Refinancing with Earnest
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Dear Student Loan Hero,
I’m thinking about going to law school to have a better career path. However, I have student loans, and one of my old loans is in collections right now. Is there a consolidation or refinance option available so I can have these paid off under a new plan and pursue my education?
Dear Student Loan Borrower,
Unfortunately, if your student loans are in collections, that means they’re in default.
As you probably already know, this default makes you ineligible for federal student loans, which you may need to cover the costs of going back to school. A defaulted student loan also severely damages your credit, making it difficult for you to qualify for private student loans.
The good news is that you’re searching for ways to get out of default. So you’re on the right track. Here are your two options to consider.
Rehabilitate your defaulted student debt. For each loan, the lender will offer you a new monthly payment equal to 15% of your annual discretionary income divided by 12 (but no less than $5 a month). In return, you’ll agree to make nine payments over 10 months. Each payment must be made within 20 days of your due date.
After you’ve satisfied the conditions of your rehabilitation, your loans will no longer be in default and you’ll regain federal financial aid eligibility. The record of your student loan default will also be struck from your credit history. But your late payments leading up to the default will likely remain.
Apply for a Direct Consolidation Loan. If approved, your new Direct Consolidation Loan will pay off and replace your defaulted loans.
Before you can apply, you’ll need to fulfill one of two requirements:
- Make three consecutive and on-time monthly payments on the defaulted loans
- Agree to repay the new Direct Consolidation Loan through an income-driven repayment plan
As soon as your Direct Consolidation Loan is processed, your old loans will be out of default. You’ll also once again be eligible for federal student aid. Going the consolidation route can resolve your default more quickly than rehabilitation, but it won’t remove the default notice from your credit reports.
Each path out of default has its pros and cons, so choose carefully. Once you’re in the clear, you should read up on how to avoid student loan default. That way, you know what your options are to avoid landing in a similar situation down the road.
I hope this helps make sense of your options. Best of luck!
Student Loan Hero
Need a student loan?Here are our top student loan lenders of 2019!
|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
1 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 7/1/2019. Variable interest rates may increase after consummation.
2 Important Disclosures for Earnest.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
4 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).
5 Important Disclosures for Citizens.
6 Important Disclosures for Suntrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
* Offer valid for new Custom Choice Loans for which applications are submitted for a credit decision between 12:00:00am EST on June 1, 2019 and 11:59:59pm EST on August 31, 2019. A 0.50% interest rate reduction will be included in the loan options presented to an applicant during the online application process, upon passing the initial credit review. The interest rate reduction will be applied as of the first disbursement date and will be effective for the life of the loan.
7 Important Disclosures for PNC.
Fixed Annual Percentage Rates (APRs): APRs range from 4.52% to 9.58% for a 5-year term. APRs range from 5.05% to 10.26% for a 10-year term. APRs range from 5.55% to 10.84% for a 15-year term. Fixed rates are based on the creditworthiness of the borrower and co-signer, if any. Loan Payment Example: The monthly payment per $10,000 borrowed at a fixed rate range of 5.05% APR to 10.26% APR for 10 years means you would make 120 payments which may range from $131.94 to $207.24. For the fixed rate loan, the monthly payment will remain fixed for the term of the loan. Payments may vary for other repayment term options.
Variable Annual Percentage Rates (APRs): APRs range from 4.90% to 9.92% for a 5-year term. APRs range from 5.38% to 10.57% for a 10-year term. APRs range from 5.85% to 11.11% for a 15-year term. Variable rates are based on the London Interbank Offered Rate (LIBOR) index plus a margin depending on the creditworthiness of the borrower and co-signer, if any. The LIBOR index, adjusted quarterly, is equal to the average of the one-month LIBOR rates as published in the “Money Rates” section of the Wall Street Journal on the first business day of each of the three (3) calendar months immediately preceding each quarterly adjustment date. The LIBOR index is currently 2.47%. If the index increases or decreases, your rate will increase or decrease accordingly. Loan Payment Example: The monthly payment per $10,000 borrowed at a variable rate range of 5.38% APR to 10.57% APR for 10 years means you would make 120 payments which may range from $135.93 to $212.65. For the variable rate loan, the monthly payment may increase or decrease if the interest rate increases or decreases. Payments may vary for other repayment term options.
APRs and loan payment examples are for the fully deferred repayment option for the Undergraduate & Graduate loan programs and include the 0.50% interest rate discount for automatic payments. The lowest APR is available to well qualified applicants. Your actual APR will be based on your credit qualifications, selection of fixed or variable rate option, loan program, repayment term, repayment option and whether you elect the automatic payment feature. Loan payment examples assume 30 days to first payment after the deferment period (45 months in school and 6 month grace period). Payments vary for other rates, repayment terms and repayment options.
In addition to Undergraduate and Graduate loans, PNC offers loans for Health & Medical Professions, Health Professions Residency and Bar Study. Rates may vary by loan program and are subject to change at any time. Visit pnconcampus.com for current rates, additional loan payment examples and more details about the Solution loan products.
Please note: PNC reserves the right to modify or discontinue the terms of these program at any time without notice. You are encouraged to explore all scholarship, grant and federal borrowing options before applying for a private loan. Private loans are subject to credit approval.
PNC is a registered service mark of The PNC Financial Services Group, Inc.
7 Important Disclosures for Discover.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
|3.96% – 11.98%1||Undergraduate, Graduate, and Parents|
|3.37% – 10.75%*,3||Undergraduate and Graduate|
|3.35% – 11.44%2||Undergraduate and Graduate|
|3.66% – 9.64%4||Undergraduate and Graduate|
|3.36% – 11.62%5||Undergraduate and Graduate|
|3.14% – 10.68%6||Undergraduate and Graduate|
|4.90% – 11.11%6||Undergraduate and Graduate|
|3.37% – 11.87%7||Undergraduate and Graduate|