PenFed Student Loans Review: Consolidate and Save?

When navigating the complex world of student loan debt, refinancing can be a powerful tool. PenFed Credit Union offers student loan refinancing as one of its financial products, allowing borrowers to consolidate their existing student loans into a single, potentially more manageable payment. This article provides a comprehensive review of PenFed's student loan refinancing program, exploring its benefits, drawbacks, eligibility requirements, and alternatives to help you determine if it's the right choice for your financial situation.

What is PenFed?

PenFed (Pentagon Federal Credit Union) has a long history, originating as the Department of War in 1935. In 1947, it transitioned into the Pentagon Federal Credit Union, expanding its services to provide banking for members of the armed forces and associated civilians. PenFed is also an online banking resource for military personnel and their families stationed overseas.

Unlike many credit unions that restrict membership to specific geographic regions or affiliations, PenFed offers open membership to anyone, regardless of military status. However, becoming a member is a requirement for loan approval. As a credit union, PenFed often offers lower interest rates on debt consolidation loans compared to many online lenders. PenFed has physical branches in 13 states, Washington, D.C., Guam, and Puerto Rico, and maintains a strong online presence due to its military focus, including ATM access.

PenFed Student Loan Refinancing: An Overview

PenFed's student loan refinancing program, powered by Purefy, allows borrowers to consolidate their student loans into a single payment. However, federal borrowers who consolidate their federal loans with PenFed will lose certain benefits such as forbearance, deferment and income-driven repayment plans.

Who is PenFed Best For?

PenFed is best suited for borrowers who:

Are already members of the credit union or are willing to become members.
Are looking to refinance a significant amount of student loan debt.
Can meet the credit union's eligibility requirements

Pros and Cons of PenFed Student Loans

Pros:

Cosigners Allowed: Enlisting a cosigner can improve your chances of approval or secure a lower interest rate.
High Maximum Loan Amount: Borrow up to \$500,000, making it suitable for those with substantial debt.
Flexible loan terms: PenFed offers five-, eight-, 12- and 15-year repayment terms. The latter two options could decrease your monthly payments if needed.
Parent PLUS refinancing: Parent borrowers can consolidate PLUS loans with other kinds of federal direct loans, including subsidized and unsubsidized.

Cons:

Membership Required: You must become a PenFed member to get a loan, requiring a minimum \$5 deposit in a savings account.
Undisclosed Timeline on Approval Process: The exact timeframe for loan approval isn't specified.
No concrete forbearance or deferment options: PenFed does not advertise deferment or forbearance. The company will work with borrowers on a case-by-case basis, however, in the event they lost their job.
Low maximum loan amounts: While many refinancing companies don't have a hard-fast maximum loan limit, PenFed borrowers can only refinance up to $300,000 in student loans.

PenFed Student Loan Refinance Rates and Terms

Fixed Rates: Range from 3.43% to 15.99% APR with all discounts.
Loan Amounts: While many refinancing companies don't have a hard-fast maximum loan limit, PenFed borrowers can only refinance up to $300,000 in student loans.
Loan Terms: 5, 8, 12, and 15-year repayment terms.

Eligibility and Requirements

To refinance student loans with PenFed, borrowers must meet certain eligibility criteria:

Membership: You'll need to be a member to get a loan. You're automatically eligible if you're in the military or an employee of a qualifying organization. But anyone can become a member simply by opening a savings account with a $5 minimum deposit.
Credit Score: While PenFed doesn’t explicitly state a minimum credit score, aiming for at least 600 is advisable.
Income: To apply for a loan of $150,000 or less on your own, you have to earn at least $42,000 a year and have a credit score of 700. And if you want to borrow more than $150,000, you’re going to have to earn at least $50,000 annually and have a credit score of 725 or more.

How to Apply for a PenFed Student Loan Refinance

Applying for a loan with PenFed is a two-step process.

Check Rates: To find pre-qualified rates you must enter your name, date of birth, citizenship status, home address, loan amount, income, housing expenses, school name, degree information, and expected graduation date. All of this information will lead to a “soft” credit inquiry or pull and won’t affect your credit score.
Complete the Application: After reviewing your interest rate offer, you can opt to complete the application process, which includes a “hard” credit pull. Hard credit checks may impact your credit score temporarily. Apply to lender and submit documents to verify your identity. This may include income information, employment information, and address verification.

Fees

PenFed does charge a late fee of $29 for payments more than five days late, which is a little higher and less of a grace period than what many lenders offer. A good way to avoid late payment fees is to set up autopay, which takes the money out of your account on the same date every month. If you set up autopay, though, make sure you have the money in the account when it’s due - PenFed also charges $30 for returned payments. You also must become a PenFed member, which means opening a savings account with a minimum $5 deposit. The account can’t go below $5 for more than six months, or you lose your membership. PenFed has a $15 inactive account fee, so be sure to make deposits once in a while to keep the account from zeroing out. If you have a PenFed regular savings account, you can make withdrawals and check balances at ATMs, but there is a $1.50 fee for the former, and a $1 fee for the latter, so keep that in mind, too, if your savings balance is low and you don’t want to zero out.

Customer Experience

PenFed has an A+ rating from the Better Business Bureau. Customers who gave good reviews on various sites are impressed at PenFed’s low rates and the fact they could get a loan for as much as $50,000. Positive reviews called the process “flawless,” and praised the fast pace of application and quick deposit of the loan money. Most of PenFed’s reviews exemplify a sound, reliable company. Negative reviewers didn’t like having to become a member to get a loan, and also complained of being locked out of accounts without adequate customer service assistance. Some were confused as to why they were denied a loan despite a high credit score.

Alternatives to PenFed Student Loans

If PenFed isn't the right fit, consider these alternatives:

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SoFi: SoFi offers competitive APRs and a "Good Grade" bonus for students with a GPA of 3.0 or higher. If your credit isn't in the best shape, SoFi's maximum interest rate is lower than what you could pay with PenFed.
Earnest: Earnest offers competitive rates and doesn't charge any fees, including delayed payment fees. Earnest also allows borrowers to miss one payment per year, in the event of financial hardship. However, that will extend the loan's term length.
Discover: Discover has APRs of 6.99%-24.99%, for loans of $2,500-$40,000, with 36-84 month terms. There is a minimum income requirement of $25,000. Discover takes a holistic approach to applicants, which includes credit history, finances, and income.
Lending Club: Lending Club accepts credit scores as low as 600, but the lower your score, the more you will pay. There is a 3%-6% origination fee and APR is 9.57%-36%. Loan amounts range from $1,000-$40,000 for terms of either 36 or 60 months. Lending Club also requires a debt-to-income ratio of 40%. Lending Club, like PenFed, allows co-borrowers.
Upgrade: Upgrade is a fintech company that matches borrowers with loan offers. It works with small banks and credit unions, and in doing so, keeps rates manageable for borrowers with good credit. Applicants will see multiple offers with a variety of terms and rates. Upgrade debt consolidation loans of $1,000-$50,000 have 24-84 month terms with 8.49%-35.99% APRs. Applicants with poor to bad credit can expect to get fewer offers and will likely have high APRs.

Debt Management as an Alternative to Debt Consolidation

If you can’t, or don’t want to, borrow money to pay off debt, a debt management plan may be a good option. Nonprofit credit counseling agencies offer DPMs to help consumers budget and plan finances while eliminating debt. A debt management plan should lower the interest rates on your debt and reduce the monthly payment, providing relief from pesky debt collectors. Plans take 3-5 years, and you make a fixed monthly payment to the nonprofit credit counseling agency that’s based on your budget.

Is PenFed Student Loan Refinancing Right for You?

Deciding whether PenFed student loan refinancing is the right choice depends on your individual circumstances.

Consider PenFed if:

You meet the credit score and income requirements.
You are comfortable becoming a PenFed member.
You want a fixed-rate loan with potentially lower APRs.
You have a cosigner to improve your chances of approval or secure a better rate.

Explore Alternatives if:

You don't meet PenFed's eligibility requirements.
You prefer a lender with more flexible forbearance options.
You want to compare rates and terms from multiple lenders before committing.

Important Considerations Before Refinancing

Before refinancing any student loan, keep the following in mind:

Federal vs. Private Loans: Understand the differences between federal and private student loans. Refinancing federal loans with a private lender means losing federal benefits like income-driven repayment plans and forbearance options.
Interest Rates: Compare interest rates carefully. Consider whether a fixed or variable interest rate is best for your situation.
Loan Term: Choose a loan term that balances manageable monthly payments with the total interest paid over the life of the loan.
Fees: Be aware of any fees associated with refinancing, such as origination fees or prepayment penalties (PenFed does not charge these).

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