Should you release your turbo tax your data?
Should you let turbotax share your data? The popular tax software from intuit inc. Is often hailed as the leader of do-it-yourself tax preparation programs, and with nearly 28 million customers, it continues to grow and offer new services every year. Now a new offer for turbotax users with a requirement that customers give permission to share their personal tax information. In return, turbotax promises something big: great deals on refinancing student loans.
It all started when turbotax met with earnest, a zero-fee student refinancer, in january 2015. Earnest, founded in 2013, claims it has refinanced more than $1 billion in student debt, saving borrowers more than $300 million over the life of their student loans. Partnering makes sense when you consider that an estimated five million turbotax customers have student loans.
Why should you share your information with turbotax?
Because doing anything in your power to reduce your student debt isn’t a piece of cake, or? You might, but first let’s take a look at how the program works.
When you complete your tax return, turbotax asks you for permission to share your information to get estimates for loan refinancing. When you sign up, your information is sent to earnest for verification. After analyzing your information and running a soft inquiry (a credit check that does not affect your credit score), earnest determines if you are eligible for refinancing.
When you do, the company sends you a custom interest rate quote to show you how much you could save if you refinance your student loans with earnest. If you accept the quote, you’ll need to fill out a full application and hard credit application. If the loan goes through, turbotax receives a payment.
But even if it’s a good deal, do your due diligence first.
Hazards ahead
Step one: investigate the potential risks of refinancing your specific student loans. To begin with, if you have federal loans (more than 90% of student and parent loans are federal), refinancing with a private lender may not be the wisest choice. Why? Because federal loans offer greater repayment flexibility. Unlike personal loans, they offer a variety of repayment plans and the ability to switch between them at any time. (for more information, see student loans: federal loans and student loans: private loans .)
There are other reasons not to switch if your loans are federal loans. If you choose to attend graduate school, your federal loans will be deferred – meaning you will not have to make payments on your student loans while you are attending college (and likely not earning any income).If you choose to work as a government employee, the government offers lending options that are not available for private loans. For example, the public service loan forgiveness program forgives the remaining balance on your direct loans after you have made 120 monthly payments while working full-time for a qualified government employer. There are similar student loan forgiveness programs for teachers and nonprofit workers. (for more information, see student loan forgiveness: how does it work? )
Turbotax representatives claim that customers who receive private refinancing offers from earnest are clearly informed that they are – service loan forgiveness. As the tax relief company continues to improve the program, it plans to propose both federal and private refinancing options, depending on the consumer’s particular situation.
Last but not least, it is always a gamble to share your sensitive financial data with an online provider, especially with cybercrime at an all-time high. While turbotax insists that its top priority is to protect customer information and only work with trusted partners, there are unavoidable risks to sharing your personal information. (for more information, see tips for keeping your financial data safe online .)
The bottom line
The new partnership between turbotax and earnest could result in big savings for some customers debt. Students who have a private loan instead of a federal loan may be particularly interested in.
But before you give turbotax permission to share your tax data, it’s important to weigh your options carefully. Sharing your financial information with an online provider isn’t just risky. Refinancing your student loans also may not be the best option for you, especially if you have federal loans. While earnest may offer you a lower interest rate, you could lose even more valuable benefits that come with federal loans. (for more information, see student loan refinancing: the pros and cons .)
If you have private loans and are thinking of consolidating or refinancing loans, you can compare earnest’s offer with those of other lenders. .. Either way, proceed with caution.