Student Loan Refinancing
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Student Loan Refinance 101
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You’ve been told time and time again that you need to get rate quotes from multiple lenders before refinancing your student loans. Two top student loan refinance companies are PenFed Credit Union and SoFi. While they both offer several loan options and competitive interest rates, they differ from one another in several key ways.
If you’re trying to decide between PenFed and SoFi, here’s what you should know.
PenFed and SoFi both offer student loan refinancing for federal and private student loans. However, they are very different companies.
PenFed is a credit union, meaning it’s a non-profit organization and you become a member when you take advantage of its loans and other products. PenFed has a long legacy; it was founded in 1935, and now serves over 2 million members worldwide. It provides loans and other financial products to people in all 50 states and the District of Columbia, as well as Guam, Puerto Rico, and Okinawa.
By contrast, SoFi is a younger for-profit business. It was founded in 2011 by Stanford University business school students. Today, SoFi has over $50 billion in funded loans, and it’s served over 1.8 million members. Like PenFed, SoFi offers its products in all 50 states and the District of Columbia.
Both PenFed and SoFi offer student loan refinancing, so how do they measure up against one another? At Purefy, we did an intensive review of both of these companies so you can make an informed decision about which lender is best for you.
SoFi is well known for its refinancing options. College graduates can refinance their loans without worrying about origination or application fees, and SoFi offers competitive interest rates and other perks.
With SoFi, you can refinance the following loan types:
Specialty student loans, such as bar loans and residency loans, cannot be refinanced with SoFi.
For loans to be eligible for refinancing, they must have been used to attend an eligible, accredited Title IV school. If you used your student loans to attend other institutions, such as for-profit schools, you aren’t eligible for refinancing from SoFi.
The minimum amount you can refinance is $5,000. SoFi doesn’t have a limit on how much you can refinance; you can refinance up to the full amount of your outstanding student loans.
However, that doesn’t necessarily guarantee that you’ll get approved for the full amount. SoFi will review your application and will perform a credit check to determine how large of a loan you can afford to repay. Depending on your circumstances, you may not be able to refinance the full amount unless you have a cosigner.
To qualify for a loan, you must have graduated from your program. SoFi requires borrowers to have at least an associate degree. If you dropped out of school or are currently still enrolled, you aren’t eligible for refinancing.
With SoFi, you can pick between fixed and variable interest rates. While fixed rates stay the same for the duration of your repayment term, variable interest rates can change along with market conditions.
While SoFi does allow you to apply for student loan refinancing with a cosigner, it does not offer cosigner releases. Your cosigner will remain on the loan until it’s paid off, or until you refinance again solely in your name.
Not being able to get a cosigner release is a major drawback, and something to carefully consider before submitting an application through SoFi.
SoFi has multiple repayment terms to choose from. You can opt for a loan term of five, seven, 10, 15, or 20 years.
In general, the shorter the loan term you select, the lower your interest rate will be. Extending your loan term will give you a smaller monthly payment, but you’ll likely get a higher interest rate and pay more in interest charges over time.
SoFi has two potential discount programs:
After your refinancing loan is disbursed, SoFi is not your loan servicer. Instead, your loan will be serviced by MOHELA. MOHELA is the company you contact if you have any questions or issues with your account.
As a refinancing lender, SoFi has three major standout features:
SoFi is a large company, so it isn’t surprising that some customers have lodged complaints against the lender. In 2020, 22 consumer complaints were submitted to the Consumer Financial Protection Bureau (CFPB) about SoFi’s student loan division. The most common issues were problems with customer service and receiving confusing information. You can view current complaints on the CFPB Consumer Complaint Database.
A leading review website, TrustPilot is a common resource for consumers looking for information about companies. On the site, SoFi has a 3.3 TrustScore based on over 2,400 reviews, giving it an “average” rating.
SoFi is recognized by industry experts as a leading lender. In fact, it was NerdWallet’s choice for “best refinancing lender for doctors” in 2020.
PenFed offers a range of financial products, including savings accounts, personal loans, and student loan refinancing. PenFed is a credit union, and it gives its members special benefits and discounts.
Like SoFi, you can refinance the following loan types with PenFed:
The minimum loan balance you can refinance is $7,500, and the maximum is $300,000.
PenFed only offers fixed rates, so you would not be able to select a variable rate option like you would with SoFi.
PenFed offers multiple loan terms. You can choose a term of five, eight, 12, or 15 years.
To get the lowest possible rate, it’s typically best to opt for a term of eight years or less. If you want a smaller payment, opt for a term of 12 or 15 years.
PenFed allows you to apply for a refinancing loan with a cosigner. However, adding a cosigner to your PenFed loan application doesn’t have to be a permanent decision.
Unlike SoFi, PenFed does offer cosigner releases. After making 12 monthly, consecutive payments on time, you can apply for a cosigner release.
Unlike some other lenders, PenFed doesn’t give borrowers an autopay discount. However, it does have some other benefits:
PenFed is both your lender and loan servicer; PenFed is who you contact if you have any questions or to make payments. Having the same company act as both lender and servicer ensures a smooth transition between when you submit your application and when you start making payments on your new loan.
PenFed has two valuable perks as a refinancing lender:
PenFed has an established reputation for excellent customer service. In fact, PenFed received just one complaint about its student loan division in 2020, a remarkably low number for a private student loan refinancing company.
On TrustPilot, PenFed has a 4.6 TrustScore based on 112 customer reviews, giving it an “excellent” rating.
In 2021, NerdWallet selected PenFed as the best overall student loan refinancing company, and the best student loan refinancing company for fast payoff.
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While both PenFed and SoFi are excellent refinancing lenders, PenFed is our choice for the best student loan refinancing company because it offers the following advantages:
As the only lender that allows spouses to refinance their loans together, PenFed stands out as an industry leader. Spouse loan refinancing is a convenient option for couples who both took out student loans to pay for school, but it’s also useful if you are a stay-at-home spouse or earn significantly less than your partner.
When you apply for a spouse refinancing loan, PenFed will look at your combined income and the higher of the two credit scores. If one of you has an advanced degree, PenFed will also use the higher degree when determining your interest rate.
PenFed’s spouse loan refinancing program can help you qualify for a lower interest rate than you’d get on your own and help you tackle your combined debt as a team.
Adding a cosigner — a parent, relative, or close friend with good credit and reliable income — to your loan application improves your odds of being approved for a loan and getting a competitive interest rate.
However, acting as a cosigner can be a significant burden, and can keep your loved one from being able to qualify for a home loan or mortgage. As your credit improves and your income increases, you want to consider applying for a cosigner release to remove your cosigner from the loan.
Cosigner releases aren’t common for student loan refinancing lenders; SoFi doesn’t offer them. However, PenFed does; if you qualify, your loved one’s responsibility for the loan is eliminated. And while many lenders require you to make payments for several years before you can apply for a cosigner release, you can apply for a cosigner release from PenFed after just one year of one-time monthly payments.
PenFed has multiple loan terms, but it also has different automated options you can use to accelerate your debt repayment. The lender doesn’t charge prepayment penalties, and you can set up automatic payments for more than the minimum amount required. If you want to make biweekly payments to cut down on the interest that accrues, PenFed allows that option too.
While credit union membership is required to qualify for a loan, becoming a member isn’t difficult or expensive. You can join online, and membership costs just $5 to get started.
Once you’re a member of PenFed Credit Union, you can take advantage of special member perks and discounts. Below are just a few of the discounts you can use:
With other refinancing lenders, the lender you send your application to isn’t the same company that manages your loan. Many lenders outsource the loan servicing aspect to other companies, and your loans can be sold and transferred to different servicers over time. The uncertainty can make managing your loans more complicated, and the level of customer service can vary from servicer to servicer.
PenFed provides its own in-house servicing for refinanced loans. If you have questions, problems with your account, or want to make extra payments, you’ll always know who to call.
6. PenFed has transparent eligibility requirements
With many lenders, figuring out whether you are eligible for a refinancing loan is difficult since they don’t often post their exact requirements. However, PenFed prides itself on transparency, so you can see if you meet its criteria — and if you need a cosigner — before you submit an application:
If you join PenFed Credit Union to refinance your student loans, you are an official member and can take advantage of PenFed’s other financial products and services, including:
When you’re thinking about refinancing your student loans, it’s important to check rates and terms from several different lenders. As two top student loan refinancing companies, PenFed and SoFi are great lenders to start with when you do your research.
Our Top-Rated Picks for 2022 Offer Low Rates and No Fees
When comparing student loan refinancing companies, consider the following factors to narrow down your list:
If you’re looking to save time as you comparison shop, use Purefy’s “Check Today’s rates” tool. By filling out one simple form, you can get rate quotes from multiple refinancing lenders without affecting your credit score.
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