Earnest Review – Is This Private Student Loan Lender Legit?
Pursuing higher education is a goal of many individuals seeking a better future. One of the things it takes to make it happen is being able to pay for the costs of going to college.
Federal loans help many students finance their degrees, but in many cases, there is a gap in funding. Private student loans through lenders like Earnest help these students pay for college.
But should you consider Earnest when searching for a loan solution? We will tell you everything that you should know about this private student loan lender before applying for a loan in the complete Earnest review. Let’s get started!
What is Earnest?
Online fintech lender, Earnest is based out of San Francisco, California, and offers education financing products. Louis Beryl and Benjamin Hutchinson founded the company in 2013.
The idea for Earnest started while Beryl was attending Harvard, pursuing his M.B.A. and degree in Public Policy. Although his earning potential being high, he was turned down for loans.
When he learned that traditional banks had a rigid view of loan applications and felt that private loans were expensive and difficult for many people.
Earnest does not just look at credit scores and other standard measures when reviewing an applicant’s application. They take a more individualized approach by looking at a borrower’s income potential, spending, education, and savings habits.
What are Private Student Loans?
Like federal student loans, private student loans are used to pay for the costs of attending college. The difference is that they originate from a bank, credit union, or online lender.
Federal loans have many benefits, such as not requiring credit history and lower interest rates, so they should be used first. However, since there are loan limits on these loans, students often must find additional funding elsewhere.
That is where private student loans come in to fill these gaps.
Earnest Loan Programs
Private Student Loans
Earnest offers the following types of private student loan options:
- Student loans with cosigner
- Medical School
- Law School
To apply for a loan with Earnest, you must:
- Be a U.S. citizen or permanent resident
- Enrolled in school full-time, have attained the age of majority (defined by the state of residence)
- Have a credit history of at least 3 years with a FICO credit score of at least 650, no bankruptcy on your credit report or accounts currently in collections, and make an annual income of $35,000 at least
If you don’t meet these requirements, you can add a cosigner to your loan.
Features of Private Student Loans
The features that Earnest offers borrowers interested in their private student loans include:
- Eligibility check
- Offers fixed and variable rates
- 0.25% auto pay discount
- Nine-month grace period
- Skip one payment a year
- Choice of loan terms
- Can get up to 100% of your school’s certified cost of attendance
- Minimum loan amount of $1,000, up to the full cost of attendance
Rates and Fees
Earnest allows you to choose between fixed and variable rates. Fixed rates will keep your interest the same throughout the life of the loan.
You don’t have to worry about fluctuating interest rates and your monthly payment amount changing. Currently, fixed rates start at 2.99% (includes auto discount).
With variable rates, your interest rate could fluctuate over time. A variable APR could lower or increase your monthly payment amounts.
The current variable APR is 0.99% (includes auto discount). Interest rates on fixed APR student loans might be higher at the beginning but could increase over the life of the loan.
There is no origination fee regardless of whether you choose a variable or fixed APR and your loan terms. This is fairly standard for private student lenders to not charge origination fees, unlike federal loans.
In addition, Earnest does not charge a late fee on late payments.
Earnest Student Loan Refinancing
Earnest also offers student loan refinancing as well. Earnest student loan refinancing allows borrowers to combine their existing federal and private debt and get a lower interest rate and more favorable repayment terms.
Here’s what you need to know about student loan refinance loans with Earnest below.
Must have a loan minimum of $5,000
To use an Earnest student loan refinance program, you must have at least $5,000 in federal and private student loans to be eligible for student loan refinancing. The maximum loan amount is the full amount that you have left on your existing student loans.
Must live in a Qualifying State
Earnest student loan refinancing is not available in all states. It is currently not available in Kentucky, Nevada, and Deleware.
If you’re still in school and want to apply for these refinancing loans, you must be enrolled less than half the time and have your student loans in repayment status.
Other Earnest Financial Products
Earnest loans are the primary products that the company offers. However, there are a few other financial products that Earnest has recently launched, including the list below.
If you have credit card, personal loan debt, or need to fund an emergency expense or home improvement project, Earnest has partnered with Fiona to help review your options.
Fiona is a search, comparison, and recommendation engine for personal loan options. It matches you with personalized loan offers without impacting your credit score.
You can get matched with a personal loan in as little as 60 seconds. Loan terms range between 24 to 48 months, You can borrow between $1,000 and $100,000, and competitive interest rates start as low as 4.99%.
Earnest Credit Card
Currently, you can join the waitlist for the new Earnest credit card. Other lenders like Sallie Mae have also gotten into the credit card market.
The card will offer 1.5% cashback rewards that can be used to repay your student loans. It doesn’t matter if it is a federal or private student loan. You can elect to put 1.25% cashback towards your credit card balance instead, although that doesn’t make sense if you have an outstanding student loan.
Among private student loan lenders, Earnest offers many attractive features for their student loans and student loan refinancing products. Here is what we like the most about their private student loan offerings below.
Deferment and Forbearance Options
Earnest student loans have some solid options for deferring monthly payments. Keep in mind that you continue to accrue interest when your monthly payment is deferred.
Here are the conditions and coverage for deferring your monthly payment with Earnest:
- Returning to grad school (must be at more than half-time) – Up to 36 months deferment
- Disability rehabilitation – Unspecified
- Active military duty – Duration of active duty plus 180 after demobilization
- Economic hardship – Up to 12 months forbearance
- Involuntary unemployment – Up to 12 months forbearance
- Natural disaster – Unspecified
- Temporary hardship – Up to 12 months forbearance
Relief and contract modification options may also exist for the following reasons:
- Death or disability discharge – If the borrower passes away or suffers a total permanent disability, their loan can be discharged
- Skip a payment – Borrowers can skip one payment every 12 months
- Unpaid maternity/paternity leave – Earnest considers this a temporary hardship for forbearance
Applying for a loan, whether it’s undergraduate private student loans, refinance loans, etc., isn’t always a great experience when applying at a bank or credit union. Since Earnest is an online company, they have focused on creating a streamlined user experience for applicants.
It is easy to apply for a student loan with Earnest, plus you can check out your loan offers without dinging your credit score with its instant rate quote.
Earnest will only run a hard inquiry if you choose a loan offer and complete an application.
Flexible Repayment Options
Before you finalize your Earnest student loan, you get the opportunity to review your repayment options. There are many repayment options that you can choose with Earnest, so you can pick the repayment term that’s best for you.
Here are the in-school repayment options that Earnest currently offers that you can choose from:
- $25 monthly payment – These small, fixed payments will help a borrower reduce the interest on their student loan
- Defer payment – While in school, you can take advantage of your grace period on your Earnest student loan and not make any payments until after your nine-month grace period after graduation
- Interest-only payments – Pay off your accrued interest while in school so when your full repayment begins, you don’t have a bigger balance to worry about
- Principle and interest payment – Start your repayment on your Earnest student loans immediately to get the lowest cost of borrowing
These four repayment options provide a ton of options on how to pay back your Earnest student loan. They also allow you to choose your repayment term.
Choose from a repayment term of 5,7,10,12, or 15 years if you have a cosigned student loan. If you have an independent student loan, you can choose between 10,12, or 15-year terms.
Whichever flexible repayment options and terms you choose, it’s important to use its student loan payment calculator first.
Although it won’t give you the exact monthly payment, it’s a great estimate of how much you should expect to pay each month. The calculator takes into account the term that you choose on your interest rate to compute this estimate.
Nine Month Grace Periods
Among competitor lenders that offer student loans, Earnest has a longer grace period. You can defer payments while in school and for nine months after you graduate.
Most lenders only allow you to defer your payments for up to six months after you graduate. The extra three months could be beneficial if it takes longer to secure a job after graduation.
On the flip side, you should consider that using the full grace period is going to end up increasing your student loan debt. The interest on private student loans starts accruing as soon as the money is disbursed.
That means you’ll have a bigger balance when it’s repayment time. Ideally, you should try to make some in-school payments to cut down on this interest to reduce your student loan debt and make it easier to make your monthly payments.
There is a lot to like about Earnest student loans with their flexible repayment options, loan terms, skip a payment, etc. But these benefits might not be enough to outweigh some of the downsides in your situation.
Need Strong Credit Score and History to get Approved
All student loan lenders have their own criteria for minimum credit score, consistent income, etc. So if you have poor credit or otherwise don’t meet their loan eligibility qualifications, you might have to look elsewhere.
Here are the loan eligibility criteria that Earnest looks for in their borrowers (or consigners with strong credit and steady income):
- Minimum credit score of 650
- Minimum income requirement of at least $35,000
- 3 years of credit history
- No bankruptcy or accounts in collect on your credit report
- History of on-time payments
Doesn’t offer Cosigner Release
It’s not likely that as a student you can meet Earnest’s minimum annual income, credit score, or other requirements. So you will need a creditworthy consigner to increase your chances of getting approved.
A cosigner like a parent is on the hook for the student loan just as much as you are. If you can’t repay your loan or make the payment date on time, their credit can be affected.
In addition, your cosigner’s debt-to-income ratio increases since their name is on the student loan.
Since Earnest doesn’t offer a cosigner release, your co-signer is responsible for the debt for the entire life of the loan. The exception is if you refinance your student loan later.
Should I Consider an Earnest Student Loan?
Rates and Terms – 4/5
The interest rates on Earnest student loans are pretty competitive with other private loan lenders. But potential borrowers should keep in mind that the starting interest rate on its fixed/variable loans is for well-qualified borrowers.
If you have a student loan with a cosigner, you can choose from loan terms that range from 5,7,10,12, or 15 years. By yourself, you can still get some good options with 10,12, or 15-year terms.
Fees – 5/5
You won’t pay application or origination fees for a private student or refinancing loan with Earnest. There are also no prepayment penalties to worry about if you repay your loan early.
Another cool thing about Earnest is that they don’t charge a fee on late payments.
Product Line – 4/5
Earnest offers more than just undergraduate private loans. They have a whole slew of graduate private student loans, and you can also refinance student loans that you already have (private and federal).
In addition to student loan refinancing, they also offer personal loans through their partnership with Fiona. Personal loans can help borrowers for a variety of purposes, including debt consolidation, home improvement, funding a large purchase, or being used in emergencies (i.e., making rent or mortgage payments if an unexpected expense drains your funds or to pay for medical expenses).
They don’t currently offer private parent loans and lack the ability to release your cosigners from a student loan.
Customer Service – 5/5
The Better Business Bureau has given Earnest an A+ rating, which is the highest possible rating. This rating is calculated by looking at a company’s history of complaints and if those complaints were resolved in a timely, appropriate manner.
Earnest has a help center that you can find answers to general questions, applying for loans, student loan refinancing, and more.
They also have a support live chat that can get you in touch with agents or help answer your questions. Their customer service can be reached Monday thru Friday from 8 a.m. to 5 p.m. (Pacific Standard Time), excluding holidays.
You can also reach them during those same hours by phone at 888-601-2801.