The Pros and Cons of Using SoFi to Refinance Your Student Loans

The Pros and Cons of Using SoFi to Refinance Your Student Loans

Eileen St. Pierre, The Everyday Financial Planner

A friend of mine recently asked my thoughts about using SoFi to refinance student loans. SoFi was started in 2011 by four Stanford graduates to provide more affordable options to repaying student loans. Everything is pretty much done online. They have since expanded to mortgages and financial advisory services to keep their customers as clients as they move through life.

Here are my pros and cons of using SoFi to refinance your student loans.


Like all things digital, it’s quick and you can submit an application anytime and in your pajamas. They do offer lower interest rates than their competitors and a 0.25% discount if you set up automatic payments. Humans are available if you need them.

Bottom Line: If you have very good credit (credit score above 700) and a high income (over $100,000), and your case is straightforward, you may have a good experience.


One of the advantages of having federal student loans (versus private loans) is that you get many protections with them. If you refinance at SoFi, you will lose these protections. SoFi is a private company. To keep your federal protections, you need to follow the federal student loan consolidation process.

If you lose your job or have a hard time paying your loan, SoFi only offers up to 12 months of forbearance. Their competitors offer longer periods.

Your credit score matters!

They perform a soft inquiry first based on the information you submit to them (which does not hurt your credit score) and give you an estimate.

  • After you fill out the application and formally apply, they perform a hard credit inquiry (which does affect your credit score) and verify all your information.
  • What they actually give can be much different from what they originally quoted.
  • This has led to a lot of negative reviews. Of course, these people may not have been upfront about their information.

Bottom Line: Like all lenders, they will verify your information. If you are considered a risk, you will pay more. Many applicants have complained about their documents getting lost, not handled properly, or not interpreted properly. This is what can happen when you do things digitally.

Remember, SoFi was created by Stanford graduates. It’s not for those borrowers who need the help most – those who never finished their college degrees, are saddled with high levels of private loans, have screwed up paperwork, and are un- or underemployed. If we can find a way to help these student loan borrowers, then our society will really be better off.

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