When his student loans kicked in six months after graduating from Bainbridge Graduate Institute 2013, Dave searched manically for a refinancing option that would lower the 7% APR he faced over the next 10 to 15 years.
In his search, he discovered SoFi, a company that refinances loans by connecting alumni borrowers with investors. Since Dave attended Virginia Tech for undergrad, he was eligible to refinance his graduate student loans. The premise of SoFi is simple, student loans are bought out by pooled or grouped alumni.
Excited about this new company and the opportunity to save money on outrageous government backed interested rates (7+ %) , Dave suggested I also submit an application. I had yet to find a post-graduation job and was therefore planning to defer my loans and just collect the daily interest. I would simply rely on the old ‘if I don’t check on them, then they won’t affect me’ trick.
Of course, I knew that ignoring them wouldn’t make them go away and I’d end up paying more in the end, so I began the process of submitting my application to SoFi. After hours of gathering information like old paystubs, past tax information, job history, and bank statements, I submitted my application and awaited a reply.
A few days later, I was informed that I was not eligible for refinancing with SoFi, because I was not employed. With the amount of time I put into the application, I felt frustrated, though understood their reasoning. Rather than defer my loans, I switched to the income-based plan to reduce my monthly loan payments.
In the summer of 2014, after returning from a trip to Colombia, Dave and I recognized that we felt unfulfilled with our jobs and daily routine and so decided to quit our jobs and began planning our bike tour. Knowing that we would not have any income during this trip, Dave sought a second refinancing of his loans with SoFi and encouraged me to try again, now that I had a full time job making $50,000 annually.
I begrudgingly reapplied. Again, the process took me hours, with several emails back and forth to clear confusion over required documentation. And, again I was denied. This time, they told me I didn’t make enough money. Infuriated, I didn’t understand how a company that claims to help students reduce their debt won’t help those who need it most. I simply gave up and continued on with the income-based plan.
Dave, on the other hand learned that since he had taken his loans from the government into private hands (SoFi is a private company), he had no option other than to continue to pay the full amount each month. After several phone conversations with SoFi, he was told to either pay or go into default. There is no forbearance option due to unemployment, despite it clearly being labeled on their website. SoFi suggested Dave reapply for a 15-year loan, since rates went down over the last year and a half.
He reapplied, and was granted the refinance, however, not having an option to pay interest only meant we would somehow need to find an extra $6,000 to fund Dave’s loans for the year.
Like most traditional lenders, SoFi judges a customer solely based on the paper documents that support their finances.
Do they make XX amount of money?
Do they have enough money in the bank?
They don’t look at payment history. They don’t ask for references. They don’t have a conversation with you.
Fed up with SoFi, Dave sat down to have a conversation with our friend Diane Freaney, founder of Rooted Investing, a company Diane created using her retirement funds. Rather than keep her money in investments that pay high executive salaries, Diane decides what she does with her own money and invests in her community as a personal lender.
In our conversation with Diane, Dave explained our situation and communicated how much we could afford to pay on a monthly basis. Diane listened and agreed to Dave’s payment plan, as long as he made up for it over the years immediately following our return from traveling.
By refinancing with Rooted Investing, Dave lowered his APR to 3% and reduced his monthly payments to $200, agreeing to pay $407 upon our return.
Jen opted to keep her loans with the government, since she can choose the income-based plan. She can pay as she can with this plan, and her loans will be forgiven after a certain date.
Because Rooted Investing took on Dave’s loans, it enables us to continue our travels for longer than we would have had Dave continued on with SoFi. A simple conversation between a lender and her client allows us to save more money, Diane to earn money, and us to follow our dream of traveling the world by bike with our dog.