeks)? When he could take a more moderate approach, have tons more free time over the same 5 years, only work an extra 2.5 years and enjoy his life along the way? I don’t think so.

        • Dr. Bill May 7, 2015, 12:06 pm

          Dr Bill @Tasha: I wouldn’t reverse your situation for the moon. Very well done! Do you know if you have to prepare yourself for the taxability of the loan forgiveness? Even folks who negotiate mortgage adjustments will find themselves with a 1099 in the year a forgiveness is realized. In six years, unless Congress exempted this specific loan, you may find yourself being taxed for the amount forgiven plus imputed interest. You might want to investigate paying off the loan in a conventional way, if the Revennoooers are standing at the end of this road.

          I hope it’s a non-taxable event for you,

          • Tasha May 7, 2015, 12:20 pm

            Dr. Bill, I actually just posted about the tax issue (or non-issue) in another comment below. The IRS exempts student loan forgiveness from taxable income if it is a result of working in a particular industry or for a certain class of employers (ie. public service/non-profit).

            Outside of PSLF, you only pay taxes on debt cancellation like this if you were solvent immediately prior to forgiveness. So if I have 200k in loans but 199k in assets, my loans are forgiven tax free.

            Third, the other little birdie up my sleeve is that my law school has a loan repayment program that I use to pay my loans. My law school will cut me a check for 30k a year for the next 5 years for me to put towards my debt.

            If the repayment program disappears by then, I’ll consider ponying up my own cash. The 30k per year is enough to make sure that my loan balances decrease during that time. My hubs, on the other hand, went to a different law school without that kind of benefit so we’re on the hook for his loans no matter what if PSLF dries up before we’ve hit the 10 year mark. Fingers crossed!

            • Cola May 8, 2015, 1:19 am


              My understanding of loan forgiveness in the case of loan 200k, assets of 199k is you don’t pay taxes on 1k, because you are insolvent for 1k, you still need to pay taxes on 199k.

          • Tasha May 7, 2015, 12:31 pm

            Dr. Bill, I actually just posted about the tax issue (or non-issue) in another comment below. The IRS exempts student loan forgiveness from taxable income if it is a result of working in a particular industry or for a certain class of employers (ie. public service/non-profit). See IRS Pub. 4681

            Outside of PSLF, you only pay taxes on debt cancellation like this if you were solvent immediately prior to forgiveness. So if I have 200k in loans but 199k in assets, my loans are forgiven tax free.

            Third, the other little birdie up my sleeve is that my law school has a loan repayment program that I use to pay my loans. My law school will cut me a check for 30k a year for the next 5 years for me to put towards my debt.

            If the repayment program disappears by then, I’ll consider ponying up my own cash. The 30k per year is enough to make sure that my loan balances decrease during that time. My hubs, on the other hand, went to a different law school without that kind of benefit so we’re on the hook for his loans no matter what if PSLF dries up before we’ve hit the 10 year mark. Fingers crossed!

      • Tim May 7, 2015, 7:28 am

        I think that a lot of the time, the people who choose the public service route see the loan forgiveness as an extra perk. Teachers and Federal employees are probably doing what they want to be doing, despite the salary limitations.

      • Rob the Lawyer May 7, 2015, 8:53 am

        Jonny Utah hit the nail on the head. The benefit of loan forgiveness is small over the course of 10 years compared to the salary. Additionally, you’re paying more interest than you would have if you paid the loan earlier with the higher salary you are forgoing, and you’re accepting the risk that the student loan forgiveness program may not even exist at the end of your 10 years. I am not sure if they “grandfather in” those who started making qualified payments while working in public service already, but even if they do, they have already proposed (and passed, if I recall correctly) upper limits on the amount that can be forgiven. In my case, it looks like I might work for a lower salary than otherwise possible for an entire decade in order to maybe have a portion of my loans forgiven in an amount that cannot possibly approach the added interest and forgone salary. Student loan forgiveness is just another scam.

        • Tasha May 7, 2015, 10:09 am

          There is a risk that the program may not exist in ten years, but I believe the risk is pretty small. From what I’ve seen, changes to student loan programs do tend to have a grandfather clause so I’m not too worried. The amount of forgiveness is currently not capped.

          See my post above about the potential benefits of PISLF particularly in the case of federal gov’t employees.

          Having said that, I am also an attorney so I totally get the who reduced salary thing. I certainly make a lot less money than my law school counterparts who went to big firms. But my quality of life is also leaps and bounds better than what they have going on.

          I went to the best law school in the country and have 220k in loans to show for it. I’d have to pay 2,660 a month (or 42,400 pre-tax) to pay that back in ten years. For a grand total of 360,000 paid. Instead, I’ll continue paying $500 a month thanks to income-based repayment and pay 60k all in. The rest will be forgiven. Meanwhile, I still make a nice six-figure salary and the hubs and I will retire at 45 with $2 mil in the bank and a 48k per year pension that kicks in at 60, never having to do one lick of work for the rest of my life if I don’t want to.

          But let’s say the 10-year forgiveness disappears. There’s still the 25 year forgiveness. So now I pay 150k and my loans are forgiven. Still beats to 360k it costs to pay it outright. Really, I’d pay even less because I’d retire 15 years in, making my payments practically nil.

          Or I could die and my student loans will die with me. Or become disabled and they’d be deferred with $0 payments until they were forgiven at 25 years.

          • Rob the Lawyer May 7, 2015, 11:37 am

            Thank you for answering my questions that I failed to phrase as such! :)

            My only hesitation I have with regard to refinancing is that I love the flexibility of IBR and deferment/forbearance options, especially with the prospect of temporary unemployment at any given time before the loans are paid off.

            In your situation, with a 6-figure salary in a qualified position, I would also choose to work toward forgiveness. The downside is slight to nonexistent, and the upside potential is HUGE. But those positions are few and far between. And absent that unlikely scenario panning out for me, I would absolutely prefer to pay off the loans in 3-4 years rather than pay a higher amount over the course of decades.

            The only positive of this program for a lower-income earner is that, if you are a person who wants to work in public service (say, a passion for the DA or PD’s office) and is lucky enough to have your loans forgiven before the program is potentially gone or capped, you may save a few thousand dollars (although your forgiveness will be taxed heavily, reducing your savings). Even then, it is not something that should be planned for/relied upon by anyone, regardless of income. It should be perceived as an unexpected windfall like winning the lottery or having a rich, previously unknown, distantly related Nigerian prince leave you his fortune. At least that’s my take, but it seems I may just be a little more risk averse than you, my friend.

            Anyway, nice to see that fellow attorneys are into Mustachianism!

            • Tasha May 7, 2015, 11:54 am

              I agree with you except for one very important thing: the student loan forgiveness is not taxable under current IRS rules. Cancelled debt is generally taxed as income. Check out IRS Publication 4681 which states that cancelled student loan debt is not counted towards income (thus isn’t taxable) when the loan is forgiven as a result of participating in a program that requires you to work in a particular profession or for a particular class of employers (i.e. the gov’t or non-profit).

              You also don’t have to include cancelled debt if you were insolvent immediately prior to the forgiveness. For example, you have 400k in loans but 399k in assets. You are thus insolvent (-1k) and pay no taxes on the forgiven amount. A tax savvy person might make sure to keep all of their assets in the spouse’s name so that they’ll stay in the red until the loans are gone. Food for thought…

            • Rob the Lawyer May 7, 2015, 12:01 pm

              Again, assuming that the IRS rule does not change. However, I hadn’t considered your second statement about the insolvency exclusion. Will keep that in mind.

      • DJ May 7, 2015, 2:06 pm

        I make $62K a year, $88K if you count the compensation for healthcare, retirement contributions, sick leave and vacation benefits. Realistically, 48K take home.

        BUT. I work in a National Forest! I live in a town surrounded by National Forest! I work a Maxi-flex schedule and can basically set my own work schedule. I get paid three hours a week to exercise! Not typical, but you can’t assume all public sector jobs suck.

        • Tank May 8, 2015, 11:49 am

          Sounds like an incredible job! I’ve always wanted to work at a national park after FIRE.. what’s your position?

        • stephani May 9, 2015, 8:58 am

          Like Tasha, I’m also super interested in what you do! Sounds like my dream life :)

        • stephani May 9, 2015, 8:59 am

          Like Tank, I’m also super interested in what you do! Sounds like my dream life :)

  • David May 6, 2015, 3:31 pm

    Product pandering? To BORROW MONEY no less?? What’s happeninggggg….

    • TrulyStashin May 7, 2015, 6:40 am

      The point is not to borrow money. It’s to refinance already-existing debt. This product review is no different than the others MMM has done (e.g. Republic Wireless).

      Many of us have student loan debt and it’s helpful to have information on how best to structure that. Thanks MMM.

    • Tetsuya Hondo May 7, 2015, 7:32 am

      This is actually useful information for many people on this site as many, many people come out of college with high amounts of student loan debt. It’s nice to know that there are alternatives to being stuck in the rigid student loan system and this can save a lot of people who already have the debt a lot of money. What’s wrong with that?

      • David May 7, 2015, 7:55 am

        I get that student debt is a problem. But from my own experience and the experiences documented in other comments- the interest rates are marginally better, if at all. Look at the demographic of a student who comes out of college with debt. They may not (and usually don’t) have the best credit, what’s the benefit of applying for another loan (possibly with a risky variable rate or accelerated pay schedule) when you’re new to the working world? I understand this may work for some people with MASSIVE debts. But the answer to debt is not to shuffle it from provider to provider. The answer is to pay it off like “your hair is on fire”. When you pay debt off quickly, the interest rate almost doesn’t matter because it doesn’t have time to compound. This doesn’t even consider transaction fees (if any). I’d be surprised if the average person who did this would break even. Not my favorite post from MMM.

        • JustGettingStarted 1980 May 7, 2015, 8:53 am

          Hi David,

          I respectfully disagree. My interest rate on 60K of remaining debt (of 180K originally) with SoFi went down from 4.75 Fixed to 1.90 Variable/5 years. This will save me $1500/year in interest. If this service was available to me during residency or directly after, it probably would have saved me an additional $6000/year in interest for something I was already paying off anyway.

          At the time, that would have been my rent for a year, my food for a year, or even a Roth IRA contribution.

          I’d recommend that anyone with significant debt check the service out, see if they fit your needs.

        • Spaceman Spiff May 7, 2015, 10:52 am

          Take a deep breath man. If you do happen to have loans, why not take advantage of lower rates for the few years you do have them? Plus, instead of paying fees, you are paid a referral bonus.

          FYI, this does consider transaction fees. Unlike a traditional refinancing, instead of paying fees, you get a referral bonus. I have multiple colleagues who have refinanced through SoFi (our employer has had this same $300 offer for a few months now), and there are no fees – just the $300 bonus in your favor. Given the sign up bonus, the “break-even” point would actually be at a higher interest rate than one is currently at. As for my colleagues, the interest rate savings ranged from 1%-2.25%.

          Maybe you could make an objection that as my colleagues are Big 4 CPA firm employees (as you style yourself an “Accountant Extraordinaire,” I assume you are aware of such) that they enjoy better rates than the average Joe, but the point on the break even still remains.

          TLDR: “Pay it off like your hair is on fire” should probably entail using lower interest rates when available. That way a higher portion of your payment goes to principal.

          • David May 8, 2015, 1:20 pm

            I see what you’re saying. I too, was a Big 4-er once, but the fact remains that the interest rates people are getting are for third parties, and the lowest rates are for adjustable rates. Adjustable rates can be risky, especially for someone right out of college. You generally will lose the right to forbearance and the like in a risky job market. Sure, 1-2% is a nice reduction, but you give up the benefits of a fixed rate and the rest MMM mentions. Maybe I’m just ultra-conservative, but I favor fixed rates. Now if you can roll a portion of your student loans into a mortgage at 3.6%? I say go for it, but adjustable rate loans are for people with money in the bank, not fresh grads.

            • BrookeS July 31, 2015, 2:59 pm

              When I looked into SoFi, the range of fixed rates I could be approved for was 3.9-5.4%, while the highest my variable rate would hit is 4.1%. I don’t think that’s a huge risk.

        • Chloe May 7, 2015, 11:39 am

          You bring up a great point that college students who take out loans “may not (and usually don’t) have the best credit.” In my case, and like a lot of others, I had zero credit. This meant that lenders required I had a co-signer: my older sister who was barely out of college and trying to get her own financial footing. It was alright for a few years while I was in college but it negatively impacted my sisters debt:income ratio and thus her credit and kept her from getting the best rates and securing her financial future. As soon as I had a job and some consistent loan payments under my belt, I looked into refinancing in order to remove my sister as my co-signer and improve her credit. The drastic interest rate reduction (cut nearly in half from 10%) and excellent customer service SoFi provides were just cherries on top of the whole situation.

  • The Bearded Dragon May 6, 2015, 3:42 pm

    This is really interesting. I haven’t heard of the company, but I just got my first mortgage in March of this year and it was a well-0iled machine of clusterfuckery. Throughout the process I kept thinking that it just seemed artificially difficult. I’m glad to see that there are companies out there trying to streamline the process, even if it’s only for a limited pool of applicants. I don’t have any non-mortgage debt and don’t plan on getting any, but if/when we purchase a rental, I’ll definitely keep them in mind.

  • John May 6, 2015, 4:03 pm

    I refinanced my student loans about 6 months ago with Darien Rowayton Bank (DR Bank). The application process is extremely slow and painful but I was able to get a lower rate than SoFi. DRB has a straight forward rate table and mine is 4.5% compared to the 6.55% I was paying before. They seem to be making a lot of improvements to their website and hopefully their application process as well. I would definitely recommend them even though the application process was slow.

  • Alex May 6, 2015, 4:14 pm

    Crowd-sourced mortgages? Righteous!! Watch out, Too Big to Fail banks, you are now obsolete and your days are numbered. You’re in bed with politicians, yes, but we’re gonna dump you both out on the floor.

    • Frugal Bazooka May 8, 2015, 12:14 am

      Wow, how great would it be for the marketplace to actually bring the criminal bankers down and only leave the good guys standing?? It could happen, but I have a feeling the Feds will find some way to subvert market forces – as they tend to do for “good intentions” – and pave the road right to hell.

  • Laura May 6, 2015, 4:18 pm

    Thanks for the post, MMM! Came just after I asked for it on the last post! =)

    I filled out the application to refi my mortgage, but it said refi’s require 80% LTV. I guess only new mortgages get the 10% down without PMI. I’m in the process of doing a refi right now with my current lender, but was hoping to see if Sofi would have an even better rate for me.

    I will definitely forward this post to my friends with student loans though. One of my friends was just saying that refi programs have pre-payment penalties. So, hopefully Sofi doesn’t have that.

  • Jason May 6, 2015, 4:33 pm

    Thanks for the post. Long time lurker, first time poster. I was wondering if there are any pre-payment penalties associated with a student loan refi? I was quoted rates that were slightly higher than my current student loan rate, but the $300 signup bonus would more than offset the slightly higher interest expense…especially if I pay the loan off sooner.

    • Leslie May 7, 2015, 10:13 am

      SoFi’s website says there are no pre-payment penalties or origination fees so I think you are good to go

    • Debt Hater May 9, 2015, 2:53 pm

      I have not experienced any prepayment penalties or any trouble with making any additional payments. My loans are with SoFi and serviced through TruStudent.

  • Paularado May 6, 2015, 7:04 pm

    We ended up with about 25K of credit card debt from building our custom home. We refinanced with Sofi. It took about 3 weeks, but it was well worth it. So happy with our experience! They actually seem really low tech in some ways to be honest. You can’t really login and change your payment amount; you have to go through customer service to do that. Odd, but I’ll take it.

  • KiwiKaz May 6, 2015, 7:16 pm

    I advise you to make hay while the sun shines if you want to use other people’s money for anything. Once you are early retired then borrowing becomes almost impossible. I couldnt even get approved for a credit card!!! Seems once you no longer have a regular paid job, you become a credit risk even if you have millions of dollars in assets. It turns out that the banks in NZ/Australia dont allow dividends to be counted as income (apparently shares are too insecure to base a loan on, but a job where people are made redundant every 6 months is not!!). Its really very annoying as I would like a line of credit on my mortgage free house so I can leverage into the share market at appropriate times and buy more positively geared shares.

    • Mr. Money Mustache May 7, 2015, 8:13 am

      Interesting Observations, Kaz. I have found the US system to be similar but not quite as rigid. (i.e., traditional big banks were scared off by my “low” retirement income in the past, but some smaller ones were willing to look at assets).

      So a retired Mustachian might also have a problem qualifying for SoFi mortgage too, since even with millions in assets you would only be drawing taxable income to meet your spending level. I escaped this problem during my testing of SoFi’s products as I listed this blog’s income as my own – even though I secretly know I have no need to ever spend any of it. Typical retirees won’t have this advantage.

      If we prove ourselves to be a large enough market, SoFi or another innovative company will start offering an asset-backed financing model.

  • Jason May 6, 2015, 7:36 pm

    I am currently going through the mortgage process on the purchase of a new property with SoFi. We’re still a few weeks from closing so I can’t 100% vouch for them yet until we do, but so far they’ve been phenomenal to work with. I was looking for a company that would do a jumbo mortgage for less than 20% down. I have excellent credit and steady income and live in one of the states they do mortgages in (a list which is growing all the time). Key differentiators:

    – They will do jumbo mortgages(up to $5M) for only 10% down and NO PMI (they compensate by making the interest rate a bit higher than what you might get otherwise, but nothing outrageous, and unlike PMI interest is tax deductible)

    – You go completely through underwriting before you even submit an offer – this is not some computerized junk pre-approval – this is a FULL COMMITMENT which means you can submit an offer without a mortgage contingency, as I did. Not quite same as cash, but pretty darn close. FULL approval was done by the end of the week that I first contacted them, as opposed to WEEKS from a typical bank.

    – They will put a property address you are interested in through an automated valuation even before you submit the offer, and so long as their automated valuation is within 110% of the price you want to offer, the approval is NOT contingent upon it appraising for the offer price. They guarantee financing even if the appraisal comes in low (If it doesn’t appraise, you can submit an appraisal contingency).

    – They only require 6 months of your monthly payment in reserves. Every other lender I talked to either limited the loan amount, required 15-25% down payment, or required 12-24 months reserves in order to get a jumbo

    – The mortgage application is about 10 pages and done online – another mortgage broker I worked through had a 100 page application I had to print out, sign, and scan.

    – Their customer service is outstanding. You can upload documents online and I have always gotten a response from my loan officer within a day, usually within hours, and I’ve been fully kept apprised of the status the entire time.

    As I said it’s tough to vouch for them completely but all indications are that I’m on track to close with no issues. My lawyer was skeptical because he’s heard so many bad things about “internet lenders” but it’s clear so far they’re of a different breed.

  • CaveDweller May 6, 2015, 8:23 pm

    People looking into this should be very aware of all the advantages they’re giving up in exchange for the lower rate. PSLF is a potentially awesome one (and doesn’t limit you to stay in one job – virtually all government- or nonprofit-sponsored ones qualify), but there are other advantages to direct federal loans as well. For example, the option of forbearance without negatively affecting your credit is extremely valuable for those whose job security might be shaky right out of school. Also with the income-based plans (PAYE and IBR), you keep the PSLF option on the table, capitalization is capped, and remaining balances are forgiven at 20 and 25 years respectively (it’s a worst-case scenario that you still have a balance to be forgiven after so long, but for those with sizable loans if shit hits the fan it’s nice to know there’s a safety net).

    Basically refinancing is best for people in the for-profit sector with a high income and good job security who know there’s no chance they’ll ever take advantage of loan forgiveness. If any of these conditions is questionable, do your homework carefully because you can never convert back to federal loan and reclaim those advantages.

    • Sibley May 7, 2015, 7:02 am

      Agree, you have to do some research and figure out if it would make sense in your situation. But for many, many people, it would be advantageous.

  • Raechelle May 6, 2015, 9:10 pm

    Totally thrilled with this opportunity – However… My husband has a student loan for $49,000, currently around 6%. I’d LOVE to refinance this – we’ve paid off ALL our other student loans. However, he didn’t complete the degree (three years into an engineering degree from Henry Cogswell.) Then they closed down in WA and moved out of state. So…this opportunity won’t work for us since he doesn’t have his degree. (One of the requirements.) That stinks. He is well-employed, long term etc. Maybe as they continue to evolve this will change. Until then, we’ll need to continue looking for other avenues.

  • Rob the Lawyer May 7, 2015, 8:29 am

    I have massive student loans, despite working three jobs and living a fairly Mustachian lifestyle throughout college and law school (~11-13k/year in expenses other than tuition and books). I’m paying them off with approximately 50% of my current sub-$40K salary, and things are going as well as they can given the circumstances. It looks like I’ll pay them off faster than lawyers with twice my salary. Unfortunately, as much as I’d love to consider refinancing with SoFi, I’ve been rejected for even 1/6 of my total indebtedness due to my low salary relative to my student loan debt. I don’t blame SoFi for this – it’s just good business – but I do wish I could submit to them my budget and payment plan! As a Mustachian, I think I am a far better bet than their model would predict. But I guess I will just have to keep this in mind as something to revisit as my salary rises (which will hopefully be soon, as I am in the midst of a very promising job search, with the support of my boss, the Judge!)

  • Super Mustache May 7, 2015, 9:19 am

    Can I refinance my student loans whIle I’m still in school or do I have to wait until after I’ve graduated?

  • Tom May 7, 2015, 9:43 am

    I started with $72k @ 7.8%
    For most mustachian borrowers, I think the most important thing to do is get on Pay as You Earn (PAYE) as soon as you can. As an early retiree, my low income qualifies me for $0 payments, and 100% forgiveness after 10 years.

    Borrowers who received their first disbursement before 2011 are supposedly not eligible for PAYE, though somehow I was excepted.

    Old timers, while benefitting from the lower interest rates (3-4% vs 6-8%), are only eligible for income-based repayment (IBR). Similar to PAYE, but the forgiveness only comes after 15 years.

    By orders of magnitude, here’s what I think will benefit most US student loan borrowers:
    1. Forgiveness via teaching, public service, PAYE, IBR
    2. Paying early, staunching the blood flow by paying loans off in <4 years, before interest compounds. (Contingent on large post-grad salary, which very few grads are landing)
    3. Not paying at all. You lose credit, but you don't go to jail, and as a mustachian, your wages are extremely difficult to garnish, and your income, if low enough, is not even legally garnish-able
    4. Refinancing to reduce interest rate

    Keep in mind refi thru SoFi and all the competitors will prevent you from using PAYE or IBR, but, perhaps, you could discharge the debt of a private lender in bankruptcy, while you cannot discharge federal loans.

    • CaveDweller May 7, 2015, 10:47 am

      Tom, let me know if I’m missing something, but it looks like you’ve got those numbers wrong for forgiveness. It’s actually 20 years for PAYE and 20-25 for IBR depending when you started borrowing. https://studentaid.ed.gov/repay-loans/understand/plans/income-driven Also important to note that the forgiven amounts in those cases count as taxable income.

      The only 10-year forgiveness I’m aware of is PSLF. Of course you can be making payments under PAYE or IBR while also qualifying for PSLF. But to do that you need to rack up 120 months (doesn’t need to be continuous) of full-time employment for a government or non-profit employer. (Think public teachers, military, post-office, police, fire fighter, public university employee or any hospital employee if the hospital is a 501c3). Also amounts forgiven under PSLF are NOT taxable.

      But if you’re retired, it’ll be 20 years at the earliest for your loans to be forgiven. The $0 monthly “payment” is pretty sweet in the meantime, but you’ll have to pay tax on the forgiven amount as income.

      • Tom May 7, 2015, 12:05 pm

        You’re right, thanks for correcting me on all those points. I was mistaken by 10 years on both IBR and PAYE

    • Trevor May 7, 2015, 1:08 pm

      Are you saying that we can essentially remove ourselves from financial obligation by retiring early? And advocating that we otherwise not pay off those loans? You’re aware of what happens when a large amount of people fail to meet financial obligations, correct? Unless you’re a bankruptcy lawyer, I don’t think you want this student loan bubble to burst quite yet. Your worldview has been perverted immensely.

      • Tasha May 8, 2015, 4:13 am

        @Trevor, it seems to me that he is advocating another possible and perfectly viable option for meeting that financial obligation. Did you actually read your Master Promissory Note before signing it? If you did, (after 2007) it would have told you that there were several loan repayment options available to you including early prepayment (your way) and IBR (Tom’s way) which provides for 25 years of reduced payments then forgiveness. The MPN also talks about cases where the loan will be discharged like after 10 years of public service (my way). Those are the terms of the contract. Since Tom is acting in accordance with the contract he signed when he took the loan, he is in fact meeting his financial obligations.

        Also, Tom never said anything about bankruptcy. None of the alternate repayment options discussed involve bankruptcy at all. Either way, it’s incredibly difficult to get student loans discharged in bankruptcy.

      • Tom May 8, 2015, 10:01 pm

        Trevor, I’m not suggesting retiring early removes ourselves from financial obligations.

        I do suggest a couple ways we can remove ourselves from debts by simply not paying. Yes, I am aware of what happens when a large number of people default. And I think for millions of Americans, defaulting in certain ways is the best option!

        Why would anyone want a bubble to grow bigger before bursting?

  • Even Steven May 7, 2015, 10:43 am

    I’m not for or against SoFi, I do think they see an opportunity that few others have taken and made their way into the student loan refinancing market and a better more competitive market is a good thing. However…..

    I used to think interest rates and monthly payments were my problem, I refinanced my student loans with the government a few years back as some sort of last time to refinance opportunity, funny thing is they still charged me interest, again and again. My thoughts are if you think the interest rate is your problem then there is a really good chance that you in fact are the problem and the solution, I would rather have a reader of MMM, read http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/ 500 times over than read this post and come away thinking refinancing solves your student loan problem.

    Again I think that this may help a few individuals, especially those who plan to take a few years to pay off their student loan debt or mortgage for that matter. I worry more that this is thought of as an answer and eases the pain of debt. Like a good deed has been done and now as congratulations the loans will disappear. Instead I would remind everyone from the words of MMM to treat debt like this instead:


    • Trevor May 7, 2015, 1:02 pm

      Yes, but keep in mind that the vast majority of us have no way of paying off our student loans in a short enough period for even a fraction of a percentage point rate drop NOT to make sense. Money states as much in the article (and also links to the exact article that you did); and besides, it’s a fairly safe assumption that the majority of us reading this do treat debt as an emergency. Lower interest rates help quell that fire much more quickly.

      • Even Steven May 8, 2015, 9:57 am

        My view is too many people view refinancing as a solution to the problem, I would argue it’s better to get angry at your student loans which makes you want to pay them off faster and you find yourself working extra or cutting out an unnecessary item from your budget to pay these off faster.

        I think that paying off debt is more psychology and less numbers, despite the number of engineers that read MMM. For example if you had 50K in student loans and you are given 2 options, either 0% loan or a 5% loan, mathematically everyone would choose 0% because it’s less money. The factor that we don’t consider is the person with the 5% loan hates the fact that not only did he/she have 50K but they want to charge a 5% interest, they decide to stop getting Starbucks every day for a year or sell their car so they don’t have to pay all the extra costs of commuting, while the person with 0% loan understands that mathematically they can take as long as they want to pay off the loan, because all you have to do is make the same monthly payment for 10-20 years.

        I agree with the math, but don’t agree with the psychology. So this “Lower interest rates help quell that fire much more quickly.” I don’t entirely agree with that on the psychology side. I just ask that others consider this in the equation.

  • MoneyRx May 7, 2015, 10:53 am

    Very surprised to find I do not qualify for a mortgage through them!? I have a very good credit score (>800), undergrad and graduate degrees, listed my income as $110k/yr and have very minimal student load debt (~14k) for someone in my position. Their algorithm definitely needs to be tweaked.

    • FrugalFred May 7, 2015, 12:03 pm

      Check to make sure you live in a state that is eligible. Only about 25 states are currently eligible and this seems to be the main sticking point for people with otherwise great numbers

  • Alexandria May 7, 2015, 11:38 am

    Very Interesting! I was not impressed with mortgage refi rate given BUT would consider when we are ready to go down to a 15-year loan. Just want to pay down a bit more first so the monthly payment is more reasonable. I figured we wouldn’t go through the hassle otherwise and rates would likely go up before we get there. We have refied our mortgage several times over the years (dropping rates) but it’s always such an awful experience.

    QUESTION: Will they let you pay your own insurance and property taxes? That’s a deal breaker for me. I also wonder if escrowing property taxes/interest affects their rates, like it does for most brokers.

    • jeff May 7, 2015, 12:08 pm

      I don’t understand this unwillingness to escrow. Why make it more complicated? You’re not making any money having it sit in your savings account.

  • Jeff May 7, 2015, 12:07 pm

    I got declined for the mortgage refinance. $150,000 annual income, current principal is $165,000. Value is close to $300,000. The rejection note was kind of vague but made it sound like my 7 years of industry experience were insufficient. That’s weird.

  • Smit May 7, 2015, 12:35 pm

    SoFi offered to cut my student loan rates from 6.8-7.9% to 4.375% – not bad, but I was able to work out a much better deal with my parents – I got them a better rate on their home mortgage by co-signing, and added my student loans to the principal on the mortgage. This got my interest rate down to 3.8%, and since the interest is lower than what I could expect from the stock market, I was able to live with the parents for 3 years and put “rent” money into index funds.

    Something to consider for mustachians who have the option of living at home for a few years after school.

  • Postscript May 7, 2015, 12:53 pm

    We are about to close on a 2-family property with a 3.685% rate from Citimortgage so I filled out a lot of personal details to try to get a mortgage quote – but it turns out they only do them for single-family properties. Now they have a lot of info about us but I didn’t even get a quote. Guess I’ll stick with the big bank for now and maybe check back for a refi…

  • Justin May 7, 2015, 12:54 pm

    It is my understanding that federally insured student loans are forgiven upon death and permanent disability. If you refinance with SoFi, do the student loans become a lien against your estate when you die? Also, would you still have to pay them in the case of permanent disability?

    • Superathlete May 10, 2015, 6:52 am

      Yeah, I think the comparison of rates alone is being incredibly naive (sort of like how people compare social security payments in retirement to investment returns while neglecting the cost of payments for surviving minors and disability benefits, should either of these bad things happen to you).

      My advice:
      Do not refinance looking solely on rates. My wife carries enough student loans that it would be a significant hit against the estate if we were to refinance or if she became unable to do her job due to disability. To really compare apples to apples, we would need to purchase a term life insurance policy and a long-term disability policy, as these are already built into the federal loans.

    • Blonde Lawyer January 28, 2016, 9:44 pm

      SoFi loans are dischargeable on death or disability just like fed ones.

  • PhillyHomeowner May 7, 2015, 1:17 pm

    Interesting… so right now I am paying $285/mo in PMI on a 3.25% mortgage from BoA (barf) that is at 92% LTV. The home would probably appraise slightly higher today than it did when we bought it 2 years ago.

    We are aggressively paying so that we hit 20% LTV exactly at the 5 year mark, but could I theoretically throw some extra cash at this to get it into a SoFi refinance with a 90% LTV and kill my PMI amazingly early for a slightly higher interest rate?

    • Colin May 7, 2015, 1:34 pm

      D’oh, looks like the answer is “no”… they won’t refinance below 80% LTV.

      Can you just delete these comments instead of posting them?

  • warder May 7, 2015, 2:24 pm

    I applied to both SoFI and DRB last year…

    SoFi: Fast, easy…but I was expecting a better rate with an 822 credit score. maybe my salary (under six figures) resulted in a lower rate…I may try again with this $300 bonus.
    DRB: slow, slow, slow…but a lower rate. I would have refinanced with them but by the time the docs came around to sign I was out of the country.

    Now that I’m back I utilize 0% cash advances on my credit cards with a 1% transaction fee and calculate what I can pay off in the year (or the term of the 0% interest rate which usually ranges from 12-18 months). You can saved thousands this way. Since I began paying back my loans in 2012 we’ve done this maybe 4-5 times.

  • Mr. FC May 7, 2015, 2:38 pm

    Having not too long ago paid off all our student debt ($180k…still makes me sick) the best way we found to do it was to haul ass and pay it down as fast as possible: earn a lot more cash, spend next to nothing, and chuck it all at the debt. SoFi is interesting from an optimization perspective, but I worry this could introduce some complacency in the equation.”Well, it’s at 1.9%, its like free money after inflation, why pay it off?” I used that one on myself for a while. Stupid.

    Debt is debt is debt is debt. Part of me thinks, quit f*cking with the interest rate and get on with it, while the other side of me sees the efficiency…but at the end of the day I’m going to land on the get the f*ck out of debt already side and plow through.

    • Jeff May 7, 2015, 2:47 pm

      It depends on where you are in life. I have a lot of debt, but it’s mostly been used to purchase, fix up, and rent appreciating properties. At this point I value ROI over cashflow so loading up on debt while interest rates are lower than inflation is the smart thing to do. Once I’m ready for early retirement (5 years?), I’ll rush to pay it all off, which will nearly triple my cashflow.

      • Mr. FC May 7, 2015, 3:49 pm

        I agree it depends on where you are in life, and what you have (and haven’t) lived through.

        Sounds like you have a plan.

  • Mario May 7, 2015, 2:47 pm

    In my interactions with SoFi, they seem to be well run and they have a simple, but intuitive idea — linking up investors who want to receive more interest with borrowers who want to pay less interest.

    And, of course, given my huge amount of student loans, I’m probably the target audience for SoFi.

    However, when I tried to refinance a couple years back, the rate I was offered would have only lowered my average interest rate by about half a percentage point. It was tough to justify a switch.

    Like you, I’ve heard from primary sources that they’ve gotten a lot more funding within the last couple years, meaning I’d likely get a better rate this time around.

    I’ll try once more soon.

    • Joan May 7, 2015, 4:51 pm

      Mario, you should definitely try again. Like you, I applied two years ago and my rate was okay but not enough to make me move. I applied again just now and my rate was 1% cheaper than before. I’m taking this one. Hope you have similar luck!

  • Teeej May 7, 2015, 7:54 pm

    My student loan balance last year was $45,000, slightly more than when I graduated. I had been paying on IBR for 3 years without making a dent. After reading some MMM and realizing my hair was on fire I came up with a plan.
    I refinanced with SoFi 1 year ago. I refinanced $35,000 from 6.55% to 4.41% on a 10 year adjustable with the goal of repaying in 5 years. Several months before refi I did a $10,000 0%, 12 month balance transfer (0% transaction fee) to a new ‘discover it’ account. I think this hurt my credit score/debt to income ratio so I only qualified for 4.41%.

    Since that time, the interest rate has inched up to 4.43%. Doing the refi was a great deal so far. Looking at a Refi calculator it shows savings of over $6000 for the life of the loan. More by paying faster. By paying aggressively and using balance transfers, my monthly interest is down to $110, from $180 – thats more money toward my principle. Current loan principle is at $29,500, with $2000 on another balance transfer.

    Using IBR, PAYE, and PSLF might work for some, but after doing some reading I felt unsure that my years of service in a public school (not low income, not math/science) were counting toward my loan. I find the information regarding PSLF confusing, and I was never sure it would work out after 10 years, or if I even wanted to keep teaching 10 years. IBR paid the subsidized portion of the interest for 3 years, but the loan never got any smaller. Student Loan Hero has some interesting reading regarding IBR and how much you stand to pay over the life of the loan.

  • Teeej May 7, 2015, 7:58 pm

    My SoFi refi is being serviced by Tru Student Inc. out of Montana. Very low tech operation with limited features and user interface, even for a loan servicing company. Not sure if this is standard or typical for SoFi, as I expected them to be the servicer.

    I also really like their tee-shirts. Reminds me to keep working hard and saving as much as I can.

  • Nathan Popham May 7, 2015, 8:07 pm

    Too late! I paid off the last of my student loans a month ago. Looks like it might have been a good option to have in some situations..

  • Beau May 7, 2015, 10:40 pm

    I refinanced with SoFi exactly one year ago. I had a good experience with the application process.

    I heard about SoFi as soon as I paid off my massive credit card (best decision ever). When I paid off my credit card debt, my credit score jumped by over 120 points into ‘excellent’ status. So of course I immediately popped up on the radar of financing companies.

    Because of the size of my student loans, my rate is still 6.1%. But still better than the 6.85% of my Federal Stafford loans. The best part of SoFi was that I could consolidate all 11 separate loans into one. The time I save paying monthly bills is worth it. I used to go to 6 different (awful) websites each month to pay bills. For my situation is makes a lot of sense, but I can understand how it doesn’t work at all for other people.

    I told a good friend about SoFi, but his rates were so low to begin with that refinancing doesn’t make any sense. So it completely depends on each person’s loan situation.

    Thanks for all the great articles Mr. Cash ‘Stache (ha, I think that’s a good nick name for you!)


Leave a Reply

To keep things non-promotional, please use a real name or nickname
(not Blogger @ My Blog Name)

The most useful comments are those written with the goal of learning from or helping out other readers – after reading the whole article and all the earlier comments. Complaints and insults generally won’t make the cut here, but by all means write them on your own blog!


welcome new readers

Take a look around. If you think you are hardcore enough to handle Maximum Mustache, feel free to start at the first article and read your way up to the present using the links at the bottom of each article.

For more casual sampling, have a look at this complete list of all posts since the beginning of time or download the mobile app. Go ahead and click on any titles that intrigue you, and I hope to see you around here more often.

Love, Mr. Money Mustache

latest tweets