Universities Promoting Student Loan Refinancing – Helpful or Gauche?
Student loan debt has reached an all-time high, with a $1.3 trillion figure commonly attached to outstanding debt. Moreover, the interest rates for direct loans first disbursed on or after July 1, 2014 have increased 0.80% year-over-year. With the increasingly high interest rates for student loans (both federal and private), many universities are feeling the need to help students understand the impact of borrowing money and the various repayment options after graduation. One option universities may consider is promoting student loan refinancing plans on the alumni website, an idea that is ever more relevant considering that the average Class of 2014 graduate enters the real world with approximately $33,000 of student loan debt.
Seton Hall University recently deployed an email to alumni advertising SALT, a nonprofit-backed educational program for students and alumni. The program is designed to impart money knowledge, useful both during college and beyond, to people associated with universities. Seton Hall is partnering with SALT to provide financial tips about topics such as budgeting, taxes, student loan repayment and career skills. The SALT program provides informational articles, tools, videos, infographics and other resources that help alumni understand the different elements of repaying student debt. Specifically, users can learn more information about payment plans, postponements, cancellations and late payments.
New York University is currently the only school within the Alumni Monitor coverage group to promote student loan refinancing lenders online. In particular, NYU promotes its partnership with SoFi directly on its Alumni Association website. Interestingly, the school does not provide any additional information about refinancing loans on its site, instead merely directing site users from its Student Loan Refinancing section to an NYU-branded SoFi page for more information. The website provides an overview of the program including the process, rates and a registration link, and advertises that alumni who apply for the program will receive a bonus when they refinance their loans.
NYU Alumni Association’s Student Loan Refinancing Section
According to The Washington Post, SoFi is one of the largest private companies to provide student loan refinancing to clients, offering lower than federal interest rates and saving members $14,000 on average. Interested alumni must have a steady income and high credit score to qualify. With this taken into consideration, SoFi proves to be a reputable company, having refinanced over $2.5 billion in loans to date.
While SoFi’s low rates can be beneficial, the cost-savings vary from client to client. According to a customer service representative, most applicants’ loans have a 6.5% interest rate or higher, and SoFi works with clients to lower their rate. However, for clients with an interest rate of under 6%, it is difficult to lower the rate tremendously. Some may argue that alma maters should not promote student loan refinancing options, but at the same time, alumni should be educated about all options for paying back their student loans, whether through a refinancing company or otherwise.
Few schools within the Alumni Monitor coverage group provide the necessary education or present all options to their alumni. Universities should break their silence on this sensitive issue and offer general information about student loan refinancing programs on their alumni sites, and at least consider partnering with student loan specialists. Students and alumni will only continue to need all the help they can get.
For more information on Alumni Monitor and our research on alumni outreach and engagement, please contact Dana Peterson at firstname.lastname@example.org or visit us at alumnimonitor.corporateinsight.com.
- Student Loans