I don’t know what information is pertinent or not pertinent to anyone who follows my blog so I will try to be as complete and succinct as possible here. I will refer (link) back to this post when I make reference to my refinance in the future.

Amount refinanced: $89,064.00
Rate: 3.500%
Minimum Payment: $636.76
Loan term: 15-year fixed (180 months)
Lender: Pentagon Federal Credit Union (PenFed)
FICO (at time of application): 794*
Loans included in refinance (amounts as of 11/1/2021):

Only a couple of things to note… First, there is a small discrepancy between the loan amount and the loan balances. This is pretty common and any overpayment will be credited to me by PenFed or refunded to me by the servicer/lender in the form of a check. And second, PSL4 was not included in my refinance which is why it does not appear on the chart above. The amount remaining on PSL4 is so small at this point that it makes far more sense for me to pay it off with the current servicer AES. It will appear separately from my refinanced loan on my student loan balances update for December 1st.

And that is it.

Fun holiday story: My father has login credentials for the private student loans that were serviced by AES. When he first logged into the account two-and-a-half years ago (the start of this blog) the balance was $30,000.00+. I didn’t realize he still checked the account until he mentioned during the Thanksgiving holiday that he saw the balance was now only $6,500.00 (he must have checked it in mid-October). I whipped out my phone and opened the app to show him that the balance was now much lower than that. He seemed very proud of me. That felt good. Not good enough to tell him about all of it but…maybe one day.

*I was…er…less than pleased with how I timed my application for this loan. I had recently applied for a Costco credit card and had taken a “new credit inquiry” FICO score ding. At the time I applied for the credit card, my FICO score was 812. Had I known I was going to be applying for the refinance, I would have waited to apply for the credit card. PenFed’s lowest advertised interest rate for refinanced student loans is 2.89% fixed (they do not offer a discount for automatic payments). While 3.500% is a much, much better rate than I had previously, I wondered if I would have gotten an even lower rate had a timed my application a bit better…

When I began my student loan refinance search, it was really difficult to find information or reviews that weren’t from a lender (SoFi’s marketing game is strong) or from a financial technology company (e.g. Credible, NerdWallet, BankRate). While these are both good sources, the information they provide is generally pretty generic until you submit an application (which is usually a soft credit pull initially) AND they are both financially invested in you completing a refinance. I was looking for more of a Yelp nitty-gritty, “This is what happened to me, YMMV…” sort of review. To that end, I have decided to make my contribution to the student loan refinance interwebs here.

Lender Search/Decision – Pentagon Federal Credit Union (PenFed)

I began my search by using one of the financial technology companies listed above to do a preliminary search for student loan refinance lenders. As I have stated previously, my top refinance priority was securing a much lower fixed interest rate. A second priority was securing a monthly payment that was manageable should I no longer have a full-time position. Ultimately, my search yielded PenFed as the best option for my refinance. If your priority is guaranteed forbearance in case of economic hardship, in-school deferment, discharge of loans in case of death or permanent disability, or if you are not a citizen of the United States, there are better lender options. In a low-interest-rate environment, PenFed is also probably not the best option for someone who is risk-tolerant of a variable rate as PenFed does not offer them. Something else I liked about PenFed is that they are both the lender AND the servicer which means no more third-party services (by forever Heartland ECSI!). While I have had good experiences with third-party services that have relatively responsive, easy-to-use, and up-to-date platforms, I have found that this is the exception more than it is the rule. And while you would expect the amount that you interact with your student loan servicer to be pretty rare, on those times you do have to interact with them, it’s because something bad has happened and you don’t want poor customer service contributing to what are already heightened emotions.

PenFed Criteria
Something else that I liked about PenFed is that they are direct and specific about their lending criteria. I found that some lenders said really nebulous things like, “well will take into consideration your whole financial picture.” I wholeheartedly support lenders moving beyond a FICO score, and other “traditional measures” of creditworthiness, to increase lending opportunities for consumers; especially to the extent that it increases opportunities for credit in underserved markets. That being said, if traditional measures are still a part of that decision calculus, then I think lenders should be upfront about what those requirements are so that consumers are not wasting their time. Here I would share that 1) PenFed’s minimum FICO score is 670, 2) the applicant must be a U.S. citizen, and 3) their income minimum is $42,000.00 without a co-signer. Another quirk is that because PenFed is a credit union, you must become a member of the credit union. Application is pretty easy and you qualify with an electronic application that is a part of your loan verification documents and a $5.00 deposit into a savings account.

Application Process
This was perhaps the most confusing aspect of the student loan refinance process with PenFed for me. The process itself, in terms of document request and upload, was pretty simple, what was confusing was figuring out the different actors and how they fit into the process…you know, since I was suddenly getting emails about three different entities and three different websites. For anyone who should search for this…

– PenFed (Pentagon Federal Credit Union) – Lender/Servicer – PenFed is the lender and the servicer which means they are the bank that is making the lending decision and to whom you will make monthly payments on the loan.

– Purefy – “Purefy is a student loan comparison site, and it also originates refinanced student loans and parent loans via a partnership with Pentagon Federal Credit Union.” I didn’t use Purefy to search for student loans and as far as I can tell, the only two student loan companies for which they offer a comparison are PenFed and SoFi (I assume no one would be shocked to learn that they ultimately rate PenFed as the better option). Thus, I was surprised when I received an email from Purefy following my initial application. That being said, my experience with them was pretty great. Throughout the process, I had a couple of questions, and Dallas, my customer service representative, responded to me almost immediately. If you are approved for a loan with PenFed then Purefy exits the banking relationship once the loan is approved, documents are uploaded, and the loan is funded. If you are not approved, it seems like they are open to an ongoing relationship to help you become a PenFed customer.

– CampusDoor (Campus Door Holdings Inc.) – CampusDoor is just the loan processor. Their website is where you upload verification documents; their website is also where you can view updates and respond to any additional requests for information.

Experience Thus Far
It is cliche but…so far, so good. I was able to create an account on the PenFed website four business days after my loan was approved. It took a bit longer than I would have liked for my loans to be paid off (14 business days) but the former servicers of loans I included in this refinance were pretty terrible…which was a small reason I wanted to re-fi and end my relationships with them. Thus, I am unwilling to lay blame for the delay at the feet of PenFed. My federal loans did end up going to another servicer (yea…ugh…I can’t talk about it) but thankfully they all ended up at one servicer. I am once again grateful that I did this now as opposed to in January because the interest pause on federal loans means I don’t have to do any magical math to figure out what my current student loan balance is.

Alright, that was a far deeper dive than most folks needed but it is my contribution to the personal finance interwebs. Part 3, my last and final post about my student loan refinance will be much briefer and will just be information about the loan itself.

I have been wanting to write this post for some time but have been procrastinating writing it because I knew it would take a while to write and because I didn’t want to jinx it. Well, as what should be the most nerve-wracking part of the payoff is over, I now think it’s okay to write…

If you will remember, I had tried to refinance my student loans shortly after starting this blog in August of 2019. Unfortunately, given my very high debt-to-income ratio and my relatively short tenure in my new role (I had just moved across the country to start working at University B), no lender would touch me. That led me to “self-refinance” my private loan with the highest interest rate using a credit card balance transfer. While all turned out well, I was wary of doing it again. Two and a half years and almost $40,000.00 in student loan debt paid off, lenders were now hounding me to refinance my student loans with them. Despite a lengthy post outlining the pros and cons of refinancing in early October, I was planning to put off refinancing until December or January so that I could enjoy 0% interest and no payments on my federal student loans for a couple more months. However, in the last week of October, I received an email from Granite State Management Services, my federal student loan servicer, letting me know that they would no longer be servicing federal student loans and would be transferring my student loans to a new servicer in exactly two weeks. I applied to refinance my student loans that very same day.

After I let you all know that I had applied to refinance my student loans, there was a mix of responses but all of them were constructive and helpful. I actually think responding to your question/concerns (and some I asked myself) is the fastest way to walk through my decision-making process so I will do that here.

1. Given how much of your remaining debt is federal student loan debt (~80% or $75K), why aren’t you waiting to see if you are eligible for any “relief” being deliberated by the Biden administration? – Unlike some blogger friends, I am not very optimistic that the Biden administration (or any other administration) will pass student loan debt relief because it’s not very politically popular. I think the pandemic has demonstrated that some of the most meaningful relief to all borrowers would be significantly lowering student interest rates but that never seems to be a plan anyone puts forth. Honestly, and this may shock folks given how much federal student loan debt I have, but I am generally not in favor of widespread student loan forgiveness for the majority of borrowers. (This does not include loan forgiveness plans tied to service for low-income earning roles). College degree holders earn on average $900,000.00 more than folks without college degrees over their lifetime. As someone who is concerned about income inequity, I don’t know how equitable it is to wipe out all debt for college degree holders. But that discussion is for another post…`

2. Why didn’t you wait until January to refinance when the payment/interest abatement on federal student loans is scheduled to end? – I was worried that the interest rates would be higher as a lot more folks considered refinancing and that all twelve of my federal student loans would not end up with the same servicer.

3. Why didn’t you just federally consolidate your student loans? – I thought about doing this as a way to keep the 0% interest rate and payment abatement on my federal student loans and ensure that I only ended up with one student loan servicer. However, I had some concern that my consolidation wouldn’t take place prior to my loans being transferred and I didn’t really want to go through the process of consolidating them only to have to refinance them a couple of months later.

4. Excellent questions and things to consider from Paula: “I would be very very careful about giving up the benefits of federal loans. Not only does the a) income based and graduated plans allow you to have lower payments if needed, think about the future. b) No in school deferrment? c) What if you need a car? d) Even if you want to pay more than the lowered payment, the fact is your credit report minimum payment is what creditors use to determine what you can afford. The fact that my minimum was listed as so low got me into a mortgage- which became suddenly absolutely necessary as my current apartment building got bought by a slumlord and became impossible. If I’d had that full payment listed as the minimum, it wouldn’t have happened. I’m not sure I could have even been approved for another rental unit.

Also… e) disability. God forbid, but if something happens the federal loans go away. f) Refinance and well.. I don’t think they legally have to care.” Again, all excellent points. Note: I have added the letters next to her points so that I can answer in the most organized way possible.

a) The payment was one of my biggest concerns going into the refinance. And while I will get to the details of the refinance itself in the second post about this, it is one of the reasons I chose a 15-year fixed loan despite the slightly lower interest rates for 5-year loans. The minimum payment for my refinanced loan is actually $260.00 less than the minimum payments on all of my loans (not including my federal loans as they didn’t require a payment) when I started this blog in July of 2019. Given that my income has grown and my student loan debt has significantly decreased, I am not as concerned about my minimum payment.

b) Many private student loan companies do have an option for in-school deferment. The most common is a maximum of 36-months after 12-months of on-time payments. However, the lender I chose does not have an in-school deferment option. Given my relatively low minimum payment (relatively to how much I have and could be paying) and some other things happening (I promise I will disclose more soon), this is not a significant concern for me at the moment. If it becomes a significant concern, I can always refinance with a different lender.

c) In December I decided to buy out my car lease. As my car is less than four years old, it is my hope that with good care that it will still be in decent shape by the time my loans are paid off in four years. The fact that I have a $5,000.00 emergency fund also eases concerns I have about immediate car expenses.

d) This is 100% true. I spoke to this above in response to point a) but I am less concerned about my minimum payment as it is pretty manageable and significantly less than my aggregate payments were in July 2019. Also, I am fortunate to have excellent credit (>800) and I suspect the refinance will actually help my credit even more as my federal student loans, which show as having balances larger than their original balances, will now be paid and leave me with one loan that will always be lower than it’s original balance.

e) This is a good point that most folks don’t consider. However, in the past, I have talked about my greatest fear being that my parents were burdened by my student loan debt should I become deceased or disabled. For that reason, I have both supplemental term insurance as well as long- and short-term disability insurance through my employer. If I died before my student loans were paid off or became significantly disabled, my estate would cover my outstanding loans. Private Student Loan 2 (PSL2) and Private Student Loan 4 (PSL4) are actually the last loans for which my parents are cosigners. PSL4 will be paid off in December (I’m calling my shot) and PSL2 being included in the refinance releases my mother as a co-signer.

f) You are again 100% correct. They don’t have to care…and many don’t. However, I refinanced with a credit union and they do seem to care.

Okay, enough for now. In my second post, which should be much shorter, I will dive more into the details of how I chose my new lender and what the refinance process was like. It is really hard to come by unsponsored reviews of refinance lenders so I want to leave something for anyone who looks for information about this lender in the future. In my final post of this three-part series, I will share the details of my new loan, including which loans I choose to include, so there isn’t any confusion in my student loan balances update posts.

Thank you to everyone who gave me feedback throughout this process. It is appreciated far more than you know.

So…should I refinance my federal student loans?

COVID-19 has meant many terrible things for the world, families, and individuals. And while it might be very mercenary to say it in this moment, one of the other things it has meant is a sharp economic downturn with interest rates at their lowest in two years. For that reason, despite saying I would not consider another student loan refinance until December of 2020 when I had expected to have paid off Private Loan 1, Private Loan 2, and have a better debt-to-income ratio, I am now considering it again…

So…should I refinance my federal student loans?

My current federal student loan profile is the following:

Using the Credible App, I sought to prequalify to see which rates I might be offered by lenders. Credible came back with the following offers, all offered by SoFi:

Rate 1: Fixed at 4.76%, monthly payment of $586.00, 15 year repayment term
Rate 2: Variable at 4.76%, monthly payment of $586.00, 15 year repayment term
Rate 3: Fixed at 5.22%, monthly payment of $502.00, 20 year repayment term
Rate 4: Variable at 5.22%, monthly payment of $502.00, 20 year repayment term

I would, without a doubt, save money on a refinance. The difference between a 4.76% and a 5.806% interest rate is significant. It becomes even more significant if you consider that 5.806% is not a weighted average and I have significantly more student loans at the higher 6.8% interest rate.

However, once you move federal student loans to a private lender, you lose all of the protections of a federal loan, which include in-school, unemployment, disability, and death protections. (Although, death is mitigated to some extent as my employer provides a free insurance policy in the amount of one year’s salary, and I pay $1.20 a month for $50,000 of additional insurance, which is more than enough to cover any outstanding obligations I currently have in the event of my untimely death).

So…should I refinance?