Loandepot Student Loan Reviews: Rates, Options, And Public Opinion


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Competition for jobs has never been higher and many of them require a Bachelor’s degree before employers will even consider a phone screen for applicants. At the same time, tuition is rising at a rate of 15% per year. For some high school graduates, going to college is an impossibility without borrowing money to pay for it. If you have exhausted all avenues of scholarships, grants, federal aid, and federal student loans, LoanDepot may be able to help make your dream of higher education a reality.

What Is a Loandepot Student Loan?

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LoanDepot is a relatively new lending company led by Anthony Hsieh, a leader in the online lending industry. Created in 2010, they have quickly become the fifth-largest mortgage servicer in the country and the second-largest non-financial institution lender.

Product Specs

To apply for a LoanDepot loan, you need to fill out an application online, visit a brick-and-mortar location, or call at 888-983-3393. The information they need is your name, Social Security number, bank account details, employment information, e-mail address, date of birth and address. Documentation required may include a government-issued ID such as a driver’s license or military ID and proof of income such as a W2, pay stubs or bank statements. Your origination fee is subtracted from the amount you receive.

PRICING

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How much you pay for a student loan through LoanDepot or any other lender depends on a number of factors including your credit score and the credit score of your cosigner if applicable, your income, how much you borrow and the terms of your loan including your interest rate and how long you spend paying back your loan.

You also must consider any prepayment penalties, late fees, and other fees as well. However, in the fall of 2016, the average private student loan was $17,040 per student. Extrapolate this across eight semesters and you are looking at private student loan debt of $136,320 for a four-year degree before considering interest accrued.

How It Compares

We picked a few similar products available on the market to see how they compare. 

  • Direct Consolidation Loans
  • Parent PLUS loans
  • Federal Perkins Loans
  • Loandepot Student Loan

Loandepot Student Loan

  • PRICE
  • Interest Rate
  • Loan Options
  • Public Opinion
  • Loan Terms

You can take out an unsecured loan from LoanDepot for up to $35,000.

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Your interest rate will be higher than if you took out a federal subsidized or unsubsidized loan but is competitive compared to other private loans.

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You must be a US resident at least 18 years of age with a credit score of at least 660 to obtain a LoanDepot student loan and proof of consistent income. You must be 19 years old in Nebraska or Alabama.

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As far as private student loans go, LoanDepot is held in very high regard. It is easy enough to get a loan if you have a solid credit history and proof of income or you have a parent, grandparent or guardian to co-sign the loan for you. This will allow you to qualify for even lower interest rates as your credit score is averaged with that of your guarantor.

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You have between five and 20 years to repay your loan.

PROS

  • Convenient application
  • Competitive rates
  • Lifetime guarantee on refinancing
  • Unsecured loans available

CONS

  • High loan origination fee
  • Hit-or-miss customer service
  • Not ideal for those with subpar credit

Direct Consolidation Loans

A direct consolidation loan is a loan you take out to consolidate your unsecured debt. The loan servicing company lends you the money to pay off the entirety of your existing loans and you now have only one company to make payments to. If your new interest rate is lower than the average of your existing rates, you may save money over the long run. However, not all loans are eligible for direct consolidation. You also lose the opportunity to pay off your higher interest rate debt faster as a method to save money.

Do a careful cost analysis of how much you will pay overall based on several scenarios including using direct consolidation loans to figure out if you are getting the best deal for your situation or not. Be careful not to extend the life of your loan out too far or you may pay more overall even if your interest rate is slightly lower.

  • PRICE
  • Interest Rate
  • Loan Options
  • Public Opinion
  • Loan Terms

How much you pay over the life of your consolidated loans depends on how much your existing debt is worth.

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Direct consolidation loans usually lower your interest rate but sometimes take the average of your existing interest rates. Direct consolidation loans are a great idea if one or more of your student loans have a variable interest rate. You may be getting a good deal in the short term, but your interest rates can rise significantly in the future. Locking in your interest rate can save you from annual interest rate increases throughout the duration of your loan.

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Direct consolidation loans give you access to income-based repayment plans. This means, if you do not make much money out of college your monthly payment could be as low as $0 per month. However, for this to be the case you must have a federal loan included in the consolidation loan such as Stafford loans, unsubsidized Stafford loans, federal PLUS loans for professional or graduate students, federal Perkins loans or federal direct subsidized or unsubsidized loans.

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Direct consolidation loans come with a lot of benefits. Students may take out a loan from a different lender every year or even every semester. This means they may have four to 10 lenders they owe money to. It can be stressful to have 10 different amounts to pay to 10 different lenders every month. Consolidation makes your life easier, especially if you sign up for automatic withdrawal from your bank.

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Direct consolidation loans give you the opportunity to qualify for forgiveness of your student loans after you make 120 qualifying payments. This is known as Public Service Student Loan Forgiveness (PSLF) and unlike other types of forgiveness or cancellation, this forgiveness is tax-free. In other circumstances, the total amount of your loan that is forgiven is taxable at a federal level as income.

Under income-driven repayment (IDR)  plans, you have to wait 20 to 25 years to have your balance forgiven. During this time, interest accrued may cause your balance to end up at $200,000 or more. If you are making $30,000 a year, you will owe federal income tax like you made $230,000 that year.

PROS

  • One loan
  • Lower interest rate
  • IBR eligibility
  • Fixed rate

CONS

  • May pay more overall
  • May not qualify
  • May lose certain federal benefits
  • Lose the opportunity to use the avalanche debt repayment method

Parent PLUS loans

Parent PLUS loans are the best loans for students because the parents are legally liable for the debt. Federal Parent PLUS loans do not offer a way to transfer the debt to their children, but some private lenders may allow the loan to be refinanced in a child’s name. This type of loan is for biological, adoptive and stepparents to support their dependent undergraduates financially while in college. During the application process for the loan, they may request deferment but they normally must make payments while their child is in school.

  • PRICE
  • Interest Rate
  • Loan Options
  • Public Opinion
  • Loan Terms

If you wish to pay off your Parent PLUS loan quickly, try to avoid up-front fees. The shorter the loan term, the greater impact such fees will have as they are amortized over a shorter time frame. There is no hard cap on Parent PLUS loans like there are on some other federal loans. You may take out a loan to cover tuition and fees, room and board, books, supplies, equipment, transportation, and miscellaneous personal experiences less any financial aid your dependent student receives.

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For the 2018-2019 school year, the interest rate for federal Parent PLUS and Grad PLUS loans is 7.9%. Private interest rates hover around 5% APR. There is also a 4% loan disbursement and default fee. This is basically an up-front interest payment. For a 10-year loan, this fee essentially increases the interest rate by about 0.875% to 1%. For a 30-year loan, the effective interest rate increase is 0.34% to 0.5% of a percentage point.

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There are options to take out both federal or private Parent PLUS loans. When paying the loan back, you may opt for standard repayment, extended repayment or graduated repayment plans. However, you are not eligible for IBR (income-based repayment), PAYE (pay-as-you-earn) repayment or REPAYE (revised pay-as-you-earn) payment plans.  

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Students think very highly of Parent PLUS loans because their tuition gets paid and they are not responsible for the debt.

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These student loans may be extended to up to 30 years. While this will result in paying more over the life of the loan, the minimum monthly payments will be lower making them more affordable from a cash flow perspective. Loan disbursement and default fees can be significant depending on how much your student’s cost of education is.

PROS

  • No origination fee
  • Private loans offer lower interest rates than federal

CONS

  • High interest rates for subpar credit
  • Private loans less flexible than federal

Federal Perkins Loans

Federal student loans are the best type of loan for college students or prospective college students. This is because they qualify for all sorts of benefits such as student loan forgiveness or cancellation.

  • PRICE
  • Interest Rate
  • Loan Options
  • Public Opinion
  • Loan Terms

Federal Perkins loans may be taken out for $5,500 per year for undergraduate students for a lifetime total of $27,500. For graduate students, the annual limit is $8,000 for a lifetime total of $60,000. The biggest downside to this federal loan is schools must distribute these loans to a number of students who can demonstrate need so even if you are eligible for a $5,500 loan, your school may lack the funding to provide it to you.

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The interest rate for federal Perkins loans is 5% and your institution is the lender. It was started by the DOE (U.S. Department of Education) to help need-based students obtain affordable student loans to complete post-secondary education such as undergraduate or graduate degrees.

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Federal Perkins loans are eligible for Federal Loan Cancellation provided you work in a public service occupation such as law enforcement, firefighting, particular active duty military postings, public defense attorney, librarian, nursing, speech therapy, childhood education or elementary or secondary school teaching.

Peace Corps volunteers may also receive this benefit as long as their loan remains in good standing through their employment. There may be additional requirements to qualify for cancellation, however. Nurses, for example, may have to work at a not-for-profit medical facility. Teachers must work for low-income schools or teach high-demand specialties such as special needs students, bilingual education, math or science.

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Students look very favorably upon federal Perkins loans because of the loan cancellation opportunities. It usually works on a graduating scale. After the first full year of your employment, you can have 15% of your loan forgiven. After your second year of qualified employment, you get another 15% of your loan forgiven. For both the third and fourth years, 20% of your original loan balance and after your fifth year of employment, the final 30% of your loan is forgiven.

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Federal Perkins loans are for 10 years. There is a nine-month grace period so you start repaying your debt 10 months after you graduate, drop below half-time status or withdraw from your college or university. If you qualify for cancellation, your debt can be completely erased within five years of graduation.

PROS

  • Loan forgiveness
  • Affordable interest rate
  • Decent term length
  • No origination fee

CONS

  • Some schools do not participate
  • Some schools cannot award you the full amount
  • Limited access to IBR

FINAL VERDICT

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Overall, we have to give LoanDepot student loans three out of five stars. Sometimes, debt is the only way to complete college and earn a degree. If you have exhausted all options for scholarships, grants and federal subsidized and unsubsidized student loans, check out LoanDepot to see if they can give you ideal loan terms including interest rates and the total amount you will pay over the life of the loan.

Customer service is hit or miss but the interest rates are competitive, especially if you have a co-signer with a better credit score than you and five years of steady income. Whatever you do, consider your options carefully to determine your best course of action.

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