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I was offered a 3.9% variable rate and am highly considering taking it, given that the majority of my loans are at 7.9%. However, I am finance illiterate and was hoping I could get some advice- for those of you that have looked into SoFi, what are the pros/cons you took into account? What are the risks involved in accepting the variable rate?

TIA. I hope this thread ends up being useful to all who have been looking into SoFi but are a bit overwhelmed with the process.

The main con is that you lose a lot of the repayment options that come with federal loans. IBR, hardship forbearance, public service forgiveness, plus possibly eligibility for your school's LRAP. Basically you are paying less money but receiving less of a safety net. Your level of risk aversion determines whether it's worth it but IMO if you are confident you'll be in private practice and making enough to meet your payments for the foreseeable future then SoFi is probably a good move. If you want to leave the door open to lower-paying work (govt etc) then I might think twice.

Does anyone from HLS know if it still qualifies for LIPP?

Plus don't forget the fact that variable rates are...variable...based on interest rates and stuff (until Ron Paul or thesealocust ends the fed). I'm guessing the quote they gave you for a fixed rate was closer to 6% which makes the aforementioned safety net cheaper.

I just refinanced through them and went with variable (3.4%) interest, which is capped at a maximum 8.5ish%. I think it's a great deal. In any event, it's a good deal for me because my interest rate went down by more than half (at 7% with the fed) and I'm looking to pay off my balance within the next year and a half. I highly doubt the variable interest would reach anything above 4 or 5% within the next year or two.

silenttimer wrote:I just refinanced through them and went with variable (3.4%) interest, which is capped at a maximum 8.5ish%. I think it's a great deal. In any event, it's a good deal for me because my interest rate went down by more than half (at 7% with the fed) and I'm looking to pay off my balance within the next year and a half. I highly doubt the variable interest would reach anything above 4 or 5% within the next year or two.

What's your credit score? I wish my rate was lower. My credit is 763 and I got 3.92%.

Anonymous User wrote:

silenttimer wrote:I just refinanced through them and went with variable (3.4%) interest, which is capped at a maximum 8.5ish%. I think it's a great deal. In any event, it's a good deal for me because my interest rate went down by more than half (at 7% with the fed) and I'm looking to pay off my balance within the next year and a half. I highly doubt the variable interest would reach anything above 4 or 5% within the next year or two.

What's your credit score? I wish my rate was lower. My credit is 763 and I got 3.92%.

800+

Look into Darien Rowayton Bank too. I found they had better rates than SoFi.

Personally, I went fixed rate refi. It is a pretty safe bet that interest rates are going up in the next 1-2 years. In my opinion, the safety of a fixed 5.75% (with ACH interest rate deduction) for a 10yr term from darien is totally worth it for me. Variable is too risky in my mind. I'd do variable if my loans were small enough that I could repay them if interest rates went up, but I could never stomach variable for a $100K refi.

If you want to hedge against prolonged low interest rates, there are other, safer ways.

Anonymous User wrote:Look into Darien Rowayton Bank too. I found they had better rates than SoFi.

Personally, I went fixed rate refi. It is a pretty safe bet that interest rates are going up in the next 1-2 years. In my opinion, the safety of a fixed 5.75% (with ACH interest rate deduction) for a 10yr term from darien is totally worth it for me. Variable is too risky in my mind. I'd do variable if my loans were small enough that I could repay them if interest rates went up, but I could never stomach variable for a $100K refi.

If you want to hedge against prolonged low interest rates, there are other, safer ways.

1) The ceiling on variable with Darien Rowayton Bank is way, way higher than SoFi.

2) With SoFi, you can always refinance your variable rate loans into fixed rate loans.

And it's not at all a safe bet that interest rates will rise in the next 1-2 years. Yes, the government has tapered it's bond-buying program, but it's not entirely clear that the economy is on solid footing--data continue to come in mixed. An increase in interest rates will accompany a full, unequivocal recovery, which hasn't happened yet.

Recall that we "exited" the last recession in 2009. It's been 5 years since then and we're pretty much due for a recession in the next 5 years (it's not a matter of if, but when). With lowering interest rates being the primary mechanism through which the Fed combats a weak economy, and with LIBOR corresponding almost perfectly to Fed interest rates, you can bet that the vast majority of the next 10 years, interest rates will remain extraordinarily low. Coincidentally, 10 years is the repayment term on a SoFi loan.

zweitbester wrote:

Anonymous User wrote:Look into Darien Rowayton Bank too. I found they had better rates than SoFi.

Personally, I went fixed rate refi. It is a pretty safe bet that interest rates are going up in the next 1-2 years. In my opinion, the safety of a fixed 5.75% (with ACH interest rate deduction) for a 10yr term from darien is totally worth it for me. Variable is too risky in my mind. I'd do variable if my loans were small enough that I could repay them if interest rates went up, but I could never stomach variable for a $100K refi.

If you want to hedge against prolonged low interest rates, there are other, safer ways.

1) The ceiling on variable with Darien Rowayton Bank is way, way higher than SoFi.

2) With SoFi, you can always refinance your variable rate loans into fixed rate loans.

And it's not at all a safe bet that interest rates will rise in the next 1-2 years. Yes, the government has tapered it's bond-buying program, but it's not entirely clear that the economy is on solid footing--data continue to come in mixed. An increase in interest rates will accompany a full, unequivocal recovery, which hasn't happened yet.

Recall that we "exited" the last recession in 2009. It's been 5 years since then and we're pretty much due for a recession in the next 5 years (it's not a matter of if, but when). With lowering interest rates being the primary mechanism through which the Fed combats a weak economy, and with LIBOR corresponding almost perfectly to Fed interest rates, you can bet that the vast majority of the next 10 years, interest rates will remain extraordinarily low. Coincidentally, 10 years is the repayment term on a SoFi loan.

When you go to refi those variable into fixed, the fixed will be higher. No doubt. Plus it's a bit of a leap to assume that you will definitely be able to refi into a fixed. There is no guarantee. It all depends on your appetite for risk. As I said, I think it is risky to put a six figure bet on interest rates remaining low for the long haul when a good interest rate is available. With my refi being around $150K, I'd rather take a sure savings of around $30k with my refi than bet on the possibility of $60K (with a potential for no savings)...that's just me. You are oversimplifying a prediction of low rates. Our best and brightest cannot predict when rates will go up and by how much. Yes, it is safe that rates will not increase by much over the next 1-2 years, but after that, rates could very well go up....not stay at historic lows. Going with a variable is by no means a slam dunk...unless you have the cash to pay down the variable low in the near future or in the event that rates rise. Each person should talk to a financial advisor who can understand your exact situation - not people on a message board.

Of course, if you are the type of person who picks his/her own stock because you think you can beat the market, then variable rate is likely for you...though, your talents are being wasted as a lawyer.

Edit: Wrote this really snarky response, but decided to edit it out. Don't have patience or time to argue it.

Do what you want.

I think SoFi variable is a pretty good bet over 7.9% fixed. The capped rate for SoFi is 8.95% which is only slightly higher than what you are looking at right now. Of course the proper comparison is probably against SoFi fixed rate.

lol at every anon in this thread

patogordo wrote:lol at every anon in this thread

When you really think about it, it kind of makes sense. The same kind of risk aversion that sends people to law school on a regular basis is the same kind of risk aversion that leads one to leave money on the table in the form of fixed interest rates in the situation above.

Anonymous User wrote:

zweitbester wrote:

Anonymous User wrote:Look into Darien Rowayton Bank too. I found they had better rates than SoFi.

Personally, I went fixed rate refi. It is a pretty safe bet that interest rates are going up in the next 1-2 years. In my opinion, the safety of a fixed 5.75% (with ACH interest rate deduction) for a 10yr term from darien is totally worth it for me. Variable is too risky in my mind. I'd do variable if my loans were small enough that I could repay them if interest rates went up, but I could never stomach variable for a $100K refi.

If you want to hedge against prolonged low interest rates, there are other, safer ways.

1) The ceiling on variable with Darien Rowayton Bank is way, way higher than SoFi.

2) With SoFi, you can always refinance your variable rate loans into fixed rate loans.

And it's not at all a safe bet that interest rates will rise in the next 1-2 years. Yes, the government has tapered it's bond-buying program, but it's not entirely clear that the economy is on solid footing--data continue to come in mixed. An increase in interest rates will accompany a full, unequivocal recovery, which hasn't happened yet.

Recall that we "exited" the last recession in 2009. It's been 5 years since then and we're pretty much due for a recession in the next 5 years (it's not a matter of if, but when). With lowering interest rates being the primary mechanism through which the Fed combats a weak economy, and with LIBOR corresponding almost perfectly to Fed interest rates, you can bet that the vast majority of the next 10 years, interest rates will remain extraordinarily low. Coincidentally, 10 years is the repayment term on a SoFi loan.

When you go to refi those variable into fixed, the fixed will be higher. No doubt. Plus it's a bit of a leap to assume that you will definitely be able to refi into a fixed. There is no guarantee. It all depends on your appetite for risk. As I said, I think it is risky to put a six figure bet on interest rates remaining low for the long haul when a good interest rate is available. With my refi being around $150K, I'd rather take a sure savings of around $30k with my refi than bet on the possibility of $60K (with a potential for no savings)...that's just me. You are oversimplifying a prediction of low rates. Our best and brightest cannot predict when rates will go up and by how much. Yes, it is safe that rates will not increase by much over the next 1-2 years, but after that, rates could very well go up....not stay at historic lows. Going with a variable is by no means a slam dunk...unless you have the cash to pay down the variable low in the near future or in the event that rates rise. Each person should talk to a financial advisor who can understand your exact situation - not people on a message board.

Of course, if you are the type of person who picks his/her own stock because you think you can beat the market, then variable rate is likely for you...though, your talents are being wasted as a lawyer.

Wow, this is not great advice, especially considering the impact that Yellen will have as Fed chairwoman.

Yeah, according to him you're either a lawyer or an economic expert . There's nothing in the middle.

I guess being a lawyer permits you to make ignorant financial decisions.

Bumping this thread because I've looked in to this a little this week. First year biglaw associate, on track to pay off my grad plus loan in May. Thinking about refinancing then with the ~60k remaining on my stafford loans.

If I plan to pay them off within 2-3 years, a variable rate with good credit has to be better than the fixed rate right? I can't imagine interest rates skyrocketing in the next couple years (although anything is possible, and I'm sure they will increase somewhat). I'm not worried about my job security for the next few years, so I think the safety net isn't as big of a deal to me.

Would also be interested in hearing from anyone who has actually used SoFi, their customer service seems pretty good so far.

Anonymous User wrote:Bumping this thread because I've looked in to this a little this week. First year biglaw associate, on track to pay off my grad plus loan in May. Thinking about refinancing then with the ~60k remaining on my stafford loans.

If I plan to pay them off within 2-3 years, a variable rate with good credit has to be better than the fixed rate right? I can't imagine interest rates skyrocketing in the next couple years (although anything is possible, and I'm sure they will increase somewhat). I'm not worried about my job security for the next few years, so I think the safety net isn't as big of a deal to me.

Would also be interested in hearing from anyone who has actually used SoFi, their customer service seems pretty good so far.

You're absolutely correct about the variable/fixed analysis. The risk of having a variable loan greatly decreases as the term of the loan decreases, and there's really no reason to believe that interest rates will magically blow up in the next couple of years when they have been low and fairly stable since the recession.

I didn't use SoFi, but I did recently refinance my Stafford, GradPlus, and some undergrad loans at 2.75% variable. So far, I don't regret doing this.

de5igual wrote:I didn't use SoFi, but I did recently refinance my Stafford, GradPlus, and some undergrad loans at 2.75% variable. So far, I don't regret doing this.

Who did you go through if you don't mind me asking?

every time i read this title i think "sofi repair, sofi replace"

owlofminerva wrote:

de5igual wrote:I didn't use SoFi, but I did recently refinance my Stafford, GradPlus, and some undergrad loans at 2.75% variable. So far, I don't regret doing this.

Who did you go through if you don't mind me asking?

Darien Rowayton Bank

Does SoFi let you refinance only half your loans? So if you had $100k of fedloans, choose to do $50k through SoFi variable and then keep the other half still with fedloan?

^ yes you choose exactly which loans you want to refinance. I am thinking about going half and half (refinancing my 7.9% loans, keeping the ones at 6.8%). Still really paranoid about it since I am not sure how long I want to be a lawyer.

Anonymous User wrote:^ yes you choose exactly which loans you want to refinance. I am thinking about going half and half (refinancing my 7.9% loans, keeping the ones at 6.8%). Still really paranoid about it since I am not sure how long I want to be a lawyer.

It would make sense even if you weren't a lawyer... assuming your new occupation isn't "unemployed."