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Student loan debt has become a tremendous burden for many Americans. Most borrowers set goals to eliminate these loans. Consolidating federal loans reduces interest rates. Federal loans are also eligible for income-based repayment plans, which are administered by loan servicers like Cornerstone Loan. Lower interest rates can be found through private student loan lenders, through refinancing from a federal loan to a private loan makes the borrower ineligible for income-based repayment plans.
Before considering refinancing a student loan, it is important to understand the difference between federal and private student loans. In this article, we evaluate federal student loan servicer Cornerstone Education Loan Services and compare it to three private student loan companies. Borrowers should consider their budgets carefully when deciding on loan terms and understand the benefits and risks of refinancing with a private student loan lender.
Cornerstone Education Loan Services
As a Department of Education approved student loan
servicer, Cornerstone Education Loan Services owns many types of federal student
loan debt. The company does not handle private student loans or other types of
debt, such as credit cards or auto loans. In this way, Cornerstone differs from
many other student loan servicers. Cornerstone Loan’s specialization in student
loans makes it an especially good choice for borrowers. Banks that dabble in student loans lack the focus on the market segment needed for excellent customer service. They tend to take a passive approach to customer service. Their goal is to service the loans with as little expense as possible. Customer service initiatives aimed at helping borrowers cuts into their profits. As a nonprofit, Cornerstone Education Services funnels its resources back into fulfilling its mission rather than extracting profits for the benefit of shareholders. Cornerstone Loan has grown popular because of its customer service philosophy. The company has been in business since 1983. In that time, it has developed programs that assist students and their families throughout the entire education financing process.
Holistic Customer Service Programs
Before students enter school, Cornerstone Loan provides financial and student loan education. Additionally, Cornerstone Loan offers advice and assistance in scholarship and grant applications. The company does this to help students borrow wisely and reduce their debt levels.
During Schooling
During schooling, Cornerstone Loan continues providing financial education and helps students stay on track with their loans. Many students forget the principles of wise borrowing and money management once they get on campus. College is an exciting time for young adults who are on their own for the first time. With their new found freedom comes responsibilities they are still learning to manage.
Traditional students have limited income and no experience with money management. As a result, they are prone to getting into debt. With the rising cost of post-secondary education and the high cost of living in many areas, students are finding themselves squeezed. Often, they turn to credit cards and other high interest loans to fill the gap without realizing the harmful impact these types of debts can have on their future. Cornerstone Loan continues its financial and debt education initiatives to help students manage their finances better and avoid these pitfalls. Because of its nonprofit business model, the interest payments made to the company are invested for the benefit of students. The company provides some of the most robust education and student borrower support in the nation.
After Graduation
Once students graduate, they can depend on Cornerstone Loan to help them during their transition from student- to working life. The company offers comprehensive customer support that helps students choose the most beneficial payment plan and create a sustainable budget. Cornerstone’s proactive approach results in a very low level of defaults on the loans it services. When borrower’s experience financial distress, Cornerstone Loan provides help in restructuring loans so they remain manageable. Today’s workforce is much more fluid than in the past, resulting in less job security. To adapt to this new environment, the government has created programs to restructure student loans and in rare cases cancel them. Cornerstone Loan has ample motivation to help its customers attain the restructuring that benefits them the most. As a nonprofit, Cornerstone Loan has the freedom to work in the best interests of its student borrowers.
The Cornerstone Loan Mission
The company’s mission statement declares that Cornerstone Loan’s purpose is helping students reach their educational goals. For many students, federal loans are critical to their ability to attend school. By helping students succeed in managing their student debt, Cornerstone Loan does its part to promote higher education. As a nonprofit, Cornerstone Loan seeks to help student borrowers manage their finances rather than increase revenue per account.
The Utah Higher Education Assistance Authority created Cornerstone to help Utah student borrowers gain access to higher education and manage expenses. As a result, the company focuses on working with students rather than increasing profits. Cornerstone has since expanded into a nationwide federal student loan servicer.
Product Specs
Cornerstone Loan receives the accounts it services directly from the federal government. It does not originate any loans. It services all types of federal student loans, including
· Perkins loans
· Direct subsidized loans
· Direct unsubsidized loans
· Direct consolidated loans
· Direct plus loans
Borrowers can make payments by phone, mail or online. Direct debit customers receive an 0.25 percent discount of their interest rate.
Pricing
Pricing on federal student loans is set by the government. Interest rates vary widely according to when the loans were taken out. Borrowers can usually get the best interest rate by consolidating all of their federal loans. If your loans have not been consolidated, Cornerstone Loan can assist in the process.
Borrowers can also lower their payments by taking advantage of federal loan programs. For many borrowers, access to these programs makes federal student loans more desirable than private student loans. These programs include:
- Income based repayment plan
- Income contingent repayment plan
- Pay-as-you-earn payment plan
These plans create a payment arrangement that fits into the borrower’s current budget.
How It Compares
We picked a few similar products available on the market to see how they compare.
SoFI
Education Loan Finance
Earnest
Cornerstone Education Loan Services
Price $$
Payments and interest rates vary by borrower.
Loan Program Offerings 5 stars
All federal direct student loans are qualified, including PLUS loans.
Eligibity Terms 5 stars
All federal student loan borrowers and qualified.
Repayment Options 5 stars
Standard and income-based plans are available.
Repayment Terms 5 stars
Federal loans have terms between 10 and 25 years.
Pros
- Comprehensive educational tools
- A+ customer service
- Nonprofit business model
Cons
- No online form submission
- Some customer reviews show customer service dissatisfaction
SoFi
SoFi provides financial services to its members nationwide. This financial services company offers much more than student loan refinancing. Its business model is similar to credit unions. Customers are members who have access to a variety of financial services. These include home loans, student loan refinance, money management and personal loans. Members also have access to career coaches and professional networking groups.
Price $$
SoFi are private student loans, so the interest rates are market based. The interest rates vary by creditworthiness and range between 2.470- and 6.990 APR.
Loan Program Offerings 5 stars
Borrowers have the choice between variable interest rate loans (2.470 to 6.990 APR) and fixed-rate loans (3.3899 to 7.979 APR).
Eligibility Terms 3 stars
To qualify, borrowers must be U.S. citizens or permanent residents. A job or other source of sufficient income must be present, though a job offer is also sufficient. Borrowers must also have a strong credit history and sustainable cash flow.
Repayment Options 4 stars
There is no prepayment penalty. As SoFI provides private student loans, income-based repayment plans and deferment or forbearance options are not available.
Repayment Terms 5 stars
Loan terms of 5,7,10,15 and 20 years are available.
Pros
- Very low rates
- Lower monthly payments
- Option to shorten term and save on interest
Cons
- Borrower becomes ineligible for income-based repayment plans
- Borrower loses deferment and forbearance options available for federal loans
Education Loan Finance
Education Loan Finance helps student loan borrowers save big money. The company notes that the average customer saves $309 per month and $20,936 in interest by refinancing with Education Loan Finance. Education Loan Finance customers improve their financial situations by using the savings to build an investment portfolio, save for a home down payment or pay off their student loans at lightning speed.
Price $
Interest rates range between 2.55 and 6.69 APR. There are no application fees.
Loan Program Offerings 5 stars
Variable- and fixed-rate loans are available. The interest rate also depends on the loan term. APRs for variable-rate loans ranges between 2.55 and 6.01 percent. Fixed-rate APRs range between 3.09 and 6.69 percent.
Eligibility Terms 4 stars
Education Loan Finance bases qualification on credit standing, debt-to-income ratio and income. Some borrowers may need a cosigner.
Repayment Options 5 stars
With no prepayment penalty, borrowers are free to pay off the loans as quickly as possible. Payments can be made by automatic debit, telephone or online.
Repayment Terms 5 stars
Loan terms of 5, 7, 10, 15 and 20 years are available.
Pros
- Low fixed rates
- Flexible terms
- No prepayment penalty
Cons
- No income-based repayment plans
- No forbearance or deferment options
- Variable rates barely lower than fixed rates
Earnest
Earnest believes that financially responsible people deserve better financial products. Its student loan refinance products deliver with low rates that save its customers thousands in interest. The company also refinances PLUS loans and provides personal loans. Earnest provides competitive products because it wants to retain good customers for life.
Price $
APRs range between 2.47 and 3.89 percent. Earnest charges no fees for student loan refinances.
Loan Program Offerings 5 stars
Variable rate APRs start at 2.47 percent and fixed-rate APRs start at 3.89 percent.
Eligibility Terms 3 stars
Earnest offers some of the best rates and terms but only accepts customers with strong credit profiles. In addition to a minimum FICO score of 650, borrowers must have a job, an alternative income source or a job offer. Earnest also requires all student accounts be current, rent or mortgage payments up to date, and no bankruptcy or collections on the credit report. Borrowers must also have an emergency fund with a minimum of two months expenses.
Repayment Options 4 stars
No prepayment penalty or other fees. To give borrowers added security, borrowers have the option of skipping a payment and making it up later. Payment dates are also adjustable.
Repayment Terms 4 stars
Borrowers can choose from terms of less than ten years or opt for extended repayment plans.
Pros
- Competitive rates
- Flexible terms
- Skip payment options
Cons
- Difficult credit requirements
- Inflexible financial requirements
Conclusion
Student loans have become a tremendous burden for many Americans. Post-secondary education is enormously costly and sometimes the investment does not financially benefit the borrower. Student loan default rates have soared to historic levels. Balancing the high cost of living in many areas with hefty student loan payments has become impossible for many.
Cornerstone Loan is doing its part to mitigate this crisis. On the front end, it provides education to students and helps them minimize their loan exposure. They also offer comprehensive customer service, and, as a nonprofit, they invest their resources in helping student borrowers rather than making profits for shareholders. Cornerstone Loan also provides support to borrowers who cannot afford their loans and steers them toward income-based repayment plans.
Some borrowers are turning to private student loan refinances to save money. Because Cornerstone is a federal student loan servicer, it cannot lower rates. Many borrowers have found they can save hundreds each month and thousands in interest by opting for a private student loan refinance. But before refinancing away from a federal student loan servicer like Cornerstone, borrowers should consider the risks involved.
Many borrowers feel certain they have the financial security needed to make the possibility of defaulting remote. Borrowers can save money with a private student loan refinance and may pay off their loans years earlier; however, they give up the benefits of the federal loan program in exchange. Should things turn south, this could prove disastrous. Remaining with a federal student loan servicer like Cornerstone Loan provides more security and gives great customer service focused on helping the borrower. We give Cornerstone Loan 5 stars.
