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.
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.
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.
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!