Laurel Road Student Loan Refinance: A Critical Review
Laurel Road, acquired by KeyBank, offers student loan refinancing with a focus on healthcare professionals. While they present competitive rates and benefits, a closer look reveals potential drawbacks that borrowers should carefully consider. This article aims to provide a comprehensive review of Laurel Road, drawing on customer experiences and expert analyses to help you make an informed decision.
Laurel Road Overview
Founded in 2013, Laurel Road distinguishes itself with an underwriting approach that considers a borrower's earning potential, particularly benefiting those in the healthcare sector. They offer fixed and variable rate student loans with terms ranging from 5 to 20 years. Special discounts are available for healthcare professionals and members of specific professional organizations.
Pros of Laurel Road
- Competitive Rates: Laurel Road can be highly competitive for borrowers with good credit scores, decent income, or a strong co-signer. Approximately 10% of applicants qualified for the lowest available APR during a 15-month survey period.
- Availability in All 50 States: Laurel Road's services are accessible to borrowers across the United States.
- Discounts for Various Professions: Members of professional organizations, such as the APTA, may receive an additional interest rate reduction.
- Refinancing Options for Doctors and Dentists: Medical and dental residents and fellows may qualify for reduced monthly payments during their training.
- Co-Signer Release: After 36 months of on-time payments, borrowers can apply to release their co-signer from the loan.
- Refinance Parent PLUS Loans: Parents can refinance their Parent PLUS Loans into the child's name.
- Forbearance Options: Borrowers facing economic hardship due to involuntary job loss or unpaid maternity leave may be eligible for payment postponement.
- Special Underwriting for 1099/Self-Employed Individuals: Laurel Road uniquely allows 1099 or self-employed healthcare workers to apply and qualify for a loan without requiring two years of tax returns.
- Referral Program: Laurel Road's referral program offers \$400 for each referral that results in a new loan origination, up to 10 referrals per year.
- Interest Rate Reduction with Direct Deposits: Borrowers can take an additional 0.25% interest rate reduction with \$2,500 or more in monthly direct deposits into a Laurel Road Checking account, with a maximum discount of 0.55% available with \$7,500 or more in monthly direct deposits.
- Rate Reduction with Savings Account: Borrowers who open a Laurel Road Savings account with their refinance application can earn a rate reduction of up to 0.30%.
Cons of Laurel Road
- Account Lockouts and Access Issues: Numerous reviews report accounts being locked with little to no warning or reason, leaving customers unable to access their funds for extended periods.
- Poor Customer Service: Many users have reported negative experiences with customer service, citing unhelpful representatives, long wait times, and unresolved issues.
- Transfer Limitations: Transfers between external accounts and Laurel Road accounts can be problematic, with frequent rejections and delays.
- Rate Drops on Savings Accounts: Interest rates on savings accounts have dropped significantly, making other options more attractive.
- Reliance on Credit Score and Ratios: Laurel Road's approval process is heavily dependent on credit score and debt-to-income ratios.
- Inability to Make Prepayments via Auto-Pay: Prepayments must be made manually, either by calling customer service or using the online portal.
- Potential Loss of Federal Benefits: Refinancing federal student loans with Laurel Road means borrowers will no longer be eligible for federal benefits such as Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) plans.
- Complaints Regarding Loan Servicing: Some borrowers have complained about issues with Mohela, Laurel Road's loan servicer, including errors with auto-pay and late payment notices.
- Difficulties Adding Co-signers: Adding a co-signer can be a complex and time-consuming process, requiring extensive paperwork and notarization.
- Account Closure Issues: Some users have reported having their accounts closed due to suspected fraud, even before fully setting up the account, and experiencing difficulty accessing their funds.
- Negative Credit Reporting: There are reports of Laurel Road incorrectly reporting negative information to credit bureaus, leading to credit score drops and difficulty opening new accounts.
Customer Experiences: A Mixed Bag
Customer reviews for Laurel Road paint a varied picture. While some users praise the company's competitive rates and efficient refinancing process, others express significant concerns about account security, customer service, and unexpected issues.
- Some customers have reported positive experiences, citing fast and quick replies, as well as matching quotes.
- However, others have described "horrible experiences" and advise staying away from the company. Some have been denied refinancing with no clear explanation.
- Several reviewers have complained about accounts being locked for "account verification" when attempting simple wire transactions, leading to delays and frustration.
- Some customers have reported difficulties with transferring funds between Chase and Laurel Road accounts.
- There are also complaints about high interest rates and a small portion of payments going towards the principal.
- One customer described a "complete betrayal" and "predatory practices," detailing how Laurel Road froze their entire account without notification or reason, leading to a financial crisis.
- Another customer recounted being threatened with collections and demands for address updates, even after making consistent payments.
- There are reports of accounts being closed due to suspected fraud, with customers struggling to access their funds.
Laurel Road vs. SoFi
Laurel Road and SoFi are often compared as leading student loan refinancing lenders. SoFi generally has better technology and a faster application process. SoFi also tends to offer better rates for borrowers with an "ideal" profile. Laurel Road, with its banking background, may be better suited for strong customer service. Laurel Road focuses on healthcare professionals, while SoFi is more popular with borrowers in the business or corporate world and those with higher incomes.
Important Considerations
- Loss of Federal Loan Benefits: Refinancing federal student loans into a private loan with Laurel Road means losing access to federal benefits like income-driven repayment plans and loan forgiveness programs.
- Variable Interest Rates: Variable interest rates can fluctuate, potentially leading to higher monthly payments. The current index for variable rate loans is derived from the 30-day Average Secured Overnight Financing Rate (“SOFR”), and changes in the SOFR index may cause your monthly payment to increase. Although the rate will vary after you are approved, it will never exceed 15.00%.
- Fees: While Laurel Road does not charge origination fees or prepayment penalties, they may assess a late fee if a payment is not received within 15 days of the due date.
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