Earnest offers private student loan refinancing and private student loans to consumers. The company has been in business since 2013, and is headquartered in San Francisco.
Earnest is different from traditional student loan lenders in that it does not simply rely on a consumer’s credit score, income, and employment history to approve a student loan refinancing application. Instead it utilizes a powerful algorithm to analyze a broader data set, including factors such as savings, education, and earning potential. Using these items, Earnest is able to build a more complete financial profile of applicants so it can often offer a lower rate for refinancing student loans and Parent PLUS loans.
Earnest Student Loan Refinancing
Refinancing is a method of obtaining a lower fixed or variable interest rate on student loans and/or consolidating multiple student loans into a single loan. With refinancing, a borrower can choose to refinance private student loans only or a combination of private and federal student loans.
Earnest offers both variable and fixed rate interest loans through its refinancing loan options. Earnest’s variable interest rate loans are currently from 2.65 percent annual percentage rate (APR) and up to a maximum of 6.03 percent, while its fixed rate loans currently have APRs as low as 3.20 percent and up to a maximum of 6.74 percent. Earnest does not charge origination fees, penalties for prepayment, or any other hidden fees. Term lengths range from five years to twenty years, and are offered at one month intervals, meaning there are 180 options for loan terms. A shorter loan term can save borrowers thousands of dollars in interest over the life of the loan.
To be eligible to refinance a student loan through Earnest, an applicant must be 18 years old, a U.S. citizen or a permanent resident, and must be enrolled less than half-time in school or will finish his or her degree this semester. Applicants must also be a resident of Washington, D.C. or one of the 44 states that Earnest lends in, which means that they cannot live in Alabama, Delaware, Kentucky, Mississippi, Nevada, or Rhode Island. Earnest cannot offer variable rate loans in Illinois, Minnesota, New Hampshire, Oklahoma, Tennessee, Texas, Utah, or Wyoming. In addition, an applicant must be the primary borrower on the student loans, and the loans must be from an accredited school.
The debt must be for the applicant's own or their dependent’s education, and must be at least $5,000. To qualify, an applicant must have a credit score of at least 660, be employed and have consistent income or a job offer. An applicant must also be current on his or her rent or mortgage payments, and his or her student loan accounts must be in good standing. Finally, an applicant must not have a bankruptcy on his or her credit report.
Earnest considers a number of factors in approving student loan refinancing. This includes the amount of savings an applicant has (which should cover at least two months of expenses), whether an applicant spends less than he or she earns, the amount of non-student and non-mortgage debt a person carries, the history of on-time payments an applicant makes, and whether the applicant has a history of late or overdraft fees.
The Application Process
Applying for a student loan through Earnest takes approximately fifteen minutes and can be completed through the Earnest website. Because Earnest considers more than just an applicant’s credit score, the company requires more information than just a Social Security number. Initially, Earnest will perform a soft credit pull to provide an estimated interest rate. This will not harm an applicant’s credit score but will provide an idea of what the interest rate may be.
If an applicant decides to move forward with the application, Earnest will request information about his or her financial history, employment status, education, debt-to-income-ratio, and more. To analyze an applicant’s savings and checking accounts, Earnest may request access to bank accounts to analyze the applicant’s financial habits. A hard offer is typically given within seven days of an application. If an application if approved, the borrower can expect to receive the funds within three days.
Earnest uses what is known as precision pricing to help borrowers save more money in interest. Traditional banks offer specific repayment terms on their loans which may be five years, ten years, or longer. Banks assign rates by bumping up payment amounts that fall between two terms or two rates up to the higher rate or the longer term. Earnest does not force its borrowers into a longer term loan. Instead, it starts by asking its borrowers to determine how much they can afford to pay on their student loans each month. Based on that number, Earnest offers them a loan with a rate and term matched to that amount.
To help its borrowers pay off their student loans with more ease, Earnest offers its customers a tool known as a “dashboard.” Through the dashboard, which is available via the website or an app, borrowers can customize their exact minimum monthly payment, bump up their payment at any time to pay off their loan more quickly, change their loan payment from monthly to bi-weekly to save money on interest, make extra or early payments, skip a payment and make it up later, and even consolidate their private and federal loans. The dashboard makes it simple to handle these tasks, many of which can ultimately help borrowers save a substantial amount of money in interest over the life of their loans.