Refinancing with Earnest
Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.Check out Earnest
Student loan default can happen to anyone. All it takes is one unexpected event, such as a medical emergency or job loss, that leads to several missed payments during tight months.
Unfortunately, this is happening more and more. According to Time, 2016 saw 1.1 million people default on their federal student loans for the first time, leading to a 14 percent increase in defaults on federal student loans.
The question is, can you turn the ship around through student loan refinancing? Will refinancing even be an option once you have a student loan in default on your credit report?
Let’s find out.
Can you refinance a student loan in default – or after?
Let’s start with borrowers who currently have a student loan in default. If this sounds like you, refinancing will be likely impossible.
That’s because approval for a student loan refinancing offer requires having a good income and a good credit score – or a cosigner who has both. Defaulting on any type of loan, unfortunately, can wreak havoc on your credit score.
Chances are, a student loan in default will stand in the way between you and refinancing. However, that isn’t the case for loans previously in default that have since been rehabilitated.
While many lenders might turn you down because of a previous default, there are some that are willing to look past a not-so-perfect credit history. Some of these lenders might focus on your education and income growth to give you more of a chance.
In fact, our very own Student Loan Hero CEO, Andy Josuweit, was able to work with student loan refinancing company Earnest to refinance his loans, even though he had a couple of defaulted student loans in his past.
It might not be easy to refinance your student loans if you’ve defaulted on them in the past, but it isn’t impossible. What it will require is first getting your loans back in good standing and then rebuilding your credit score.
If you need a faster option, adding a cosigner once you’re in good standing to refinance your student loans can do the trick. But know that your cosigner is on the hook if you default again, so this isn’t an agreement to walk into lightly for you or your cosigner.
One of the best ways to rebuild credit is to make payments on all your bills on time. If you get your loans back in good standing and stay on top of all of your monthly bills from then on, you’ll be able to improve your credit score in the process.
How to get a student loan in default back in good standing
If you have a federal student loan in default, getting back into good standing might be easier than you expected. According to Federal Student Aid, your options are:
- Pay your entire loan balance in full
- Enter loan rehabilitation
- Consolidate your loan
If you have enough money saved to pay your loan in full, that’s great. Especially since, once you pay it in full, you’re finished with it forever.
So let’s discuss the next two options: loan rehabilitation and consolidation.
To enter loan rehabilitation, you contact your servicer and agree to make nine on-time payments within 10 consecutive months. The amount you pay via these payments will be based off a percentage of your income.
The other option, consolidation, is not to be confused with refinancing. Remember, student loan refinancing happens through a private lender.
Federal student loan consolidation, however, happens with a Direct Consolidation Loan. To use a Direct Consolidation Loan to get out of default, you must first have at least one qualifying federal student loan in default. Once you complete the Direct Loan Consolidation process, you can make payments through an income-driven repayment plan.
Alternatively, you can make three full monthly payments on your student loan in default and apply for the Direct Consolidation Loan.
However, if your defaulted student loans are private, a Direct Consolidation Loan will not be an option for you. In that case, you’ll need to work with your servicer to find out what their requirements are for rehabilitating your defaulted student loans.
There is life after a student loan default
Being in student loan default can feel hopeless, but it doesn’t have to be. While goals like refinancing your student loans might be far off because of a current or past default, there are other things you can do to tackle your student loans.
For example, you can go through the rehabilitation process to get your loan out of default. Then, sign up for income-driven repayment plans for lower payments. These two things can help to turn your situation around quickly.
What’s more, when the default is in the past, you can try refinancing. When you do, look for student loan refinancing lenders that evaluate more than just your income and credit score. That way, your chances of approval are likely higher and you can finally get that much-needed lower interest rate.
Remember, a student loan in default doesn’t have to define your repayment future. It’s a challenge, yes, but one that you can overcome by using the strategies listed above.
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
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
|2.57% – 6.98%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.80% – 6.22%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.57% – 8.17%6||Undergrad & Graduate||Visit Citizens|