Refinancing with Earnest
Refinancing rates from 2.57% APR. Checking your rates won’t affect your credit score.
In years past, you were stuck with your student loan interest rates. You had little to no options for changing your repayment situation.
But as more and more felt the pinch of student loan debt repayment, a new industry was born to help make things a bit more manageable: student loan refinancing.
You might have heard about student loan refinancing, but you might not be sure if it’s right for you. In this guide, you’ll learn everything you need to know to decide whether you should refinance your student loans.
What is student loan refinancing?
Student loan refinancing is the process of obtaining a new loan at a new interest rate. Typically, you can refinance both your federal and private student loans, which involves paying off your old loans and getting a new one with different repayment terms and (hopefully) a better interest rate.
Student loan refinancing is different than consolidation, though many people erroneously use the terms. Consolidation typically refers to taking out a Direct Consolidation Loan and combining all your federal student loans into one loan with one interest rate.
While there are some similarities with refinancing, consolidation doesn’t offer any interest savings. Private student loan borrowers aren’t eligible for consolidation. As a result, refinancing can be a good option for private student loan borrowers or those with a combination of federal and private student loans.
The key benefit of refinancing is the potential to save thousands of dollars in interest over the life of the loan. For example, as of July 1, 2018, federal Direct PLUS Loans have an interest rate of 7.60%. Through refinancing, you could get approved for a much lower rate, saving you a lot of money.
Using the extra savings, you could pay more money toward your principal balance, invest, or start an emergency savings fund.
Should you refinance? What to consider first
Student loan refinancing is a great way to make payments more manageable, but there are important things to consider before you decide to refinance your student loans.
Through the process of refinancing, you are essentially applying for a private loan. If you already have private loans, that might not be an issue. But if you have federal student loans, you’ll give up your federal student loan protections, including:
- Income-driven repayment (IDR) plans: IDR plans are a smart option for those struggling to afford their payments. With a longer repayment term and a monthly payment that is a percentage of your discretionary income, you can dramatically reduce your minimum payment with an IDR plan. But when you refinance, you’re ineligible for IDR plans.
- Loan forgiveness: Federal student loans have some loan forgiveness options, such as the Public Service Loan Forgiveness and Teacher Loan Forgiveness programs. When you refinance, you’re no longer eligible for these programs.
- Deferment and forbearance: If you fall on serious financial hardship, postponing your payments through deferment or forbearance can help. But if you refinance, you may have limited options to postpone your payments.
When you refinance your student loans, you work with a private lender and lose out on the federal protections offered to you with your federal student loans. This doesn’t mean that you shouldn’t look into refinancing as a viable option, but it’s something to consider before moving forward.
The process of refinancing is irreversible, so you can’t go back and get these benefits at a later date. Once you refinance, you’re going to be with your refinancing company for the duration of your repayment.
How to determine your refinancing eligibility
Because student loan refinancing companies are private lenders, there is more than one option for student loan refinancing. There are many companies in the student loan refinance marketplace from which you can choose. Before you pick one, it’s key to determine whether you’re eligible for a refinancing loan.
Student loan refinancing companies tend to have stricter eligibility terms than you’d have with federal loans. Before you go through the hassle of applying, do your research on the requirements for each lender.
Most lenders require you to have a good credit score, though each lender is different. Lenders also want proof of a stable income and cash flow to support your new loan.
If your credit isn’t great, or if you don’t make enough money, you might need a cosigner to qualify for a loan. A cosigner acts as a guarantee to the lender. If you fall behind on your payments, the cosigner makes them instead. Having a cosigner reduces the risk to the lender, making it more likely to approve you for a loan.
To find out if you qualify, research several different student loan refinancing lenders and review their eligibility requirements. Be sure to read the fine print since refinancing may not be available in all states.
How to find the best student loan refinancing company for you
Once you’ve assessed your eligibility and narrowed it down to a few possibilities, it’s time to choose the best lender for you. Here are some questions to ask that could help you find the best lender for you:
- Does the lender offer fixed or variable interest rates?
- How much could you save with their interest rate? Use our student loan refinancing calculator to see potential savings.
- What are the repayment terms and how will that affect your monthly payment?
- Do the lenders offer any perks? For example, some allow you to make interest-only payments if you experience financial hardship.
- What are others saying about the lender? Does it have a good reputation?
- Is there an origination fee or prepayment penalty?
- What are the minimum and maximum amounts of debt it will refinance?
- What kind of customer support does it offer? Is it easily accessible?
After doing a comparative analysis between lenders, pick your top three and start applying.
Why three? Even after you’ve assessed your eligibility and chosen your top three lenders, you still have to get approved for refinancing. Each lender has its own requirements, and some are stricter than others. Depending on your credit score and your income, one lender might be more likely to approve you than another.
In the end, you want to have options and find the best lender for you.
How to prepare for refinancing
Before you apply for student loan refinancing, do a quick financial audit and prepare some documents to help the process move along smoothly. Here are some steps to take to prepare for refinancing:
- List all your federal and private student loan totals.
- Write down your loans’ interest rates next to the total.
- Create a third column and include your loan servicer’s information, including phone, email, and mailing address.
- Gather your most recent pay stubs.
- Collect last year’s tax return.
- Check your credit reports from the three major bureaus using AnnualCreditReport.com.
- Check your credit score for free at LendingTree, which is the parent company of Student Loan Hero.
Taking these steps can help you prepare to refinance your loans and have all your information in one place.
Choosing your refinancing terms
Through student loan refinancing, you may be able to choose from various repayment terms and interest rates.
Consider your repayment term and assess how it will affect your monthly payment. In other words, will your monthly payment be going up, staying the same, or going down? It all depends on the repayment terms that you choose.
Most refinancing companies offer repayment terms between five and 20 years. Of course, we believe it’s best to pay off your loans as quickly as possible. But you should also make sure that whatever repayment term you choose is manageable for you and allows you to reach other financial goals, too, such as saving for retirement.
With interest rates, assess the impact of choosing a fixed or variable rate. Fixed rates are typically a tad higher than variable rates — but they are fixed, meaning they won’t go up or down over the life of your loan.
Variable rates tend to be lower and can be an attractive option. Variable interest rates are tied to the markets — often the London Interbank Offered Rate.
Before you opt for a variable rate to save money, understand that rates can rise anytime. You could end up with a higher interest rate down the line than if you had selected the fixed-rate option.
If you think you can aggressively pay off your loans in a few years, a variable-rate loan could help you achieve that. But if you choose a longer repayment term, you may be better off with a fixed interest rate. To save extra money on interest, see if your prospective lender offers automatic payment discounts. Some lenders will reduce your interest rate by 0.25%, which can help you save money over time.
Deciding to refinance your loans
Refinancing your student loans could be a great way to save money on your student loans, but it’s still a major financial decision. Carefully assess the costs and the benefits of student loan refinancing and choose what’s right for you.
Ready to refinance your loans? Compare offers from multiple student loan refinancing companies to make sure you get the best rate and loan repayment terms.
Melanie Lockert contributed to this article.
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 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 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% 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
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|