We have been working with student loan refinancing companies to help white coat investors get a fair shake for six or seven years now. The first time I saw companies refinancing student loans again I knew it was going to be a service my readers needed and I jumped right on it. Over the years I have sat down with the CEOs for both SoFi and Laurel Road (then known as DRB) personally and asked them for products I knew my readers needed. We pay a lot of attention to this market around here and it has been interesting to watch what has happened with it over the years.
Every year or so a new company comes on to the scene promising better service and lower rates as they fight for their share of the market. Sometimes it actually even happens. But one of the best ways for me to understand the market is to look at what you guys are actually doing. Who are you refinancing with? If I send you to a refinancing company, what percentage of the time do you actually refinance with them? If the percentage is high and more and more of you are refinancing with a company each month, I know they're doing something right. That usually means one or more of the following:
- Great customer service
- A slick technological interface
- A nice cash back bonus and, perhaps most importantly,
- The lowest rates
While some of you undoubtedly refinance with the first company you apply to, I hope most of you are applying with at least 2 or 3 of them and, assuming the service is adequate, taking the lowest rate you are offered.
Earnest Student Loan Refinancing Fights Their Way to the Top
A trend I have noticed over the last couple of years has been with the company known as Earnest. As far as physician student loans go, SoFi and Laurel Road have long been the big players in this space with the doctors and other high-income professionals that make up my readership/listenership/viewership. But Earnest has muscled its way in and appears to be competing very effectively. So I thought it might be interesting to figure out why and review Earnest today.
Earnest was actually founded in 2013 (same year as Splash and two years after SoFi and CommonBond in 2011.) So they're not all that new to student loan refinancing, but they have been gaining traction. In 2017, perhaps 1/5 as many of you refinanced with Earnest as with market behemoth SoFi. Maybe that was as high as 1/3 in 2018. But by 2019, it was about the same. What happened? What is it that Earnest is doing that so many of you find attractive?
$500 Cash Back
Earnest is currently offering our readers $500 cash back when they refinance, while SoFi and Laurel Road are only offering $300. But I think you guys are smart enough to recognize that a couple hundred bucks doesn't mean much when we're talking about saving thousands of dollars in interest every year on your student loans. Besides, I have plenty of other companies that offer $500 or more to you that haven't attracted nearly as many of you to refinance with them. It's hard to blame it on that.
Low Rates
I suspect a big part of it is that they have found a source of funds that allows them to offer you lower interest rates than they used to be able to offer. I can't prove that. In fact, it's basically impossible to tell what rates any given borrower is going to be offered until they apply. I mean, look at our chart here:
Variable 4.54% - 11.72% APR
Fixed 3.95% - 9.19% APR
† Bonus includes cash rebates and value of free course. Borrowers who refinance more than $60,000 in student loans using the WCI links will be enrolled in The White Coat Investor’s flagship course, Fire Your Financial Advisor for free ($799 value). Borrowers will still receive the amazing cash rebates that WCI has negotiated with each lender. Offer valid for loan applications submitted from May 1, 2021 through June 30, 2023. Free course must be claimed within 90 days of loan disbursement. To claim free course enrollment, visit https://www.whitecoatinvestor.com/RefiBonus.
Student Loan Refinancing Disclosures
Yes, we publish a rate chart. And we update it every month. But it is basically useless. I mean look at the ranges there. Every company has offered at least some borrowers with some terms a rate somewhere around 2%. And for most companies, the upper end of the range is up around 6-7%. What one cannot tell from that chart (and which the companies are very unlikely to reveal) is how many borrowers get a certain rate for a certain loan. So there is no way in advance to know which rate you'll be offered without applying to multiple companies. But the fact that many more of you are choosing Earnest tells me that their rates have probably become much more competitive for more borrowers with various loan amounts and terms in the last year.
Earnest's lowest listed rates (as of 1/24/2020 when I wrote this post) start at 1.99% for variable-rate loans and 3.20% for fixed-rate loans, if you set it up on autopay to qualify for a 0.25% interest rate discount.
Set Your Own Terms with Earnest
The really unique thing about Earnest is that they allow you to choose from an incredible variety of loan terms. Instead of being stuck with a “standard” 5, 7, 10, or 15-year loan term, you can basically pick your term. Picking your term, of course, also picks your interest rate. Want a lower rate? Commit to paying it off faster. Want a longer term? That's going to cost you a bit more. But it's your choice so you can customize the loan to your unique financial situation. They call this feature “precision pricing” and this is how they say it works:
- Determine how much you can afford to pay each month
- Get a rate and term matched to that amount
- Save money due to your lower rate/shorter term
- Marvel at why no one came up with this sooner
Okay, there's a lot of marketing spin there, but you've got to admit it is a smart way to do things. They basically offer 180 different options between 5 years and 20 years. This is how it saves you money:
As you can see, if you only need 12 years to pay off your loans, you can get a 12-year term (with a 12-year interest rate) instead of a 15-year term (with a 15-year interest rate) from a competitor. Brilliant! My only beef with it is that there are no options below five years. Since I want all of my readers out of student loan debt in less than 5 years, I'd love to see them extend this “precision pricing” down as low as 1 year. You can still pay your loans off faster, ubt you won't be rewarded with a lower interest rate for doing so. You can, however, take a variable rate loan in the 44 states that allow them (all but IL, MN, NH, OH, TN, and TX.)
Slick Tech Interface
Earnest's interface is also very user-friendly. You can get your rate in just two minutes. While this is a necessary condition for success, it isn't a sufficient condition for success. They're obviously not the only company that can do this, but this feature does allow them to compete well.
Top-Notch Protection
If you die with student loans from Earnest, those loans just go away. Earnest doesn't come after your spouse or estate for the balance. That is also the case for federal loans, but only some private student loans (which your loans are once you refinance) offer this feature. In the event of total and permanent disability, Earnest will also discharge your loans. These features can help you save a little money on term life and disability insurance. In the event of temporary disability or other hardship, they might even allow you to defer payments for up to 36 months.
Other Cool Features From Earnest
Earnest also offers some other cool features that its competitors don't. For example, they keep their loan servicing in house. Customer service from all of these refinancing companies is head and shoulders above what you have probably experienced with the federal loan servicing companies like Great Lakes, Nelnet, and Mohela. However, being able to keep it in-house gives Earnest maximum control over the experience and the ability to make things right faster. They also allow you to make biweekly payments if you want (might help you budget and pay them off even faster if you're paid biweekly) and even allow you to skip a payment every year. When you are checking rates, they only do a soft credit pull, so it doesn't hurt your credit score just to take a look. Many companies do this, but not all of them.
The Total Package
When you put the whole package together, Earnest seems to do as well as other companies in all categories and better than other companies in some categories. They have clearly earned their place as a major partner with The White Coat Investor and most importantly, with the white coat investors. You should certainly include them on your shortlist when choosing who to refinance with.
Apply to refinance with Earnest today and get $500 cash back!
What do you think? Have you refinanced student loans with Earnest? What was your experience like? What did you like and dislike? Comment below!
I recently refinanced from Sofi to Earnest. My only critique thus far is that Earnest doesn’t permit you to apply the entirety of additional payments solely to principal. Sofi had this feature.
I’ll ask about this. That seems very odd.
Here the text from the FAQ section of the website:
How do I make a principal-only payment? | Student Loan Refinancing
Since all payments received on your loan will be applied to interest first, then to principal, we’re unable to offer a principal-only payment option. However, by making an extra payment on the same day as your due date, the majority of that extra payment, if not all of the extra payment, will go towards your principal balance. You can find directions on how to schedule an extra payment here.
If you’re enrolled in auto pay, you can increase your monthly auto pay above the minimum payment amount to have more of your payment go towards principal each month. To increase your monthly auto pay, contact Client Happiness Team directly by clicking the “Get In Touch” button found at the bottom of this article.
That is a little wacky. But the truth is only a tiny amount would go toward interest and that amount would increase the amount of the next regular payment going to principal. So no harm done. Seems easy enough to work around.
I was able to do this. Just set your new payment and they structure it as 2 separate withdrawals. One with the monthly due, and one with the additional to principle.
I recently re-financed with Earnest after being with Laurel Road for the past 2 years. The process literally took 20 min on my end and maybe 2 weeks total. Smoothest process I could expect. My rate is 1.61% variable right now as well, hard to beat that! My advice – the process has gotten so smooth, refinance early and often!
Impressive rate. I agree that people should refinance early and often.
We just refied a $55k loan that had been at Sofi to Commonbond. Use the links here on Sunday, 2/2/2020, and were approved 2/4/2020 for a 5 year variable at 1.77% (includes a 0.25% electronic bank withdrawl autopayment discount). We tried several other links and Commonbond came out with the best rate. I’m hoping they make it easy to direct payments to principal only, however, we plan on paying this off in less than 2 years. At 1.77%, it won’t save a ton of money if they make it hard to direct to principal only.
You shouldn’t have any trouble making principal payments with any of these companies.
When we were with SoFi, I found a form letter on a financial blog that I used. We had to send it to Mohela, who is/was the actual loan servicer for our loan through SoFi. Once the received the letter, all excess payments were then directed soley to principal. It’s sort of a pain to have to send an actual letter in the mail to them, but it did work in the end. You should be able to do this on the website when you pay.
Link to Letter in case others are in the same situation:
http://poorerthanyou.com/2018/01/29/template-pay-principal-on-student-loans/
Worth noting that Earnest was bought by Navient in late 2017. The “source of funds” could be from ripping off Federal borrowers:
https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-nations-largest-student-loan-company-navient-failing-borrowers-every-stage-repayment/
https://techcrunch.com/2017/10/05/online-lender-earnest-sells-to-navient-in-a-disappointing-deal-for-investors/
That may explain the changes I’ve seen. At any rate, the service seems way better than I would expect from a federal loan servicing company. Hopefully those being served by Navient are getting better service now too.
Agree with most of your post, it’s all about the rate. I paid my regular rate for a year before figuring out I could refi. I initially refinanced with Sofi, but my variable rate climbed from 3 to >6% in a couple years. It was better than the 8.5 on original loans, but still. I worked it down to 150k (I know…) with extra payments, but figured there was enough meat on the bones to refinance again. I got under 2% at Earnest with autopay deduction. Sofi didn’t want to match it. Earnest is owned by Navient now. Their customer service is really nice and very responsive. I called and changed my auto pay to much higher than the 5 year term amount. I still make extra payments over that as well but want the flexibility if I need it. The app and website aren’t terribly helpful. You can make a payment on it. Still has my next payment listed at a fifth of my autopay amount and my payoff date is listed as 4 years away. I wish that part was adaptive and reflected real world scenario. In reality, my payoff will be in 3 months, 2 months shy of five years post residency and the same month we plan to welcome our first kid. That part was coincidence but a happy one. Thanks for all the knowledge and encouragement this blog provides. I already was a natural saver who hated debt. The playbook was what I needed. My life/career outlook would be incredibly different without it.
Wow, I’m really surprised to hear your rate went up over 3% in the last few years. I’d like to hear more details. Do you know the month you bought and when the rate hit over 6%? That seems really odd. I don’t think any interest rate has gone up 3%+ in the last 5 years.
Congratulations on your success!
So I tracked down some details. Basically, my memory was faulty. Loan approved 7/16 at 3.7%. I’m sure you know this, but their rate is 30 day LIBOR on the 25th of the month + modifier. Because loan was paid and moved, it’s not on their website any longer. My computer HD died and I don’t remember my modifier. My last payment was 6/19 right at 6%, which prompted the switch. With Earnest, I got 2.18% (with autopay deduction) in 7/19, and currently sitting at 1.56 with autopay. I know the Fed raised rates throughout that 3 year span but I thought it went up more than I’d expect as well. Obviously it’s on its way down again but I’m still glad I switched.
We’ve used earnest for the better part of 4 years. We couldn’t be happier with the level of services and the rates. Took your advice about variable rates and got them to under 2%.
The rates and service are so good I (almost) want to keep them around (Jk).
Regards,
Psy-FI MD
I’ve been super happy with them. Currently sitting at 1.72% for 5-year variable.
So far Earnest is not compatible with Personal Capital. Have sent a request but heard nothing back.
I’m currently at 1.52% variable with SoFi (1 month Libor + 0.11 margin – 0.25 autopay incentive). Wonder if Earnest would be willing to beat that margin?…
Earnest is shady in my honest opinion at this point. I refinanced with them through the link on WCI back in December and never received the $500 that was promoted (no idea if it takes months and to get though). I refinanced about $50k (basically my last year of my fixed payments back to another 5 year variable rate plan from DRB). Process was easy. I’m a very long time reader and was a bit upset. No idea what went wrong in it all. I did get a good variable rate though. No idea how to even prove to them that I did this all.
Send me an email. Let’s at least find out why you didn’t get the cash. Either there is a good reason (you didn’t go through my link or you refinanced with them before) or it was an honest mistake and they’ll correct it. When you don’t get paid, I don’t get paid so I have just as much incentive as you do to fix this.
Situation resolved. Kyle now getting paid. Anyone else who runs into similar issues, please let me know.
Earnest was very kind in their email response and as always, WCI couldn’t have been of greater help. I do believe it was an honest error and may have occurred to multi-computer use in doing an application over several days. Either way the issue is resolved and I would not consider Earnest shady. And as I mentioned before, they do have one of the easiest application processes and lowest rates. I would refinance with them again.
I tried to get the $500 cash back with Earnest. They said because they are a financial institution, there are a handful of states (including Michigan) that don’t allow cashback due to some laws. Checking online, I couldn’t find anything related to the laws they referenced. Know anything about that?
That may be the case. Let me check with my contact. I know some of these companies cannot do variable loans in some states.
I recently refinanced my massive student loans through Earnest. In part, I was enticed by the $500 carrot for refinancing with them. After I didn’t see the $500 payment, they are now telling me they can’t pay anything to me because I live in Michigan. I don’t remember seeing this disclosed very clearly when I went through all the paperwork.