The Federal Trade Commission and SoFi on Monday settled a complaint accusing the student loan refinancing company of misleading its customers in advertisements.
The FTC, which doesnâ€™t have the authority to fine SoFi, alleged that the company has been guilty of false advertising since at least April 2016, in part through the lenderâ€™s average savings claims. One TV ad, for example, touted that SoFi members saved $22,359 on average by refinancing.
The government agency argued that SoFi inflated these average savings totals by leaving some of its customers out of the equation. More specifically, it said the lender didnâ€™t include borrowers who lengthened their loan term via refinancing to reduce monthly payments â€” and thus didnâ€™t save at all.
Further, the FTC complained that potential SoFi customers werenâ€™t advised that refinancing could sometimes cost them more money. These potential borrowers would reach a page on SoFiâ€™s website during the pre-qualification process and be told their savings was zero.
â€śStudent loan debt is a huge problem facing students and graduates across the country,â€ť FTC Chairman Joe Simons said in a news release. â€śLenders who offer refinancing options must be upfront with students about savings. They cannot make deceptive claims and bury the truth in fine print.â€ť
SoFi was ordered â€” and agreed â€” to halt the specific messaging across its products. SoFi could face civil penalties if it violates the order. Besides student loan refinancing, the company also offers personal loans, mortgages and wealth management.
â€śWe have always been committed to giving our current and prospective members clear and complete information with which to make smart financial choices, and are pleased to have this matter resolved,â€ť a company spokesperson wrote late Monday to Student Loan Hero via email.
In web ads and TV commercials promoting average customer savings, a few facts about student loan refinancing could be lost in the shuffle.
First of all, not all student loan borrowers benefit from refinancing â€” or benefit in the same way.
You might not save money, for example, if you elect to lengthen your loan term. Moving your federal loans on 10-year repayment terms to a private loan repaid over 15 years, for instance, would allow interest to accumulate.
But refinancing could help you to reduce monthly payments so that you donâ€™t fall behind in repayment and risk delinquency or, worse, default.
Also, refinancing could be a boon simply because it consolidates your original federal and private loans into one new loan with a single monthly payment. And if youâ€™re fed up with federal loan servicers, refinancing would also allow you to choose a lender that caters to your needs.
That said, if you refinance, be sure you wonâ€™t need the special loan protections that come with federal loans, such as loan forgiveness or income-driven repayment. Refinancing turns your federal loans into a private loan, so you would lose access to these.
Itâ€™s also important to remember that to achieve the highest possible savings with any lender, you generally need a sparkling credit score. In most cases, the higher your credit score, the lower your rate â€” and the more money you could save by refinancing.
Itâ€™s wise to examine how you could benefit from refinancing, rather than basing your views on how itâ€™s helped, say, your former classmates. To let the numbers speak for themselves, enter your loan information into our student loan refinancing calculator and see what you find out.
5.99% To 35.99% APR
6.99% To 15.49% APR
6.99% To 24.99% APR
3.34% To 16.99% APR
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