Refinancing with Earnest
Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.
When it comes to finances, everyone needs a little help sometimes. It doesn’t matter how old, educated, or experienced you are: money decisions can feel overwhelming when you’re making them on your own.
Unfortunately, that can lead to paying for services that you very easily could have done yourself. Or worse, falling victim to an outright scam.
This happened recently to a friend of mine who paid $600 to consolidate his student loans – only to find himself in default and with no clue what to do next. Here’s how to keep that from happening to you.
What does it mean to consolidate student loans?
The word “consolidate” has become one of the murkiest in the financial industry.
Originally, this referred to combining multiple debts into one for a single payment and creditor. But now some companies claim to consolidate debt when, in fact, they settle it.
However, these are two different things, with very different credit consequences. That said, let’s talk about what it means to consolidate student loans. Here’s how FinAid describes federal consolidation loans:
Consolidation loans combine several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on other loans. They also provide an opportunity for alternative repayment plans, making monthly payments more manageable.
Meanwhile, the Consumer Financial Protection Bureau (CFPB) describes private student loan consolidation as combining your private student loans into one larger loan, “replacing your original private student loans with this new loan.”
The CFPB goes on to explain how private student lenders “may offer an interest rate deduction for creditworthy borrowers seeking to consolidate their private student loans.” Essentially, it’s the same thing, except for one caveat:
Just like private education loans, private consolidation loans often have variable interest rates – meaning your interest rate can change over the life of the loan – the interest rate you are offered depends on your credit score.
Essentially, to consolidate student loans is to combine several loans into one, potentially with the opportunity to achieve more favorable repayment terms.
Student loan refinancing vs. consolidation
Student loan refinancing is the act of paying off your student loans with one new loan – very much like consolidation. The difference is you can combine private and federal loans into one this way, which you can’t with consolidation.
You’re also able to refinance a single student loan if you’re simply trying to achieve more favorable terms.
Like private student loan consolidation, student loan refinancing is a way to turn a variable interest rate into a fixed rate if you so choose. Yet, refinanced loan offers may come with variable and fixed rate options (in addition to various options for the repayment term).
Student loan refinancing can be a good idea if you want one payment and to lower your interest rates. However, keep in mind that it doesn’t come without risk.
For example, if you have federal loans, refinancing them means turning them into private loans. And that means losing out on protective perks like forgiveness, deferment, and forbearance.
But, if you consolidate your federal loans through a Direct Consolidation Loan, you get your single monthly payment, potentially more favorable terms, and your loan stays federal. Which means you still get the protections that come with federal student loans.
Don’t pay to consolidate your student loans
The reason you shouldn’t pay to consolidate student loans is simple: you can do it yourself.
When my friend sought help consolidating his student loans, he thought the company he was working with could change the terms of his loans. He didn’t know it’s as simple as getting a consolidation loan to pay off the other loans and, in turn, achieve new terms.
So he paid a company a large, upfront fee and waited as the company went ahead and lowered his payments through an income-driven repayment plan.
Unfortunately, due to some miscommunications and missed payments from this company, he found himself delinquent on his student loans. And out a few hundred dollars to boot.
Luckily, there’s a happy ending to this story. My friend is getting a refund and taking back control of his loans. But it didn’t come without a few months of intense stress.
The moral of the story? If you want to consolidate student loans, you don’t need to pay someone to do it for you. You can do it on your own. Here’s how.
DIY student loan consolidation
Here’s how to consolidate student loans on your own.
1. Decide if you should consolidate or refinance
The first step to consolidating student loans on your own is deciding if consolidating is the right move.
If you have just one loan and want more favorable terms, then student loan refinancing is probably what you need. The same goes if you have both federal and private student loans, or all private loans, and you want to combine them into one with a lower interest rate.
But if you have all federal student loans and you want to bring them under one servicer with one payment, consolidation could be your tool.
2a. Federal student loan consolidation
Federal student loans can be consolidated through a Direct Consolidation Loan. You can apply for that here with the Office of Federal Student Aid. We also offer our own tool to help you apply to consolidate student loans *for free.* You can check it out here.
2b. Private student loan consolidation
If you’re refinancing your loans or consolidating private student loans, then you’ll need to find a lender. Take a look at our list of the six best banks to consolidate and refinance student loans, including their rates and eligibility requirements.
And if you go this route, make sure you get the lowest interest rate possible so you can pay less for your student loans over time.
3. Choose terms that will help you reach your goals
No matter what, focus on the loan terms that will help you reach your goals.
If you need lower payments but also want to pay your loans off faster, remember that the terms that help one don’t always help the other.
For example, monthly payments are often lowered with longer repayment terms. However, they also keep you in debt for longer. But, if your interest rate is much lower, that could be a way to pay the loans off faster while also getting a lower monthly payment.
Decide what’s most important to you. If you’re seriously struggling to make ends meet, you may want to be open to a longer repayment term if that’s the only way you can get lower payments. If faster repayment is your top priority, go for a shorter repayment plan.
4. Know the potential downsides before you sign
Finally, before you sign anything, read all the fine print. This is especially relevant with student loan refinancing; that’s when federal loans turn to private and you lose the protections that come with them.
However, the fine print on federal and private student loan consolidation is just as important. Knowing how much you’ll have to pay each month and how long you’ll be repaying the consolidation loan are two very important facts to consider.
The more you know, the less likely you are to pay extra money unwittingly to pay down your student loan debt. And you can enter into loan consolidation with confidence, knowing exactly what you’re agreeing to.
With this knowledge, you can confidently enter into a successful loan consolidation on your own, without having to rely on (or pay!) a third party.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|