Refinancing with Earnest
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When you graduate from college, it’s common to walk away with several different types of loans from several different lenders. Each loan may have a unique interest rate, minimum payment, and due date. Paying down your student loans is hard enough without having to juggle all those payments and due dates.
One option that could make your life simpler is to consolidate federal student loans through a Direct Consolidation Loan. Consolidating your debt can streamline your repayment, but it can have serious consequences — especially if you’re pursuing Public Service Loan Forgiveness (PSLF).
Here’s what you need to know before consolidating your loans.
How PSLF works
If you have federal student loans, you may be eligible for PSLF. Under this program, borrowers who work for a nonprofit organization or government agency can have their loans forgiven after making 10 years of qualifying payments.
To be eligible for loan forgiveness, you must work full-time for your employer. If your loan servicer approved your application for an income-driven repayment (IDR) plan, you can make reduced payments while still qualifying for PSLF.
Depending on your salary and your loan balance, PSLF can help you save thousands. Use the PSLF calculator below to find out how much you could save.
Public Service Loan Forgiveness Calculator
Only federal loans qualify for PSLF; private student loans are not eligible for loan forgiveness through the PSLF program.
Direct Loan Consolidation can affect PSLF
With a Direct Consolidation Loan, the government will consolidate your federal student loans into one. You’ll have just one interest rate (set at the weighted average of your previous loans), with one loan servicer and one monthly payment.
While pursuing PSLF, managing several different loans and due dates can be stressful. Consolidating your loans into one can sound appealing. However, Direct Loan Consolidation can have a big impact on public service forgiveness.
If you’re under an income-driven repayment plan or have made qualifying payments toward PSLF, consolidating your loans will cause you to lose credit for those payments.
For example, if you’ve made five years of payments before consolidating your federal student loans, those payments will not count after consolidation. You can still pursue PSLF, but the clock starts over when you consolidate your debt. Instead of being halfway to loan forgiveness, you’ll have to make another 10 years of payments to qualify.
If you’re on an IDR plan, that can mean you’re paying your debt for several more years. The extended repayment period means you’ll pay more out of your own pocket toward your debt, potentially costing you money you’d otherwise save.
When to consolidate federal student loans
Consolidating your loans can be a smart option, even if you’re pursuing PSLF. Direct Consolidation Loans can be a good idea in the following situations:
- You’re still in your grace period or early on in your repayment: If you haven’t made payments yet or have just started, you can consolidate your loans without losing too many qualifying payments for PSLF. You can simplify your debt while still making progress toward loan forgiveness.
- You want access to IDR plans: Some federal loans are ineligible for IDR plans. To get around this rule, you can consolidate your loans into a Direct Consolidation Loan and then apply for an IDR plan. That way, you can reduce your monthly bill and have just one payment to manage.
- You need a lower monthly payment: When you take out a Direct Consolidation Loan, you can choose a new repayment period. You can opt for a loan with a term as long as 30 years, which can dramatically reduce your payments and make your loans more manageable.
In some cases, consolidating your debt doesn’t make financial sense. However, that doesn’t mean you’re stuck with multiple loans with many different servicers.
Another option to consider is private loan refinancing. With this strategy, you consolidate some or all of your loans into a new one through a private bank or organization. The new loan will have a different repayment term, interest rate, and payment.
Once you refinance your loans, you’re no longer eligible for PSLF or IDR plans. However, it can be a solution for you if you’re struggling to manage both federal loans and private ones, or if you want to pay off your debt ahead of schedule.
If you’re considering a Direct Consolidation Loan to reduce your monthly bill and extend your repayment, you may be able to save money by refinancing instead. With refinancing, you may be able to get a more competitive interest rate.
Managing your student loans
If you’re struggling to keep track of all of your debt, deciding to consolidate federal student loans can simplify your payments.
However, before you pursue Direct Loan Consolidation, consider your public service forgiveness timeline. Make sure you understand all of the potential drawbacks before submitting your application to prevent any issues later on.
For more information about loan forgiveness, see if PSLF is right for you.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 email@example.com, 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|