There are a lot of student loan lenders and servicers in the industry, and it can be a daunting prospect to choose the right one for your educational needs. While all lenders and servicers are bound by the same federal laws, there is a wide variety in their interest rates, product packages, and how they interface with their customers.
Sometimes it’s not enough to read 20 different reviews on 20 different lenders; it can be a lot easier to see a comparison between two similar lenders in order to determine the best one between them. Today we will cover two lenders, SoFi and Earnest, and talk about the similarities and differences of their products.
SoFi stands for Social Finance; they bill themselves as a “new kind of finance company,” and they have several differences from traditional lenders that set them apart. They’re exclusively online, which isn’t unheard of in student lending, but they also operate on a model of efficiency that they say helps them serve customers better.
Where most lenders tend to plan ahead and charge their rates based on the possibility that the borrower will miss payments or even default, SoFi takes more factors into account when making a lending decision – and they’re a lot pickier than your average lender as well.
Here’s how it works: A decent credit score and good payment history aren’t enough to get a loan with SoFi. They also look at your education, planned cash flow, and job market in your chosen field. This means they might be more likely to lend to someone in a difficult, high-demand field, such as electrical engineering or medicine, rather than someone with a major typically seen as difficult to get a job in.
SoFi prides itself on setting its borrowers up for success by being very selective about who they lend to – and it shows. Most borrowers with SoFi pay back their loans in full.
As a private lender, SoFi doesn’t offer federal loans – or even regular private student loans. It does, however, offer Parent Loans. Their website says that the average borrower saves over $3,600 as opposed to a federal Direct Parent PLUS Loan. There are no origination fees or penalties if you pay the loan off early, and their interest rates are highly competitive because of their efficiency model.
Their variable rate loans currently run from 3.690 percent to 7.1115 percent APR, and like most lenders, SoFi offers a discount if you set up automatic loan payments. Fixed rate loans are only slightly higher, from 4.250 percent to 8.0 percent APR with autopay. In addition, SoFi gives their borrowers a discount of .125 percent APR on a second loan, making it even more affordable if you need multiple loans.
SoFi is also one of the leading refinancers of student loans partly because they can consolidate both federal and private student loan debt. As with the Parent loans, SoFi’s refinance packages come with no fees and competitive rates – currently 2.815 percent APR to 6.740 percent with autopay on a variable rate, and 3.350 percent to 7.125 percent APR for a fixed rate. The average savings per borrower is $288 per month according to their website.
In addition to the loans, being a member with SoFi comes with perks. Members are invited to special events, and have access to both career coaching and SoFi’s excellent customer service. If a borrower loses their job, SoFi will not only pause payments on the loan, but will also help find another job to get the borrower back on their feet.
Earnest is another all-online lender that specializes in student loan refinance. They, like SoFi, use a more efficient model that takes into account your savings patterns, investments, and even expected career trajectory to help with lending decisions, which means they can offer what they call “Precision Pricing.” Rather than set up a boilerplate loan term and rate, Earnest uses your monthly budget to determine an individualized loan package with a unique interest rate and loan term. In other words, your monthly payment ability determines your rate and term – not the other way around.
Earnest also has a mobile app which borrowers can use to make payments and check the status of their loans. Customer service is available via phone, live chat, email, or even mobile text, putting expert help seconds away.
Earnest Loan Products
Earnest says its borrowers save over $21,000 per year by consolidating with them because of how Earnest structures its loans. With the intuitive desktop dashboard or mobile app, borrowers can tailor their monthly minimum payment, increase their payment at any time to pay off the loan faster, use a bi-weekly payment schedule to cut down on interest, or even skip a payment and make it up later. Earnest is also able to consolidate federal and private loans, making it a viable option for borrowers who have multiple loans across both the federal and private sector.
Because Earnest uses a personalized model there is no set loan rate or term. Each loan is tailored to the individual borrower, and is based upon not only credit history, but current cash on hand, retirement/savings, and expected career growth and pay. As a result, Earnest collects far more data than a typical lender, and uses all of it to ensure that only borrowers with the highest chance of repayment are approved for a loan.
They can lend any amount between $5,000 and $500,000, making their loans a viable option whether you’re looking to refinance one small loan or an entire high-end education such as law or medicine. In order to be considered, you must also have graduated and be employed, or be within 6 months of graduating with a job offer already in hand.Online lenders like Earnest and SoFi are gaining in popularity for borrowers who are looking for more flexibility and solid customer service. Student loans can be financially draining and, for some borrowers, a seemingly lifelong obligation. Lenders like SoFi and Earnest seek to make that process more efficient – and save you money in the process.