PenFed Student Loan Refinancing Review: Is It Right for You?

PenFed Student Loan Refinancing Review: Is It Right for You?

Refinancing APRs starting at 1.89%. Checking your rates won’t affect your score.

Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

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With the PenFed student loan refinance program, you may be able to get a lower interest rate or monthly payment on your education debt.

PenFed is a good fit for bachelor’s degree-holders with multiple student loan types who have solid-to-stellar credit and income (or access to a cosigner who does). It’s especially useful when attempting to consolidate spousal or parental student loan debt.

Let’s review the basics of PenFed student loan refinance, plus the credit union’s application process.

Established in 1935, Pentagon Federal Credit Union serves about 2 million members nationwide. PenFed primarily serves government employees and military personnel, but you don’t have to belong to either group to join.

Here’s what you need to know about the PenFed student loan refinancing program, which has been powered by Purefy since 2016:

  • Refinance $7,500 to $300,000 in student loans
  • Private and federal loans are eligible, including parent PLUS loans
  • Consolidate your significant other’s loans into a PenFed couple loan
  • Refinance parent PLUS loans into your child’s name
  • Fixed and variable APRs available
  • Estimate your rate using the lender’s Find My Rate Tool (without submitting to a credit check)
  • No application, origination fees or prepayment fees
  • Choose from four repayment terms: five, eight, 12 or 15 years
  • Option to apply with a cosigner

Keep in mind, however, that to reap the rewards of PenFed student loan refinancing, you must be a bachelor’s degree-holding U.S. citizen. Also, your creditworthiness will be put under the microscope.

  • Credit score: PenFed requires solo applicants to have a 700, or a 670 when applying with a spouse or cosigner
  • Income: PenFed requires lone applicants to prove earnings of $42,000, or $25,000 when applying alongside a cosigner

With all that said, if you’re interested in the PenFed student loan refinancing program, there are some key benefits and drawbacks to consider.

What to like about PenFed student loan refinance

Competitive fixed and variable interest rates

PenFed advertises both fixed and variable interest rates, and they’re competitive with APRs promoted by more well-known banks and online lenders.

Remember that if you choose a fixed rate, you won’t have to worry about your interest rate changing over time like variable interest rates do. Inherently riskier, variable rates start out lower but could rise over time.

Your APR will also depend on your creditworthiness (or that of your cosigner) as well as which of the following repayment periods you choose for your PenFed student loans:

Term (years) Lowest fixed APR* Lowest variable APR*
5 3.23% 2.58%
8 3.45% 2.64%
12 4.18% 2.84%
15 4.39% 2.97%
* APRs current as of Aug. 24, 2020

Consolidate your partner’s debt with PenFed’s couple loan

The credit union’s spouse loan makes it possible for couples to save money on their student loans without having to refinance separately.

If both you and your significant other have student loans, you can combine them into a couple loan. When you apply for a couple loan, PenFed combines your incomes and bases your interest on the higher of your two credit scores. Either you or your partner must have a 670 credit score and $42,000 in annual income.

Consolidating student loans with a spouse isn’t the right move for everyone, however, so proceed cautiously.

Refinance parent PLUS loans, possibly into the student’s name

It’s also possible to refinance federal parent PLUS loans, either as the mom or dad, or as the ex-student.

However, if you’re the parent, your son or daughter must be the primary borrower on at least one other loan to be eligible for PenFed student loan refinance.

Shopping around will help you secure your best loan terms, however, so check out the offerings of competing lenders that refinance parent PLUS loans.

Option to add a cosigner — and release them in 12 months

Adding a student loan cosigner with good or excellent credit can increase your chance of getting a lower interest rate. It can also help you qualify for PenFed student loan refinance.

Loan amount You’ll need a cosigner if your … And your cosigner needs …
Up to $150,000 ● Credit score is 670 to 699
● Income is between $25,000 and $41,999
● A 720 credit score and $42,000+ income
Above $150,000 ● Credit score is 670 to 724
● Income is between $25,000 and $49,999
● A 725 credit score and $50,000+ income

If you’re adding a cosigner to your application, they must also be a U.S. citizen the age of majority in their state.

On the plus side, after 12 months of consecutive on-time payments, you can apply to have PenFed remove your cosigner from the loan. At this time, PenFed will reevaluate your financial and credit profile to make sure you qualify for a cosigner release.

Cosigners are jointly responsible for the student loan debt. So, cosigning a student loan can be risky for both the cosigner and the primary borrower. PenFed student loans’ cosigner release policy can help resolve any long-term concerns.

In-house loan servicing

This national credit union also stands out for servicing its own loans. If you elect to apply for PenFed student loan refinance, you won’t have to worry about your new debt being passed off to a loan servicer that manages your repayment.

Unfortunately, that is the case with other refinancing lenders, who may issue your new loan before sending you elsewhere to make your monthly payments.

What to keep in mind about PenFed student loan refinance

PenFed Credit Union membership is required

Like most other student loan refinancing credit unions, PenFed has certain eligibility requirements to become a member. The good news is you can bypass those requirements if you apply for its student loan refinancing program.

After you’re preapproved, you’ll fill out a membership form as part of the underwriting process. Once you’re approved, you’ll be a full-fledged member and will have access to PenFed’s other products and services.

PenFed doesn’t charge a membership fee, as you only need to maintain a $5 savings account balance. Also, PenFed provides member discounts on home, auto, financial and other services.

Other eligibility requirements can be stiff

To be eligible for the program, you must meet some basic requirements:

  • Be a U.S. citizen
  • Be at least the age of majority in your state
  • Be the borrower on at least one outstanding education loan
  • Have a bachelor’s degree or higher
  • Have a strong credit history
  • Have an annual income of at least $42,000 (or $25,000 with a cosigner)

PenFed also requires an annual income of at least $42,000 and a credit score of at least 700 to apply without a cosigner. Even with a cosigner, you must earn at least $25,000 and have a 670 credit score or higher to qualify.

If you can’t meet these thresholds, no sweat: Some other refinancing programs have no minimum income requirements or require as little as $24,000 annually.

In fact, there are a handful of cases where an alternative lender might be more accessible should you find yourself ineligible for PenFed student loan refinance:

Scenario Alternative lender
You’re still in school or have an associate degree EdVestinU works with borrowers who hold an associate degree, or didn’t graduate
You’re a noncitizen Prodigy Finance is among lenders assisting international borrowers
You have less than $7,500 in loans to refinance LendKey sets its minimum lending amount at $2,000
Your income is below $42,000 (and you don’t have a cosigner) Splash Financial has no minimum income requirement
Your credit score is below 700 (and you don’t have a cosigner) Earnest only requires that your score eclipses 650

Lacking deferment and forbearance options

PenFed doesn’t offer a clear-cut deferment or forbearance policy. But it does work with borrowers on a case-by-case basis during times of economic hardship.

Other extraordinary circumstances may also apply (losing a job after refinancing, an illness or a death in the family) if you’re looking for assistance with your PenFed student loan payments.

Unfortunately, if you head to graduate school, you won’t get a deferment on your payments during that time. And if you do qualify for forbearance, it may or may not be favorable. That’s because interest will continue to accrue during the forbearance period.

No industry-standard autopay discount

Some refinancing programs offer a 0.25% rate discount if you sign up for automatic payments. PenFed, however, doesn’t offer this or any other type of rate discount.

On the other hand, PenFed student loan refinance does offer low interest rates, so compare its terms to other lenders that do offer student loan discounts.

Applying for PenFed student loans refinancing

To find out what kind of rate you qualify for, you first need to share basic information about yourself, your education history and financial picture.


Next, you can share more information about your current loans, select a term and view what APR you might qualify for if you apply solo or with a cosigner.

The good news is inputting this information to figure out your rate does not affect your credit in any way because you don’t give Purefy or PenFed your Social Security number.

After you go through that prequalification process (or if you want to skip it altogether), you can apply online. You’ll need to create a student lending profile so you can log in to see your application.

To file a formal application, you’ll need to hand over screenshots or smartphone pictures of …

  • Pay stub or tax return, among other options to verify income
  • ID, such as a driver’s license or passport
  • Payoff verification statements from your existing loan servicers
  • Your diploma or transcripts

You’ll then consent to e-sign certain documents and agree to disclosures and terms and conditions. After that, you can submit your application.

When you apply, PenFed will run a credit check, which will trigger a hard inquiry on your credit report. If you apply with a cosigner, the same will happen with their credit report.

Should you apply for the PenFed student loans refinancing program?

If you meet PenFed’s income and credit score requirements, its program is worth considering. Its competitive interest rates, speedy cosigner release policy and options for couples and parents make it a strong option among top refinancing banks.

If you plan to go back to school, though, you might want to choose a program that has a deferment policy. Also, if you have federal student loans, keep in mind that you’ll lose access to student loan forgiveness and income-driven repayment plans if you refinance through PenFed.

To make sure PenFed is right for you, shop around and compare rates and other features. With time and research, you’ll find the best student loan refinancing program for you.

Student Loan Hero has independently collected the above information related to PenFed student loan refinance, which is current as of Aug. 24, 2020, unless otherwise noted. PenFed Credit Union has neither provided nor reviewed the information shared in this article.

The information in this article is accurate as of the date of publishing.

Andrew Pentis contributed to this report.

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