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Earnest Student Loan Refinance

April 23, 2016

Note:  Just like all posts on this blog, this is NOT a sponsored post.  I’m sharing my positive experience and offering a referral code.

Unlike most personal finance bloggers I know, I still have student loans on the books and I’m not in a rush to pay them off.  I have cash on hand (and then some) to kill them, but I prefer to keep the cash on hand.  Extra cash is going to our mortgage. I had my loans set at $225/month with a 4.25% interest rate (fixed at the time of consolidation in 2007). At that rate, They would have been paid off in 3.5 years, and I would have paid $682 in interest over the remainder of the loan.  A couple hundred per a year in interest is in the noise of my overall financial picture, so I’m just not worried about it.

Enter Earnest. There is a slew of new loan companies on the scene offering competitive rates for competitive borrowers with non-traditional underwriting processes.  SoFi and Earnest are the more heavily advertised ones, and I got a rate quote from each.  Since Earnest let me choose my monthly payment amount & shorten my loan term, they were able to give me the best rate.  Everything went quickly and smoothly in the process. It was very much a Silicon Valley company designed for millennial who can’t stand bad web design, inefficient processes, or too many phone calls.  I got my rate quote within minutes, and the approval process was also very quick.

I now have a 2.15% variable rate loan for the next 5 years. If I continue with my $225/mo payments, they will be paid off in ~3.5 years with $320 in interest total. I chose a variable rate because if it ever gets undesirable, I can simply pay down the cash and clear the balance.  The required payment is $150/mo, which would result in them being paid of in 5 years with $488 in interest.  The savings is modest at this point, but there seemed like no reason NOT to do it.

$200 signing bonus: I followed a promo link to earn $200 cash back  (which  reduces my effective rate to about 1.3%).  Are you interested in refinancing with Earnest and getting a $200 bonus?  Follow my link!  Note that you lose federal benefits if you refinance, so if you plan on taking advantage of them, Earnest is not for you.  You also need to have good credit and generally be a low risk borrower, so they aren’t for everyone.

The future of student loans: A one-size-fits-all federal loan might make sense when we are 18 and in school, but I’m now a very low risk borrower.  There is virtually no chance I’m not going to pay my loan, but I’m still not in a huge hurry to do it.  It is nice that there are new options that recognize my low credit risk and reward it with a low rate.

The student loan system as it stands has major issues, and I applaud companies that are taking new approaches.  Yet, knowing that the point of federal aid is to give more people access to college, and knowing that, for example, SoFi started by offering loans only to Stanford business school graduates, there is a small part of me that wonders what the overall effect of companies like this will be. If more privileged borrows get favorable rates, doesn’t that imply that the more risky borrows will end up with higher rates to balance?    In the long run, will Earnest, Sofi, and similar companies skim off the high quality student loan borrowers, leaving more risky options to the government-backed programs? If the government wants to subsidized higher risks borrowers, they may have to do it in a more direct and transparent way.

Do you have student loans, or did you pay them off quickly?  Would you consider an alternative lender for a refinance?

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7 Comments leave one →
  1. April 25, 2016 9:27 am

    Thanks for sharing your experience! I’m happy to hear of another private company refinancing student loans other than SoFi. It seems like such a good idea that there had to be more than one company doing it!

    I have federal student loans still but they are at a low variable interest rate so for now I’m not concerned with paying them off. Actually, when preparing our taxes this year, I learned for the first time how much interest I had paid over the first year the loans were out of deferment – it was less than $250. Like you said, that amount of money is in the noise, and while our invested payoff money did not earn that last year, in most years we expect it would!

    • April 26, 2016 7:33 am

      Yes – the cash flow is even not a big deal, but the actual cost (the interest itself) is really just not something I worry about.

  2. April 25, 2016 10:10 pm

    Yay for an alternative to SoFi! I had a horrible experience with them for mortgage refinancing so while I wanted to recommend them and others had done so for student loans, I simply cannot on principle 🙂

    I never had student loans thanks to choose a cheap state school and working my way through but I don’t know if those options will be available to LB by the time it’s hir turn to think about it, nor do I necessarily want hir to have to work like I did, so I always hope these companies do a good job and grow to be even better.

    • April 26, 2016 7:32 am

      That’s too bad – did the mortgage refi go through, or did you go with someone else? I just picked the one that gave me the best rate. They were really easy to work.

      I worked while in school and went to state school, but I think I didn’t work as much/hard. 🙂

      • May 19, 2016 11:01 am

        We finally finished the refi with them because it was the best rate and I had already gotten too far to let it go 😛 I decided the money we’d save SHOULD be worth the hassle.

        Eh when you don’t ALSO have the pressure of a drowning family to take care of, there’s much less motivation to kill yourself for four years!

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