SoFi, an online personal finance company, has partnered with Fannie Mae to offer student loan borrowers a cash-out refinance option. This new loan option, called Student Loan Payoff ReFi, allows consumers to use their home equity to pay off their student debt.
By paying down student debts, borrowers can experience increased financial freedom due to the lower rates of mortgages. The spread between student and mortgage rates makes this cash-out refinance option highly attractive. Additionally, compared to other traditional cash-out refinancing, SoFi’s product is priced 25 basis points lower. By staying within certain investor criteria, approximately 8.5 million of the 44 million US consumers with student debt who are also homeowners will qualify for the loan.
Still early in its development, SoFi and Fannie Mae see a lot of potential with the new product offering. Although the concept of refinancing is not new, the Refi program stands out as SoFi will pay the student debt servicer directly from the proceeds of the ReFi. This product will now help homeowners turn traditional mortgage holding into an opportunity to ease their student debt burdens, thanks to today’s low-rate environment.