While the Wells Fargo parent loan used to be a useful tool for covering college costs, it is no longer widely available. Beginning on July 1, 2020, Wells Fargo parent loans are only available to borrowers who already have an outstanding balance on a Wells Fargo private student loan.
If you’re not already a Wells Fargo borrower, you’ll need to look for other options. But if you are, read on to learn about the pros and cons of the Wells Fargo loan for parents so you can decide if the loan is still right for you and your family, or if you’re better off considering refinancing to another lender.
You could get a lower interest rate than with a parent PLUS loanWells Fargo offers interest rate discounts and low feesYou can defer full payments for 48 monthsYou have options for applying online or over the phone
The interest rates might not beat other private lendersYour borrowing limit maxes out at $25,000You can’t qualify for income-driven repaymentWells Fargo has had legal issues in the pastPro: You could get a lower interest rate than with a parent PLUS loan
When it comes to borrowing on behalf of your child, you have two main options as a Wells Fargo customer: a private loan, like a Wells Fargo parent loan, or a federal parent PLUS loan.
Parent PLUS Loans taken between July 1, 2020, and June 30, 2021, come with a fixed interest rate of 5.3%, with an origination fee of 4.236%, at time of writing (note that interest rates were closer to 7% in past years).
The Wells Fargo parent loan, on the other hand, has a range of rates and no origination fee. The loan’s fixed rate — currently — started higher than a parent PLUS loan, but its variable rate — at — started lower.
The rate you qualify for will depend on your creditworthiness as a borrower. The stronger your credit, the lower your interest rate will be.
If you have good credit, you could snag a rate that’s lower than the one you’d get on a parent PLUS loan. Lowering your interest rate is the best way to reduce your overall costs of borrowing.
Combine a low interest rate with no origination fee, and you could potentially save money by opting for a Wells Fargo parent student loan over a parent PLUS one.
That said, variable rates have the potential to rise over time, so opting for a lower variable rate is not guaranteed to make your loan less expensive.
Con: The interest rates might not beat other private lenders
Although the interest rates on a Wells Fargo private student loan could beat out a parent PLUS loan, they’re not necessarily the lowest on the market.
SoFi Parent Loans, for example, have fixed APRs that start at APR and variable rates that start at APR — that means you could potentially get a lower rate on a SoFi Parent Loan than on a Wells Fargo one.
Although it’s easy to get a rate quote with SoFi, unfortunately, Wells Fargo doesn’t reveal your rate until you submit a full application — and agree to a hard credit check in the process.
Although it’s worth shopping around with other lenders, you can’t know what interest rate you’d get with Wells Fargo until after you apply.
Pro: Wells Fargo offers interest rate discounts and low fees
If you borrow from Wells Fargo, you could get a discount on your interest rate. First, you could snag one of the following three discounts:
0.25% interest rate discount if you have a qualifying Wells Fargo checking account. 0.25% rate discount if you already have a student loan with Wells Fargo. (Since the parent loan is only available to existing Wells Fargo borrowers, you should get this discount right off the bat.) 0.50% rate discount if you participate in the Portfolio by Wells Fargo program. (Note that this program has a $30 per month fee, unless you make $25,000 or more in linked bank deposits or have $50,000 or more in qualifying balances.)
On top of these discounts, you could get an additional 0.25% discount on your rate for setting up autopay. Note that most lenders, federal and private, offer this same autopay discount.
Let’s say you qualified for the banking customer discount and the autopay discount. Your interest rate could go from 7.00%, for example, to 6.50%. On a $20,000 loan over 10 years of repayment, that 0.50% reduction could save you $614 in interest.
Besides interest rate discounts, another pro of a Wells Fargo private student loans is its lack of an origination fee. It also doesn’t have an application fee, and there’s no penalty for paying off your loan early.
This reasonable fee structure, along with the interest rate discounts, could save you money as a borrower.
Con: Your borrowing limit maxes out at $25,000
Wells Fargo private student loans have an annual maximum borrowing limit of $25,000 for parents. This limit is low compared to a parent PLUS loan, which lets you borrow up to the cost of attendance at your child’s school, minus any other financial aid you’ve already received.
If you don’t need to borrow more than $25,000 per school year, this might not be a problem. But if you’re looking for additional funding, Wells Fargo might not meet your needs.
Pro: You can defer full payments for 48 months
If you’re not ready to make full payments while your child is in school, you have the option to make interest-only payments for up to four years.
To qualify for interest-only payments, your child must be enrolled in school at least half-time.
This option could provide some financial relief, and your loan balance won’t balloon since you’ll still be making payments on interest.
But if you’re able to make full payments from the get-go, you could chip away at your balance and pay off the loan sooner.
Con: You can’t qualify for income-driven repayment
Unlike federal student loans, Wells Fargo private student loans don’t have a ton of options for repayment.
Since they’re private student loans, they won’t qualify for income-driven repayment, extended repayment or graduated repayment.
If you need more flexibility, you might explore the PLUS loan or other private lenders who offer more options.
Pro: You have options for applying online or over the phone
Wells Fargo has a straightforward application process, which you can access online or over the phone. You’ll provide basic personal information, and upload any required documents.
Some other private lenders only allow online applications, so Wells Fargo’s phone support might be an appealing feature. And since you’ve already borrowed a Wells Fargo loan before, you’ll likely be familiar with navigating the website.
Con: Wells Fargo has had legal issues in the past
Although Wells Fargo has an easy application process, its history of lending raises some red flags.
According to the Consumer Financial Protection Bureau, Wells Fargo charged illegal fees to student loan borrowers. It also misled them about payment information and failed to update information to the credit bureaus.
In the end, Wells Fargo paid $410,000 to borrowers and $3.6 million to the CFPB after reaching a settlement agreement.
Unfortunately, Wells Fargo private student loan reviews on Consumer Affairs and the Better Business Bureau still reveal a number of problems with the lender, including unhelpful customer service and unfair late fees.
Is a Wells Fargo private student loan right for you?
Wells Fargo private student loans have a number of benefits, including competitive interest rates, low fees and a straightforward application. But the Wells Fargo parent loan is only available to existing Wells Fargo borrowers, so non-customers will need to explore other options.
Even if you are eligible, it’s a good idea to shop around for your best rates before choosing a lender. That way, you can make sure you find a loan with the lowest possible costs of borrowing.
The post Parents: 8 Must-Read Pros and Cons of Wells Fargo Student Loans appeared first on Student Loan Hero.