Refinancing with Earnest
Refinancing rates from 2.49% APR. Checking your rates won’t affect your credit score.
Maybe you’ve heard the buzz surrounding student loan refinancing — that you could save money in interest and merge your loans into one simple monthly payment.
Some private refinancing companies are rolling out unique perks to their customers. SoFi, for example, offers unemployment protection and a cool entrepreneurship program. For socially-conscious borrowers, CommonBond is a lender who funds educational causes through its Pencils of Promise program.
As you see, there can be a lot of benefits (but some drawbacks too). So when can you refinance student loans?
When can I refinance student loans?
For eligible candidates with good credit and a stable income, the sooner you refinance, the better. This is because of the potential interest savings.
Let’s say you have a Graduate PLUS loan with an interest rate of 7% and a $50,000 balance. If you refinance to 4.99% over a 10-year repayment period, you could save roughly $50 a month, according to our refinancing calculator. In other words, you’d save more than $6,000 in interest over the life of the loan.
With that extra cash you could put more money toward principal payments, save for a rainy day, or invest for retirement.
Even if you just graduated, you could benefit from refinancing. For example, some lenders — including SoFi and CommonBond mentioned above — honor grace periods, so if you just graduated and don’t have to pay your loans right away, you could benefit from a lower interest rate.
The catch? Most refinancing companies want you to have a job lined up already and sufficient income to pay back your loans — or else to have a cosigner with strong credit. If you’re lucky enough to score a job right after graduation, you could save money on interest before your first payment is even due.
Some refinancing companies, also want to see a positive repayment history before you are eligible for refinancing, so you may not qualify right after graduation. Likewise, most (but not all) refinancing companies require you to complete your degree in order to be eligible. An exception is Citizens Bank, though if you have an associate’s or no degree, then they require 12 on-time payments before you refinance.
Once you decide refinancing is for you, and you meet the requirements for the lender you’ve selected, then the sooner you act, the better, so as to maximize any interest savings.
What you need to be able to refinance
While knowing when you can refinance student loans is pretty straightforward, you’ll also need to answer the question “Can you refinance a student loan?” Here are a few key factors to consider when looking to refinance your student loans.
- Good credit: You’ll likely need a credit score of 700 or higher in order to be eligible to refinance your student loan, unless you have a cosigner.
- History of on-time payments: If you are always on time with your monthly payments (student loans, credit cards, etc), you’re more likely to be eligible to refinance because you seem like less of a risk to lenders.
- Enough income to pay your debts: You should be making more money than you have to repay in debt each month. The lower debt-to-income ratio you have, the better.
- Employment history: Having a stable job with a stable income can make you appear more desirable to a lender because you’re more likely to make payments on time, every time.
- Savings account(s): A lender may look to see if you have savings in order to ensure you have something to cover your debts if your income suddenly decreases.
Things to consider before refinancing: pros and cons
“When can you refinance student loans?” is an important question, but perhaps more crucial is whether refinancing is a good fit for your particular situation.
Although refinancing may seem like a sweet deal, there are drawbacks. For instance, if you have federal student loans, you’ll lose the option to pursue benefits such as loan forgiveness or an income-driven repayment plan.
What makes this all the more serious is that the process of refinancing is irreversible. You won’t be able to return to your old payment plan with your old terms, and you will forfeit federal student loan protections. On the other hand, if you only have private student loans to begin with, refinancing may be less of a risk.
Here are four downsides to refinancing your student loans:
- Your debt will take longer to pay off: If your loan term is extended, you’ll be making payments for a longer period of time. For example, many refinancing companies offer new terms of five to 20 years.
- You won’t necessarily save more money with lower payments: An extended term with a lower monthly payment can sometimes be more costly because you may end up paying more in interest over the span of the loan.
- You will no longer be eligible for federal government programs: If you refinance federal student loans, you will no longer be able to select opt-in income-driven repayment plans that cap your monthly payment at a percentage of your disposable income. You also won’t be able to access federal forgiveness programs, such as Public Service Loan Forgiveness.
- Your credit score can be impacted (a little): A hard credit check may be needed to review your credit, which means your score can drop a few points.
When can’t I refinance student loans?
If you’re still in school, you may not be eligible for refinancing until you graduate. One of the very few lenders that offer student loan refinancing in such a case is Earnest, but it requires students be in their last semester of college to qualify.
As mentioned, you’ll also need to have solid credit and a strong, stable income (as dictated by the lender). If you don’t meet this threshold and don’t have a cosigner to bridge the gap, then you might be better offer exploring income-driven repayment for your federal loans — an option that could lead to payments as little as $0 if your income is low enough.
When should I refinance student loans?
So you know refinancing sooner rather than later is a good option. You know what you may be giving up if you pursue this option. But is it the right time for you to refinance?
Before you begin the process of refinancing, start preparing first. There are a variety of ways to check your credit report and credit score for free. If your credit is weak and you lack a cosigner, then you may want to work on building credit, or improving damaged credit, before trying to refinance.
You’ll also want to shop around for the best lender and the best deal. Fortunately, some online lenders (including those on this list) offer instant rate quotes to give you an idea of what kind of rate to expect. Do your research first before refinancing.
And even as you investigate refinancing, make sure to look at all of your repayment options to see what’s best for you and your financial situation.
Carissa Chesanek contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for SoFi.
2 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 3.50% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.49% APR (with Auto Pay) to 7.27% 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 April 17, 2019, 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 04/17/2019. 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 our student 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.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed 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.
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.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
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 2.48% effective April 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.49% – 7.27%1||Undergrad & Graduate|
|2.49% – 6.65%3||Undergrad & Graduate|
|2.49% – 7.41%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.49% – 7.11%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|