Reviews consolidating large student loans 27
So Fi pays off the student debt with the extra cash and the borrower is left with a new, larger mortgage, but at a lower interest rate.Borrowers already have the option of taking out a home-equity loan or line of credit and paying off their student debt.Rates on a 30-year fixed-rate mortgage currently average around 3.5 percent.The new program also waives origination and other lender fees.But since second home loans generally carry higher interest rates than a first mortgage, there’s often little benefit to doing so, said Michael Tannenbaum, senior vice president of mortgage at So Fi.With the So Fi program, the loans are combined into a single home loan, at current mortgage rates, which remain historically low.The current rate for federal undergraduate student loans is 3.76 percent; the rate for federal Plus loans, for parents of undergraduates or for graduate students, is 6.31 percent.
The current average rate for a fixed-rate private student loan is about 6.5 percent, Mr. About 41 percent are homeowners with their own student debt; more than a third are co-signers of student loans.
You’ll pay a lower rate, but for a longer period of time.
The standard student loan repayment plan is 10 years, while most mortgages are 30-year loans (although 15-year loans are an option). Tannenbaum said that borrowers with federal and private student loans could benefit from the payoff program, but he considered it a “slam dunk” for those with private loans.
In contrast, defaulting on student loans means you may ruin your credit and face financial havoc, but you’re unlikely to lose the roof over your head, said Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.“This adds a new layer of risk,” Ms. Borrowers with federal student loans, in particular, should think carefully before making such a trade.
Federal loans, unlike most private loans, come with protections, like the option to defer payments if you lose your job and flexible repayment programs that tie your monthly payment amount to your income.