Refinancing with Earnest
Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.
If you’re looking to lower your interest rates and save money on payments, student loan refinancing could be the solution for you.
However, depending on your situation, refinancing might not be the best idea, especially if you don’t have a secure income or the best credit score.
Here are six pros and cons of refinancing student loans to consider before signing on with a lender.
6 pros and cons of refinancing student loans
Before you decide if it’s the right course for you, here’s a brief note on how student loan refinancing works. Refinancing means lumping your existing federal and private loans into a new loan with a private lender.
Through refinancing, you could score a better interest rate but lose access to federal loan protections. See if any of the following pros and cons of refinancing student loans speak to your situation.
1. Con: You need to meet lofty eligibility requirements
When you applied for student loans, you needed to meet specific requirements, such as being enrolled at least half time at an eligible school.
Similarly, top lenders offering student loan refinancing have requirements. Basic criteria include being a legal resident and holding an undergraduate or graduate degree.
But refinancing companies also require borrowers to be creditworthy. And you’ll need to have solid credit if you want to score the best rates. The best private student loan companies often require you to have a good or excellent credit score (typically 660 or above) to qualify.
2. Pro: You can apply with a cosigner to access lower interest rates
Refinancing requirements can be hard to meet. But you could enlist the help of a cosigner.
Although you’re not required to apply for refinancing with a cosigner, many top lenders give you the option to do so.
Say you don’t have the credit history or income to benefit from refinancing on your own. Consider asking a relative or other creditworthy adult to cosign so you can get a lower rate.
If you’re concerned about being joined at the hip to your cosigner, remember that many top lenders offer clear pathways to cosigner release. At Laurel Road, for example, you can remove a cosigner from your loan agreement once you make 36 consecutive timely payments.
3. Pro: A lower interest rate could lead to major savings
Whether you benefit from a cosigner or have built up your own strong credit history, refinancing will award you accordingly. It’s a merit-based system; the more qualified you are for refinancing, the lower your interest rate will likely be.
That’s a big deal because a lower interest rate means paying less overall. Say you refinance $40,000 worth of loans at a 6.00% interest rate. Over 10 years, you’d shell out $13,290 in interest. But if your rate was 4.00%, you’d pay $8,598 in interest, saving close to $5,000, according to our refinancing calculator.
Once you improve your credit score and debt-to-income ratio or find a cosigner, you don’t have to settle for the first interest rate you’re offered. A benefit of refinancing is that you can choose your lender, comparing offers until you find the best one.
Also, consider that refinancing gives you access to variable interest rates, which increase or decrease during your repayment according to market influences. The option of variable rates isn’t a pro for every borrower, but it could be if you’re looking to repay your refinanced loan over a shorter period.
4. Pro: A single monthly payment with the lender of your choice
Each time you took out a federal loan for college or grad school, you were assigned to one of nine federal loan servicers. You could’ve ended up with federal loans that were all from different servicers. Add private loans to the mix, and keeping tabs on your debt could be difficult.
One pro of refinancing is that you can end up making a single monthly payment to the loan servicer of your choice.
A Federal Direct Consolidation Loan achieves the same thing with federal student loans. However, you won’t score a lower interest rate. And you can’t lump your private loans into the new loan.
Refinancing, on the other hand, gives you the power to group all your loans together. You could even transfer a Parent PLUS Loan from your parent’s name to your own with top lenders such as SoFi and CommonBond.
5. Con: You’re locked into a repayment plan
One benefit of federal loans, including Direct Consolidation Loans, is that you can alter your repayment plan. You could switch from the 10-year Standard Repayment Plan to the 20-year Income-Based Repayment Plan, for example. The latter would set your payment based on a percentage of your discretionary income.
Refinancing offers no such flexibility. Once you’ve taken out your new refinanced loan, you have the same repayment plan until your debt is paid off.
Still, you should have a strong degree of choice at the outset. Earnest, a top refinancing company, offers the “radical flexibility to pick any monthly payment and term between five and 20 years.”
But remember that the lower your monthly payment, the longer your repayment term. That means you’ll pay more over time to cover your debt. Use our student loan term comparison calculator to help you decide how long you’d like to repay your loans.
6. Con: You lose federal repayment protections
Many top refinancing companies offer you the ability to pause your payments if you lose your job or suffer another money-related setback. CommonBond, for example, gives its refinancing borrowers up to 24 months of unemployment protection. In addition to awarding you forbearance for economic hardship, the lender could provide you with a consulting job via its CommonBridge program.
Still, deferment and forbearance options offered by the best refinancing companies are likely to fall short of what’s offered by the federal government.
The Department of Education lists several ways you could qualify for up to three years of mandatory forbearance. If your monthly loan payments account for 20% or more of your monthly income, for example, your servicer would be required to award you forbearance.
So if you see yourself potentially needing to pause your student loan payments, ask private lenders about their deferment and forbearance options. If you’re unimpressed, you might be wise to stick with your federal loan protections.
It’s also safer to keep your federal loans if you have a path to loan forgiveness. Refinancing companies don’t offer forgiveness options. If you work in public service, for example, check out Public Service Loan Forgiveness before opting to refinance.
Consider the pros and cons of refinancing student loans
As with any decision you make regarding your student loans, refinancing should be considered with care. If you’re a qualified borrower, refinancing could help you repay your debt faster. But refinancing isn’t right for everyone.
To avoid making the wrong choice, consider all the pros and cons of refinancing student loans. One other potential pro: It’s relatively easy to apply for refinancing.
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|