SoFi vs. Laurel Road: Student Loan Faceoff

If you are researching student loan financing and consolidation, you have probably run across SoFi and Laurel Road, two of the biggest names in the business. Social Finance (SoFi) and Laurel Road, a division of Darien Rowayton Bank (DRB), are both reputable lenders with some subtle differences.

Here is a comparison of the pros and cons of SoFi vs. Laurel Road and the few disparities that might make one a better choice over the other for your student loans.

SoFI

 Pros

  • Extremely low interest rates
  • Flexible loan types and repayment terms
  • Additional 0.25% discount applied for autopay
  • No application or origination fees
  • No prepayment penalties
  • Fast approval and loan funding
 Cons

  • Rigorous qualification standards
  • Minimum $10,000 in student loans to qualify
  • Requires minimum salary and credit score
  • Can’t remove a co-signer from your student loans
  • Must have a degree from an accredited U.S. university
  • Not available in Nevada
Example Scenario: $40,000 student loan debt with 6.8% interest rate and monthly payments of $460.32. If refinanced with SoFi under a fixed rate loan for 10 years.

  • Minimum savings: Save over $5,500 in interest over the life of the loan.
  • Monthly payment: Approximately $414 for 10 years to pay off the entire loan with no additional fees.
Bottom Line: SoFi is one of the best lenders in the market to refinance your student loans. If you meet their qualification standards, you should apply here first.
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Laurel Road

 Pros

  • No limits on student loan financing
  • Can refinance 100% of Federal, private, and Parent PLUS loans
  • Available in all 50 states
  • Flexible repayment terms (5, 7, 10, 15, 20 years)
  • Both fixed and variable loans available
  • Doesn’t require a Laurel Road checking account to qualify for a 0.25% rate discount
  • Might have incentives for new loans
  • No origination fees or prepayment penalties
 Cons

  • $5,000 minimum loan requirement
  • Can’t remove a co-signer from refinanced loans
  • Lender targets borrows with good credit
  • Need a degree from an accredited university to qualify
  • Forbearance program only on case-by-case basis
Example Scenario: $10,000 private student loan debt with 8.2% interest rate and monthly payments of $161.90. If refinanced under a variable rate loan for 7 years at 3.69%, you can expect the following savings and monthly payment.

  • Maximum savings: Save over $2,230 in interest over the life of your loan.
  • Monthly payment: Approximately $136 for 7 years to pay off your entire student loan.
Bottom Line: While Laurel Road might have competitive rates, there are personal loan lenders with better terms such as SoFi and Citizens Bank. Laurel Road is still an option if the others don’t fit your credit profile or preferences.
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How SoFi and Laurel Road are alike

The two lenders match up in some key areas. Both offer some of the most competitive interest rates on the market for student loan refinancing, as each has variable-rate loans that start at 1.90% annual percentage rate (APR).

Their repayment terms are the same, as are many of their qualifications. Both require a bachelor’s degree from an accredited U.S. university. Neither lender charges origination fees or prepayment penalties.

Both lenders now have a minimum loan requirement of $5,000. If you aren’t sure about your student loans totals, go to the federal student loan database and pull up a list of your student loans there. If you find that some loans are missing from the list, it could be they are private student loans, which you can refinance along with your federal loans.

There are a few subtle differences between the two lenders that might sway your decision.

The SoFi job placement advantage

One thing SoFi does that you won’t find at Laurel Road is a job placement service. In a revolutionary move for a lender, SoFi has hired an in-house team to assist unemployed borrowers in finding new jobs. The company hired the former assistant for career services from the Simon School of Business to run its career services division.

The reality is that people lose their jobs all too often. A loan company has a vested interest in getting borrowers back to work, and SoFi is a pioneer in putting job placement services ahead of collection agency calls. Among the services the company offers are customized career coaching, resume tips and training in interview and negotiation techniques.

SoFi forbearance options

Both SoFi and Laurel Road offer up to 12 months in forbearance, in three-month increments, should you suffer a financial hardship. SoFi, however, goes a step further. If your hardship persists, it works with borrowers on a case-by-case basis to figure out more flexible terms for your loan.

SoFi sign-up bonus

Lender sign-up bonuses are another perk that could make your decision easier. Some sign-up bonuses are offered for a limited time, while others are more permanent. Currently, you can get a $150 sign up bonus from SoFi as a new borrower.

The SoFi service advantage

SoFi has taken great pains to disprove the common misperception that online lenders do not offer good customer service. This starts with an emphasis on personalized and friendly service with potential borrowers.

SoFi also offers services and events for its borrowers to foster financial independence and grow a business. It has networking opportunities for its members and community events throughout the country. Members can get together for happy hour, meet with a licensed wealth advisor, and even sign up to speak with a mentor in the company’s entrepreneur program.

SoFi’s entrepreneur program is unique for this type of lender. If you want to start your own business, the company allows you to postpone, or defer, your debt for up to six months while you work toward this goal. The company also gives you access to investors, a peer network and mentors to help increase the odds of your success.

SoFi is best for customers with excellent credit and high incomes

SoFi might sound like an amazing student loan financing company, and they are. The company is also picky, with a 40% denial rate for applicants. SoFi is the best choice if you have an excellent credit score and a high income (more than $100,000 a year).

You should also have a strong employment record, good bill-paying habits, and a low debt-to-income ratio. There is no minimum debt-to-income ratio requirement, but the company wants to see that you have strong monthly cash flow and the ability to repay your loan.

The traditional Laurel Road advantage

If you’d rather borrow money for your student loan refinancing from a traditional bank, Laurel Road might be your best choice. Darien Rowayton Bank is a community bank with branches in several Connecticut communities. It has created a niche for itself as a low-rate refinancer of student loans. The company has worked with more than 12,000 borrowers since they began their program.

If you want a complete banking experience, you can probably achieve that with Laurel Road. You can open a checking account with the bank, refinance your student loans and manage all your accounts under one roof.

The downside to this is that you’ll be required to open a checking account with Laurel Road if you want to take advantage of the 0.25% automatic payment interest rate discount. Other lenders, such as  SoFi, only ask that borrowers enroll in AutoPay to get the same discount.

Laurel Road approval and funding

If you are in a hurry to get your student loan refinancing approved and funded, Laurel Road might not be the best choice. Based on past experience from other borrowers, it can take months get through DRB’s approval process. This is a community bank that is now running a nationwide student loan program. SoFi, on the other hand, often issues approval the same day and will fund a loan within the same week. If making room in your monthly budget is a priority, you might want to apply at SoFi.

Laurel Road is a good choice if you don’t qualify for SoFi

Laurel Road is also a good alternative if you don’t qualify for a loan with SoFi. SoFi’s loan requirements are fairly stringent, and Laurel Road’s are less so. The minimum qualifications for a loan with Laurel Road are a credit score in the high 600s and an annual income of $60,000. The company also wants to see a debt-to-income ratio of 40% or less.

Laurel Road has a specialized borrower program

The other instance in which you might want to consider Laurel Road is if you fall into one of their “specialized borrower” classes. Laurel Road has specific programs for MBA, law and medical school students as well as some other classes.

For example, the program for medical school graduates allows those in residency and fellowship programs to pay just $100 per month on their student loans until the end of the program. Then there is a six-month grace period before standard loan payment begin.

Bottom line

Student loan payments can drain your monthly budget and make financial independence after college nearly impossible. Both SoFi and Laurel Road are excellent private student loan refinancing companies, with a few subtle differences.

SoFi tends to beat out Laurel Road on things such as service, particularly with its community services and job placement advantage. It also approves and funds its loans faster than Laurel Road, which could take weeks or months to give you a loan approval.

SoFi is the best choice if you work in a turbulent industry, in which you might find yourself looking for work at some point. It is also a good option if you think you might want to start your own business and that a six-month payment break would be necessary.

Laurel Road is an option to consider if you don’t meet SoFi’s rigid qualifications. You also might want to take advantage of Laurel Road’s unique programs for specialized borrowers if you are in an advanced degree program and wish to defer part of your payments until after graduation.

Remember comparing interest rates and fees can save you thousands of dollars on your student loans.

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Variable:
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