I recently returned from a trip to San Francisco. Now, as you might imagine knowing my hobbies, I'm not a huge city-lover. However, as cities go, San Francisco is one of my favorites. I love the architecture, the views, and the people and there is always so much to do there. I was actually in San Francisco when the recent post on making the blog more inclusive ran, which I thought was appropriate, given that San Francisco is perhaps the most diverse city in the country. I had been invited out to visit blog sponsor SoFi, at their expense a few months ago. I told them I didn't think it would really work out anytime soon as I was pretty burnt out on traveling. The next day I received an invitation to speak at the Fellows Conference for the Coalition of State Rheumatology Organizations (CSRO,) also in San Francisco. I figured the stars had aligned, so I committed to go. Since SoFi and CSRO were now splitting the cost of my travel expenses, I figured I'd see if my wife could come along too. So we dumped the kids off with the cousins (thanks, BTW) and headed out for beautiful, sunny, 65-degree San Francisco while Boston was weathering the storm of the century and Salt Lake was suffering through it's worst ski year pretty much ever.
Day One – SoFi
I came away from my visit with SoFi very impressed, and it wasn't just the bottlecap openers, pens, and T-shirts I left with (BTW, if you want a SoFi T-shirt, let me know in the comments section and I'll get you one.) I was mostly impressed with how rapidly they had grown and how much they had bent over backwards to make refinancing student loans simple.
The Yoda Fountain at LucasFilm
Social Finance, Inc was founded the same year as this blog by four Stanford MBA students as a school project. They've got a couple hundred people working for them, and I've only got one working for me, so maybe I should have gone to MBA school instead of medical school. At any rate, their office is located in the Presidio, in the same building as LucasFilm. That explains the security I ran into upon arrival. Needless to say, because of that security, I still have no idea what the deal is with that stormtrooper in the Episode VII trailer. But I did learn a lot about how SoFi works.
SoFi was originally founded as an alumni to alumni lending organization. So if you went to say, Stanford University School of Business, and had student loans you needed to refinance, they went to alumni of that school who wanted to help out fellow alumni and obtained the funds to refinance your loans. You got a lower rate, the alumni got a halfway decent investment they could feel good about, and default rates were supposed to be very low because, hey, you know these guys. Well, it turned out that was a rather inefficient way to run a business. So although there is still “alumni money” in every loan, most of the money is coming from investors. (If you would like to be one, either on the debt side or equity side, contact SoFi. You have to be accredited of course, as they have no yet had their IPO.) However, what SoFi has been able to do is keep defaults very, very low. In fact, there have been only two of them, total. Both were premature deaths and the loans were written off. Because these defaults have been low, investing in these loans is considered to be pretty low risk by the investors, which allows SoFi to pass that savings on to borrowers. In fact, as noted in a recent post, they dropped their variable loans as low as 1.92%. All their competitors quickly followed suit, of course.
When you walk into SoFi, it looks like a scene out of the The Social Network movie. I think only one person in the entire building was older than me, and the average number of years with the company is just a few months due to their rapid rate of growth. I wore a shirt with buttons on it, making me severely overdressed. I should have just worn a hoodie. At any rate, aside from the free lunch, T-shirts, and airfare, I also received answers to the questions that many of you readers have voiced about SoFi in emails to me and in the comments section of relevant posts.
What Does It Take To Get The Lowest Rate?
SoFi has their own computerized algorithm they use to determine your rate. Of those who complete the application, about 40% are flat-out rejected. Another 35% are approved and the remainder go into the “maybe” pot where the process becomes a bit more manual. This is one reason that the defaults (and thus the rates) are so low. They simply don't lend to a lot of people. When they go to investors for money, they can thus describe their lending pool as “super-prime.” So if you're not super-prime, don't expect to be refinanced. And realize when you're trying to get the lowest rate they offer, well, you're competing against the best of the best. That's why you didn't get the lowest rate advertised. They (and readers,) however, assure me that some WCI readers actually do get the lowest advertised rate.
Why Does The Process Take So Long?
I've lost all compassion for those who complain about it taking forever to go through this process. I walked through it while I was there. It is super easy to find out what rates (and loan terms-not all applicants are offered every type of loan they have) you're eligible for. Within 5 minutes you can find out whether you will be approved and if so what rate you are eligible for, without ever talking to anyone or waiting for the office to even open. It's basically automatic. It is based on your earnings, your total debt burden (but not the interest rate of that debt), where you live, your degree program, and a soft pull of your credit. That's it. Now, if you decide to move forward with the application, it looks to me like that would take another hour to input all your information into the application. Maybe a little longer if you've got a dozen different loans from a dozen different lenders you need to track down. But if you're not getting the best possible rate, there isn't much you can do about it except:
- Boost your income
- Pay down your loans
- Move to a lower cost area
- Fix any errors on your credit report/Boost your credit score
- See if their competitors will give you a better rate
and apply again in a few months or a year (and it still only takes 5 minutes.) At any rate, after you finish the application, it only takes them 4-5 days to do their part and get the loan funded. So if you log on at midnight on Sunday and put all the information into the application, you're done by Friday. I don't know, that's a heck of a lot easier than getting a mortgage, much less getting credentials at the hospital so I don't want to hear any more whining about the process. In fact, you can even call them up and have them walk you through it on the phone or even just scan all the paperwork and send it to them and they'll input it into the computer for you. You can even provide your documentation using their free app on your cell phone. What more can they possibly do to make this easier? I couldn't think of anything.
Why Can't You Refinance as a Resident?
I had a long discussion with their CFO about this issue. As a general rule, residents should not refinance their loans because they need the lower IBR/PAYE payments and they do not yet know if they will be working for a 501(c)3 after completion of their training and thus be eligible for PSLF after 120 total payments (including those made in training.) However, if a resident knew for sure that he wasn't going to go for PSLF, and there were a private refinancing option that allowed him to have lower payments until he left training, there are likely a lot of residents who would be interested.
Name the statue in the comments section for bonus points
There are basically two reasons why this has not yet been offered. The first comes from the other side of the equation. Rather than being able to promise an investor (remember your loan is someone else's investment) that they will start getting dividends next month, you have to convince them to make an investment where they won't start getting dividends for 3-7 years. That's a lot harder sale.
The second reason he gave, however, was not only surprising but impressive to me. He was worried about marring the company's reputation as “the good guys” in the business. Their reputation was very important to everyone I talked to, and is one reason they try to make sure there is some “alumni money” in every loan made. But they worry that there will be someone out there who refinances as a resident, then later realizes they should have gone for PSLF (and thus not refinanced) and they will be stuck looking like the bad guy for not forgiving the loans of a poor neonatologist trying to save the world while working for a non-profit. Just like it only takes one bad Yelp review to make dozens of prospective patients avoid your clinic, one irrationally dissatisfied doctor can torpedo their reputation.
My counter argument was that they were already taking this risk, if they refinanced someone's loans upon residency graduation who then changed employers to a 501(c)3. In the end I think they decided that they could realistically start looking at residents who are 6-24 months out from graduation for potential refinancing. So hopefully we'll hear some news on a new loan product soon. Speaking of new loan products, they are also doing both personal loans and mortgages now (I don't get any commission on those BTW.) The mortgage loans are very similar to some of the doctor loans that many WCI readers have used in the past as it only requires 10% down.
At any rate, I was pretty impressed with SoFi and if I had student loans to refinance, I would probably start there (at 2 am on a Saturday night shift since it's all computerized) with the application process. At least I'd know in 5 minutes what rate I could potentially get. Remember that just like with most of the other student refinancing companies that advertise on this site, if you go through the links on this site not only do I make money but you get an extra $300 when you refinance. Please put it toward the principle on your loans. The company wins, you win, and I win. There are no losers in this situation unless you're eligible for PSLF (then for heaven's sake please don't refinance.)
Here's the WCI SoFi Refinancing Link if you're interested in finding out what rate you qualify for.
Day Two
An 80 lb bike and a cool SoFi T-shirt at Land's End
The second day of this trip I spent bicycling with my wife through the famous “Wiggles” streets over to Golden Gate Park where we toured the Japanese gardens, checked out the Dutch windmill and rode up to Land's End. (It felt good on the final climb to pass some poor Schmuck on his fancy carbon bike while I was riding this 60 lb piece of junk rental bike with a bag on the front and a rack on the back. What he didn't know is that I do all my cycling above 5000 feet! ) That evening I was the concluding speaker at a rheumatology fellows conference. (By the way, if you're a rheum fellow you should really go to this-it's 100% free to you.) As you might imagine, this was the first time most of those fellows (and some of the attendings) had ever heard any of this stuff and so it was well received as usual. Talking with the fellows and attendings at the reception and dinner afterward I was most impressed by two different things:
The first was the International Medical Graduates who didn't have any student loans. They won't have to Live Like A Resident for nearly as long as the US graduates, while enjoying the same income. Sure, it might be tough to match into ortho as an IMG, but there are some real financial benefits to being an IMG in many specialties.
The second was how beneficial it is to become an owner of a business related to your specialty. For example, radiologist buy imaging centers, surgeons buy outpatient surgical centers, emergency docs buy free-standing ERs, and nephrologists buy into dialysis centers. So what about rheumatologist? Well, they incorporate an infusion center into their practice. One rheumatologist I met had been flying his family all over the world on frequent flier miles for years simply by putting all the Humira for the infusion clinic on a credit card that provided airline miles. There truly is room for the entrepreneur in just about every medical specialty. I suspect that more and more we will see a substantial difference in income for those willing to be owners and not just employees.
Well, let's have some comments. How long did it take you to get a rate quote with SoFi? Who did you end up refinancing with and why? Or, if your student loans are long gone, what business can you own in your specialty? Comment below!
Columbus… Did I win the SOFI t-shirt?
I finished residency in 2013 and first heard about the possibility to refinance loans through this blog…. thanks! Most were at 6.8% with several at 8.5% (ouch). I started applications in the fall of 2014 with DRB and SOFI the same day. SOFI’s initial application process was more streamlined to begin with, but after submitting the required documents, I received repeated requests for more documents. It seemed never ending because I would not hear anything for a week or two and then they would request another document. I think my application was a little more complex because I have and LLC and S-corp, but they should be used to applicants like me. DRB required more paperwork up front, but did not have as many follow up requests. In the end, DRB approved my loan first so I went with them. The interest rates ended up being the same for both (2.88% variable 5 year), which was the lowest they offered at the time. It was a tedious process which took about 7 weeks. I’m refinancing my mortgage now, and it has been a much easier process than then the student loan refinance. In the end, I’m very happy that I was able to refinance the super-high student loans, and the hassle was well worth it, but it ended up being much easier with DRB.
I think both companies have streamlined things significantly over the last few months to a year; at least I’m hearing fewer stories like yours as time goes on.
I have nothing to say currently regarding refinancing (other than I’ll look into it as I finish residency), but I believe that is Christopher Columbus.
There is a lot of talk recently about relying on PSLF and 501(c)3. I would like to extend caution that there has yet to be a PSLF loan forgiven, in fact, the first will be in Oct 2017. Between now and then, there are A LOT of politics that will occur and A LOT of debt discussions. I have serious doubts in this administration or the next not adding this, soon to be, very expensive entitlement program to the chopping block.
2 comments:
1) I have refinanced with sofi about 9 months ago. The process was super easy. As you mentioned, it took no time to get a quote online. Then they ask you to submit a few documents via upload to their site. Paystubs, drivers license, and loan statement. That’s it. They even accepted .jpg photos of these documents that I shot with my iphone–this seemed very laid back and very “silicon valley.” The underwriting process did take about a week. Then I got an email stating that it was all a go, and my rate didn’t change. I got the 5 year fixed rate option last year for 3.99%, which saved me 2.81%. In the end it didn’t mean much as I just paid off the loan in about 9 months–4 years ahead of schedule. They didn’t make much off of me! But I did get the free way-to-tight T shirt and some coffee out of the deal and saved some interest.
As an aside, I just filed an application with their competitor, CommonBond. I am in the underwriting stage now. I went hog wild and applied for the 5 year variable rate, and I did get the lowest advertised price of 1.92%. Lets see if it sticks after underwriting. To be honest the only reason I’m going with them this time is because I happened to click the link on your site and it was so easy to do (I seriously did it during a 30 min slot a patient no-showed to clinic). If it comes thru and stays at 1.92%, Ill sign with them and take the $300 bonus you’ve set up. Thanks! This time I plan to pay the minimum and invest whatever I would be throwing at the loan on the margin.
2) As an oncologist who’s partners own an infusion center I can say those guys are playing with fire! At least in oncology its a tough business buying and administering drugs these days. The senior partner has told me that 25 years ago he would buy 5FU for $5000 and makes $4950. Now he buys it for $5000 and makes $50. That’s supposed to cover the overhead of administering drug AND compensate him for tying up what amounts to millions a year in “drug cost.” Imagine what would happen when one patient dies/leaves town/insurance rejects after you’ve ordered rare drug (think radiopharmaceutical) with your own money! Not worth the risk to me, even for all the airline miles in the world!
I’m lost. What did you refinance with Common Bond if you paid all your loans off in 9 months? Your spouse’s loans?
I had 2 sets of loans: federal at 6.8% (refinanced with sofi) and a consolidated loan at 3.9%. I really had no interest in refinancing the 3.9% loan (after all, that’s the rate I got INTO with sofi) until I saw the super low rates. I realize it may go up as a variable loan, and if it does I’ll pay more aggressively.
just an update for anyone who cares, I finished the app process for common bond and it was one week from initial online application to signing the loan documents. Took one 5 minute phone call to ask a few questions I couldn’t find on the web. The final rate came back just as they quoted it in the initial computer-generated quote. Couldn’t have been easier.
And yes, one of those questions I had was “am I getting my $300 bonus from WCI?”
Glad to hear it. I’ve been getting lots of good feedback about Common Bond lately. In fact, feedback for all these companies has improved dramatically over the last year. Much lower percentage of “disgruntled” customers.
My step daughter is in a Pathologist’s Assistant {MS} program and will have a bunch of loans at lousy rates upon finishing grad school in 2 years. Would she qualify for SoFi refinancing even though she is neither a Stanford alum nor a medical resident?
Also, I would be happy to have a t-shirt, size XL if available. Thanks!
Most will qualify for refinancing. You certainly don’t have to go to Stanford. If you want a T-shirt, you can send me your mailing address and size in an email and I’ll forward to SoFi.
2XL for me, thanks! Really enjoy your column.
i was always cautioned in Med School to NOT refi Fed loans. Fortunately my Fed loans (although quite high) are a mix of 2.8% to 6.8%, but I was always told to not refi in case of the horrible possibility of premature death. My wife (also a physician with about the same dept as me) would then be required to pay off the private refi loan?? It sounds like in your post that SoFi wrote off those two cases so far but will that always happen. If love to get a lower rate and support a great startup like SoFi but I am cautioned because I would not want to stiff my family with repayment of my loans.
I just reviewed my lending agreement: loans are discharged for death or if one becomes “totally and permanently disabled.”
Took me about 5 minutes to get my SoFi rate, and the whole process was less than a week from application to funding. DRB was about a month from application to acceptance. Not Sofi’s best rate, but I’m a primary care doc with pretty high debt burden. Process was super easy though, and finally the loan balance is going down instead of up.
That is great to hear! Thanks for replying.
The worry over someone being left with a student loan should be a non-issue. Buying 200-300k of term life insurance or upping your monthly disability policy should be pretty dirt cheap without much extra per month**if you are healthy** Thats a big savings on the interest rate though if your at 6.8% or higher.
+1, if there is any concern with discharge at death, just grab some cheap term insurance. For a healthy doc in his 20s, 30s, you could probably get $500k for ~$20/mo.
No reason to blow an extra 3-4% a year on interest.
Seriously, get life insurance. Even if you don’t refinance (which you absolutely should) you should have some protection for your family. Life insurance is cheap. Refinancing will save you a bundle. You were given bad advice in Med school, likely because there was no way to refinance at a low variable rate until a few years ago. Most refinances until SOFI and DRB emerged were either combining a bunch of small loans together at a similar rate to make them easier to track or a married couple bundling their loans together. The latter always being a terrible idea.
I already have a 1 mil term life insurance plan. So does my wife (also MD). I was just confirming they have the forgiveness in death clause. I’m already looking at refi’ing the 6.8% Fed loans with SoFi. Started the process last night. My other Med Student loans are already at 2.8% so not touching those.
Rt click — view image info
Coit tower with statue of columbus 🙂
Cheater!
Medium for me please ! Love your column as well 🙂
Large T if you have one, please.
I refinanced with SOFI as soon as I read about them on this blog. I have nothing but positive things to say. I had a little back and forth about the interest rate offered due to some questioning about the income from my rental house but all email correspondence was replied to promptly. The issue was that since the property was in another state and held in an LLC there had to be a resident of that state listed on the LLC even though I was receiving 100% of the rental income. Anyway, it was sorted out with some additional paperwork and I did get the better rate. I also got ear buds, a pie and a super comfy t-shirt that I wear frequently. Friends ask me why I’m repping this company so hard. Why? They saved me thousands of dollars and I like the T-shirt. My loan has been repaid, but I still refer people to SOFI. In fact, one of my friends (ER physician) just refinanced on my recommendation. He also reported a very positive experience. Now that the alumni requirement has been dropped everyone not planning PSLF (or IBR) that is still paying interest on loans at 6.8% or worse is burning money by not refinancing. I have a couple acquaintances relying on PSLF. One currently has >400k in loans. It’s a different topic, but I would be sweating bullets if I was relying on a government promise that that is all going to be wiped away.
Good to see some love for rheum. As a rheumatologist, been following your blog for few years. You can do a separate post about IMGs who have different financial backgroud when they start working and most of them dont have any loans and most are not familiar with tax system and retirement accounts.
No SoFi quote yet. Unlike most readers of this blog I’m not in medicine, I’m a law student going the biglaw route. I’m a 3L so I’m waiting until this fall when I start work to get a quote.
Large t-shirt if you’ve still got one!
As an aside I know this blog is targeted at physicians but 95% of it seems spot on for lawyers going into biglaw. Currently about half way through your book and again most of the advice is spot on and not stuff we normally hear. So, thank you!
Application process with SoFi was terrible. After a complete application, it took about a month to get a response (any response) which was a flat rejection for no apparent reason (800+ credit score, zero debt besides student loan, etc). All the while, before, during and after we still get letters from SoFi telling us we’re “pre-approved.” Calling on the phone is almost impossible, and when you do get someone on the phone they may or may not try to be helpful, but nothing happens after that.
Refinanced with Darien Rowayton and couldn’t be happier. The process took a few weeks but it was painless, and a loan manager held my hand along the way. The one time I had to call, I got a competent and helpful individual on the phone. DRB’s rates are the same or better than SoFi, so there is little reason to choose the latter.
Seems like an ok company. I went to refinance my loans with them as a resident and had absolutely no luck. Not a great policy on their part. Was able to refinance with DRB for a similar to lower rate (although they required my wife to cosign), which was a smooth process.
I agree had the same thing happens to me. As far as I see, this is their loss. They have zero risk refinancing my loans. Both my wife and my credit scores > 800, my total annual income was 70% of the loans and had properties that are paid off. They flat out reject me because i was a resident. DRB offered me a better deal took it and paid of my loans in a year. Sofi -1 DRB + 1. By the way, WCI, the reason they gave for not refinancing residents got to be the dumbest explanation ever. Doctors have the highest earning capacity and highest graduation rate. Plus PSLF is not limited to physicians it is available to everyone. I call BS on Sofi.
I’m an anesthesiology resident finishing up my final year. A little less than 4 months left. Has anyone had experience starting the application process and using a contract to secure the loan? Should I just wait till August or September to apply? Trying to get my financial future all in line before starting in a busy private group and I don’t want to give the government a penny extra.
I believe DRB will refinance you with a contract (for that matter, they’ll refinance you as a resident if you have good enough DTI ratio). You should get the best rate now as you have a contract, so no point in waiting. Definitely worth calling them up.
I’d like a T-shirt, if some still exist. Which email address should we send addresses and size requests to?
I haven’t refinanced my wife’s student loans yet, as I’m currently in turbo-down-payment-savings mode based off of my previous year’s IBR payments. When the down payment fund at Betterment is sufficiently plump then I’ll refinance hers with whichever company offers me the best variable rate.
I’ll have to co-sign as she’s a stay at home mother, but that’s what insurance is for. Interest rate risk with the variable loan doesn’t bother me, either, as I could pay it off quickly if its rate rose above that which I expect from investments.
My pile of loans will stay with the Federal government, on the other hand, as I’m doing PSLF.
[email protected]. I plan to forward them to SoFi and let them ship em out.
Jim
Still digging the blog and continuing to hone in on fiscal relevance and security. I dropped my retirement plan on the Army and now just waiting on the approval.
Everytime I think I am doing something that creates $ sense I pause to ask, “what would they say at WCI?”
Spent a day with my youngest son who is in his first year of Med School and was reminded that this pace is a young man’s game for sure!
I am kinda of a T-Shirt junkie for the gym so the SoFi XL would be awesome but not a hill to die on! Thanks again to you and Doug for all your help. I have WCI now with many of my dentist colleges here in Italy and will continue to promote, it’s a great read!
CMR 437 Box 2654, APO AE. 09630
WCI,
Based on your review seems like it might be a good company to invest in. Would you put your hard earned money into this company prior to an IPO?
Thanks,
I don’t generally buy individual stocks. So no. Are they a bad company? No. but there are lots of great companies whose stocks I only own through index funds.
PGY-3 here with about $160k in loans. What is considered a good DTI ratio? I’m currently being destroyed at the rate of 6.5 – 8.5% interest rate. Fortunately, good support from family who’ve always valued education. As a result, I don’t “live like a resident.” However, I am still interested in getting a lower rate. Do you think it’s worth trying to submit an application to SoFi or DRB?
Is it PGY3 of 3? Then yes. If it’s PGY3 of 6, then probably not.
WCI,
Really enjoy reading your posts. Would love a large t-shirt if you have one. Thanks!
For investment products on their site I only see note backing products. I dont see anything for equity investing? Is this actually possible?
They have not had their IPO yet, so actual equity investment would be extremely limited. Companies can only have up to 5000 investors as a private company and a company the size of SoFi would require significant sums of money to get in Pre-IPO (ie. venture capitalist, institutional investors, etc).
Agree, its in all likelihood out of my ballpark and/or position size comfort zone, especially given the amounts they’ve already raised. There are ways of course nowadays to get into things like this without the whole up front cost, but of course you get the proportionate return/risk as well.
Any company that is successfully signing enough people up to refinance in a growing market such as student loans, without any defaults due to poorly chosen contracts, should have a bright future. We’ll see if that vision is diluted or maintains as they enter new markets.
Yes, it’s possible. You have to call.
I refinanced 2 loans through SoFi (private ~$30k at 8.25% variable and GradPLUS ~$30K at 8.5%) both now just over 5% on 10 year repayment plans. So I’m saving roughly $1,800/year in interest and can now focus on my loans which are 6.8% (not refinancing any other Federal loans in the off chance that the government will allow refinancing at the super low rates of long ago).
Super streamlined and easy. Word of warning: Sallie Mae/Navient tried to apply the payoff amount to my loans with already low APRs, but a quick phone call to Navient cleared it up.
Hey could I get a medium! It appears that in order to invest in SoFi you need to be an accredited investor, and I am not sure if that’s worth doing.
WCI, do you have any insight into the following conundrum?
In 2011 I foreclosed on an investment property (purposely) that was losing a lot of of money. This was during the housing bust period where there were millions of foreclosures around the nation. As a result, on my credit report there is a “derogatory” listing on that mortgage.
Other than that looks like my credit is quite good.
I’m a first yr ER doc in California (out of residency last July), have about 270K med school loans ranging from 5 – 6.8%. Would obviously love to refi my loans with SoFi, DRB or other similar companies. I’m wondering if my foreclosure above will unequivocally hurt me in refinancing my loan through SoFi, etc. I wouldn’t be surprised if you don’t know the specific answer, but you did talk to the SoFi folks for a long time on your visit to SF!
I didn’t specifically ask about foreclosures, but that does show up when your credit is pulled so you should be able to get an estimated rate in just a few minutes with either Sofi or Common Bond (who tells me they offer something similar you can do online in a couple of minutes.) It’s been 4 years so that effect is starting to fade.