Refinancing with Earnest
Refinancing rates from 2.46% APR. Checking your rates won’t affect your credit score.
If you have student loans, you’ve probably heard the buzz surrounding student loan refinancing. Being able to save thousands of dollars in interest and merge your loans into one monthly payment is definitely appealing.
But can you refinance a student loan right out of college? Here’s what you need to know if you’re interested in refinancing student loans but aren’t sure when to make your move.
Can you refinance a student loan right after graduating?
There are no strict rules about when you can refinance your student loans after graduating. But trying to refinance student loans right out of college might be a challenge, mostly because you might not be in a position to qualify.
Here are three factors you need to consider when picking the right time to refinance your student loans.
1. Your employment and income
It’s important to look at eligibility requirements for each lender since they all have different standards.
Keep in mind that most refinancing companies want you to have a job lined up and sufficient income to pay back your loans. There may even be specific income requirements as dictated by the lender that you need to meet to pay back your loans.
But as a recent graduate, you might still be looking for a job or earning a lower entry-level salary. So if you’re a lower-income borrower, chances are refinancing may not be the best option for you at this time.
2. Your credit score and credit history
Many new college graduates don’t have a long credit history – or any credit at all. Yet, you will most likely need to meet credit requirements that, depending on your credit history, could make refinancing difficult.
For example, many private lenders may expect you to have a good credit score is the high 600s, though thresholds will vary.
Some refinancing companies also want to see a positive repayment history on your student loans before you are eligible for refinancing. If you weren’t paying back your student loans while you were in school, you may not be eligible for refinancing right after graduation – you don’t have proof of repayment.
Citizens Bank, for instance, requires you to make three on-time payments and show proof of graduation before refinancing. And if you didn’t complete a degree, you might still be eligible to refinance, but you’ll need 12 on-time student loan payments to qualify.
3. Your student loan grace period
Your student loan grace period (the six months after graduation during which repayment is deferred) helps you start your post-college life off on the right foot. It gives you some breathing room.
Depending on the lender’s repayment terms, refinancing student loans might mean switching to a new loan with payments that kick in as soon as the loan is disbursed.
There is the option to choose a student loan refinancing company that honors grace periods. SoFi, for example, will “honor the first six months of any existing grace period of the loans you refinance.” That way, you can benefit from lower interest rates now — without starting payments right away.
What to do before you refinance student loans
Before you decide to go through with student loan refinancing, consider the following so you can determine if it is the right move for you.
Check your credit reports
You can also get your free credit score from sites such as Credit Karma to find out where you stand. That way you can cross-reference the lender’s credit score requirement with your own.
Make a list of all your outstanding loan amounts and interest rates. This will help you see how your newly refinanced student loan payments will fit in with the rest of your debts.
Understand the potential downsides of refinancing
If you have federal student loans and choose to refinance them, you’ll lose the option to pursue benefits such as loan forgiveness or income-driven repayment plans.
What’s more, the process of refinancing is irreversible. You can’t go back to your old payment plan with your old terms. While refinancing can help you get a better interest rate and save you money, you ultimately forfeit federal student loan protections.
However, if you only have private student loans, refinancing may be less of a risk since they don’t have federal student loan benefits attached to them.
Depending on the lender you choose, you might actually gain more protections. SoFi’s refinancing terms include an Unemployment Protection feature. It suspends your payments for three months if you’re laid off (or otherwise lose your job through no fault of your own).
Research a lender’s requirements for student loan refinancing
Trustworthy lenders will make it easy to tell if you are eligible to refinance your student loans.
Typically, student loan refinancing companies look at your area of study and degree, credit score, employment, salary, and payment history to determine if you are eligible. Some lenders will only refinance student loans with high balances, such as Education Loan Finance ($15,000 minimum) and PenFed ($20,000 minimum).
Many lenders also have other eligibility requirements, including U.S. citizenship or residency in certain states. Certain lenders, especially fintech companies, will not offer student loan refinancing in all states. Residents of Nevada, for example, won’t be able to refinance student loans with SoFi, Earnest, or CommonBond.
Before you start submitting applications to lenders, research student loan refinancing companies’ eligibility requirements to see if you qualify.
How soon can you refinance a student loan?
For eligible candidates with good credit and stable income, the sooner you refinance, the better. If you refinance now, you’ll start reaping interest savings right away and you’ll be more likely to receive lower interest rates.
Let’s say you have a Graduate PLUS loan with an interest rate of 7.00% and a $50,000 balance. If you refinance to a typical rate of 4.99% over a 10-year repayment period, you could save roughly $50 per month. Even more impressive, you’d save more than $6,000 in interest over the life of the loan.
You can use this student loan refinancing calculator to estimate your own savings. Imagine what you could do with that extra cash. You might put it toward your principal payments, save it for a rainy day, or invest it to boost your retirement funds.
Essentially, the best time to refinance student loans is as soon as you can qualify for lower interest rates.
To qualify, you may be required to meet a lender’s underwriting standards. Oftentimes lenders will want to see stable employment and a good income. Citizens Bank and LendKey, for example, require annual pay of $24,000 or greater.
You’ll also need a solid credit history and score. Some lenders, such as Earnest, have more flexible credit requirements and no credit score minimums. Others, including SoFi and Laurel Road, like to see credit scores of at least 680.
As soon as you can meet these requirements, you will want to seriously consider refinancing with a lender of your choosing.
When you can’t refinance student loans
Most lenders won’t approve a student loan refinancing application while you’re still in school. You’ll probably have to wait at least until you’ve graduated or are otherwise no longer enrolled.
One exception is Earnest, which accepts refinancing applications from students in their last semester of college. Citizens Bank doesn’t require a degree to refinance student loans, but you can’t be currently enrolled.
Finally, you must be in good standing on your student loans in order to refinance. In other words, lenders are looking for borrowers with a history of on-time payments who are not in default. If you are currently in student loan default, you most likely won’t be eligible for student loan refinancing.
However, if you have federal student loans and are facing default, you can work to get out and repair your credit.
By making nine consecutive payments within 10 months, you may be able to rehabilitate your loan and have the default removed from your credit history. You can then rebuild your credit after a default and eventually refinance after you’ve improved your score.
3 options if you can’t refinance student loans yet
If you’re a recent college graduate who hasn’t had time to get their credit in order or is working on their career trajectory, that’s okay. You still have a few options to help you refinance or otherwise manage your student loans.
1. Work toward qualifying for student loan refinancing
If you applied for student loan refinancing and were rejected (or suspect you will be), don’t be discouraged. You can work on what’s keeping you from qualifying and then apply again.
Credit score not where you want it to be? Come up with a plan for improving it. Spend several months working toward a raise or building credit. This will improve your chances of qualifying and could even get you a lower interest rate, so you save more.
2. Get a cosigner to refinance student loans
If you can’t qualify on your own to refinance right now, but you don’t want to wait, you can refinance student loans with a cosigner. A cosigner is someone who signs the loan agreement with you and is equally liable for the debt.
This makes it easier to qualify for the loan, even if you’re a recent college grad with lower income and no credit. Some lenders will even set your rate based on the higher credit score of the two applicants. You could potentially save even more when refinancing if your cosigner has a high credit score.
3. Look into income-driven repayment plans
If you have federal student loans, an income-driven repayment plan may be a better option. And if your income is truly an issue, you could qualify for payments that amount to as little as zero dollars.
The best time to refinance is when you’re ready
There are few great reasons to refinance student loans now, such as:
- Take advantage of today’s low interest rates.
- Start saving on student loan interest as soon as possible.
- Lower monthly payments to free up money for other important goals.
However, whether or not to refinance student loans is a decision that shouldn’t be rushed. It can have its drawbacks when compared to the benefits of keeping federal student loans. What’s more, not everyone can save by refinancing their student loans.
As a borrower, it’s important to look at all of your repayment options. Take your time researching and comparing your options. Only refinance your student loans if it’s truly the best choice – and the best timing – for you.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.44%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|