PenFed Student Loan Refinance: A Complete Review and Guide.
Penfed Student Loan Refinance: If you are looking for ways to lower your student loan interest rate, reduce payments, or even combine student loans with your spouse, then PenFed is one credit union offering extremely low-interest rates for qualified borrowers out to refinance their student loans.
Pentagon Federal Credit Union, shortly known as PenFed, is a credit union that serves government employees, military members and their families, and members of certain associations or organizations such as the American Red Cross or the American Society of Military Comptrollers primarily.
PenFed offers student loan refinancing options through Purefy Student Loans, and also provides checking and savings accounts, auto loans, mortgage and home equity loans, and personal loans.
This article explains the advantages and disadvantages of refinancing with PenFed. You can find out more about whether it is worth refinancing your educational debt in this PenFed review.
PenFed student loan refinancing: At a glance
PenFed is a federal credit union that majorly serves government employees and their families.
Membership with the credit union is needed to access PenFed’s financial tools
A very low rate (some of the best in the industry)
Spousal student loan refinancing option
Spousal student loan refinancing option
Easy application process
PenFed Refinance Student Loan
$7,500 – $300,000
5, 8, 12, or 15 years
3.48% – 6.03%
2.42% – 7.16%
Minimum credit score
Minimum annual income
After 12 on-time, consecutive payments
PenFed will refinance private student loans and also federal student loans, including Parent PLUS loans you have taken out for your child.
PenFed student loan refinancing could help you reduce your monthly payments on existing student loan debt by either lowering your interest rate or changing your loan repayment term—if you or your cosigner meets the lender’s minimum income and credit score requirements.
PenFed’s interest rates on refinance loans are competitive with other student loan refinancing companies.
Pros & cons of PenFed student loan refinancing
Interest rates are competitive. Rates for both the fixed and variable rate loans are below the rates charged by many other student loan refinance lenders.
There are no fees. You won’t pay any charges to apply for or originate your loan, neither will you pay any extra fees if you decide that you want to repay your loans ahead of schedule.
The refinancing process is quick. It usually takes only three to 15 days for your loan servicers to receive the funds from PenFed to pay off your outstanding debt balance, once you have been approved for a loan.
Short cosigner release. If you take out a loan with a cosigner, you can apply to have your cosigner released from the loan after just 12 months of consecutive, on-time payments. Some other lenders do not offer release until after 36 monthly payments.
Income requirements are high. Many borrowers cannot meet these requirements unless they have a cosigner. Also, PenFed’s minimum income for cosigners is more than the minimum income many competitors require.
Credit requirements are high. If you need a student loan refinance with limited or fair credit, PenFed may not be good for you. Some lenders need credit scores as low as 600, while others do not require a minimum credit score at all.
Membership is required. Since you have to be a PenFed member to qualify, not everyone will be able to refinance their student loans with PenFed.
How to get PenFed student loan refinancing
To qualify for a refinance student loan with PenFed, first you must be a member of the credit union. Generally, you could become a PenFed member through military service, government employment, or membership in select associations and groups.
You must also meet other eligibility criteria to refinance your student debt with PenFed, including these:
Be a U.S. citizen.
Have reached the age of maturity in your state.
Have at least one educational loan that has been fully disbursed.
Be the primary borrower.
Have a bachelor’s degree or higher.
Be able to provide proof of income. The minimum income required is: $42,000 for solo applications for loans up to $150,000; or $25,000 for applications with a cosigner if the cosigner earns at least $42,000 annually. For loans exceeding $150,000, the minimum annual income for solo applications is $50,000 or $25,000 with a cosigner who earns at least $50,000 annually.
Loans less than $150,000 will need a credit score of at least 670 or a cosigner with a credit score of at least 720.
For loans greater than $150,000, either you or your cosigner will need a credit score of at least 725.
If you can’t qualify for a PenFed student loan on your own because your credit score is not high enough or because you do no have sufficient income, you can apply with a cosigner for a PenFed student loan.
Cosigners share responsibility for the loan and can be held responsible for repayment if the primary borrower doesm’t pay back the loan on time.
FREQUENTLY ASKED QUESTIONS
How does refinancing with PenFed work?
Refinancing your student debt with PenFed works by taking a new loan that you use to pay off your current student loans. You could refinance between $7,500 and $300,000 of total student debt, including private student loans and federal ones like Parent PLUS loans. You can decide to take 5 to 15 years to pay it all off.
PenFed is a direct lender, but uses Purefy to process its student loan applications. Like with other credit unions, you need to become a member to take out any kind of loan. However, you can apply to become a member during the application process — and Purefy will do most of the work for you.
Both you and your cosigner could complete the entire application online. Normally, you can finish your end of the application in a day if you have all of your documents handy. But the whole process takes about 16 to 20 days from start to finish.
What happens if I refinance my federal loans with PenFed?
You will lose access to several key functions that PenFed does not offer. These includes income-based repayment plans, graduated repayment plans, deferment if you go back to school and a variety of other deferment and forbearance options. You will also lose access to student loan forgiveness programs that can wipe out all or part of your student debt.
Moreover, you may not save much — the rates PenFed offers are similar to the current rates which are set by the federal government.
How much will I pay to refinance?
PenFed does not charge any fees associated with applying — and you will not have to spend any money becoming a member and creating an account. The real cost to worry about is the interest rate.
Like most other student loan refinancing providers, PenFed offers two different types of interest rates: the fixed and variable. Fixed rates stay the same the entire time you pay off your loan and will make it easier to predict how much your loan is going to cost. At PenFed, they are low too.
Variable rates can go up and down, fluctuating over the life of your loan, meaning that your monthly repayments will also change. It can be risky, but it might drop lower than even the lowest fixed rate.
PenFed calculates its variable rates by first giving borrowers a fixed rate which is called a margin, which it adds to the one-month LIBOR rate. To protect borrowers from unnecessary high LIBOR rates, PenFed caps its variable rates at 9% for five- and eight-year loans and 10% for 12- and 15-year loans. It has a minimum variable rate of 2% too.
Does PenFed offer any discounts?
No, what you see is what you will get. Its rates are competitive even without the 0.25% discount many lenders offer for signing up for autopay.
What are my repayment options?
PenFed will only offer one standard repayment option, where you make fixed payments on your loan principal — the amount you borrowed — plus interest every month. If you have a fixed-rate loan, your repayments will stay the same. If you have a variable-rate loan, your monthly repayments will change slightly based on trends in the lending market.
PenFed also does not offer deferment or forbearance options, which means you won’t be able to put your loan on hold if you lose your job, get hurt or go back to school. However, PenFed can be flexible if you are struggling to afford your repayments and might be willing to renegotiate the terms of your loan.
Presently, PenFed gives great rates for people with a strong income and strong credit scores. These are one of the lowest rates you will find on student loan refinances. PenFed’s options for joint spouse refinancing, can be great for couples that want to lower their interest rates. Actually, if one half of the couple has a poor credit score, PenFed is likely the best option for refinancing.
Besides joint spouse refinancing, PenFed could still be a great option. It has a really easy way of getting an estimate of your new interest rate, so you can easily compare the quote to other lenders.