Earnest Refinance: A Better Option Than Sallie Mae Loans?

Earnest is an online-only lender that offers student loan refinancing and private student loans. It was acquired by Navient in 2017 as an independent subsidiary. Navient had an agreement with Sallie Mae Bank that prohibited Earnest from refinancing Sallie Mae loans. This restriction was lifted in January 2019. Earnest's underwriting process may make it easier for some people who don't have great credit to qualify for refinancing. However, unlike many other lenders, borrowers cannot add a co-signer to their application to increase their chances of qualifying or getting a lower interest rate. Sallie Mae does not offer student loan refinancing and has a poor reputation for customer service.

Earnest's acquisition by Navient in 2017

In 2017, Navient, a leading provider of asset management and business processing solutions, announced its acquisition of Earnest, a financial technology and education finance company. The acquisition was valued at $155 million in cash.

Earnest, founded in 2013, is a technology company that uses data science, smart design, and exceptional service to rebuild financial services. The company provides student loan refinancing to young borrowers with thin credit files by leveraging tens of thousands of data points. Earnest serves financially responsible, digitally native consumers who have been underserved by traditional banks.

Navient, on the other hand, had spun off from Sallie Mae in 2014 to manage the company's federal student loan debt business. At the time of the acquisition, Navient was focused on servicing and collecting existing private and federal student loans.

Following the acquisition, Earnest continued to operate as a distinct brand, with its own management team, rates, terms, and benefits. The acquisition was intended to create a platform to deliver consumer-centric education credit products for the digital age, combining Earnest's technology and data science capabilities with Navient's industry experience and reach.

As a result of the acquisition, Earnest was initially prohibited from refinancing Sallie Mae loans due to a non-compete agreement between Navient and Sallie Mae. This restriction was lifted in January 2019.

Sallie Mae's non-compete agreement with Navient

Sallie Mae and Navient's non-compete agreement was a result of their split in 2014. Navient was spun off from Sallie Mae to manage the company's federal student loan debt business. As part of the agreement, Navient was prohibited from refinancing Sallie Mae's private student loans or any federally guaranteed student loans held by Sallie Mae. This restriction was in place until January 2019, when the non-compete agreement between the two companies ended.

The non-compete agreement also extended to Earnest, which was acquired by Navient in 2017 as an independent subsidiary. Earnest, a startup lender that specialized in refinancing student loans, was prohibited from refinancing Sallie Mae loans due to the agreement between Navient and Sallie Mae. This restriction on Earnest was also lifted in January 2019, along with the expiration of the non-compete agreement between Sallie Mae and Navient.

Following the end of the non-compete agreement, Navient began to compete with its former parent company, Sallie Mae, in the student loan market. Navient started offering education loans to college students and utilized technology developed by Earnest to create an Earnest-branded product. This product enabled borrowers to quickly check their eligibility for loans by providing basic information, such as school details and an estimated credit score.

Navient's CEO, Jack Remondi, expressed enthusiasm for the opportunity to refinance loans made or held by Sallie Mae. However, Sallie Mae downplayed the threat from refinance lenders, including Navient, by pointing out the thin and eroding interest margins in the refinance loan market. Despite this, Navient moved forward with its plans to compete for refinance lending, targeting Sallie Mae's existing borrowers.

Sallie Mae's poor customer service

While Earnest was previously unable to refinance Sallie Mae loans due to a non-compete agreement between the two companies, this restriction was lifted in January 2019. Currently, Earnest can refinance Sallie Mae loans as long as both the borrower and the loan meet their eligibility criteria.

Sallie Mae's customer service has been described as "horrible" by some customers. Reviews claim that the company has a "bad attitude" and that it is difficult to get past automated recordings that do not understand English. The average hold time is up to 3 minutes, with the longest wait times on Fridays and the shortest on Sundays. The customer service phone lines are open from 8 am to 9 pm ET Monday to Thursday, 8 am to 8 pm ET on Fridays, and 10 am to 2 pm ET on Saturdays.

Some customers have complained about the difficulty of releasing a cosigner from their loan. One reviewer mentioned that Sallie Mae denied receiving the necessary documentation multiple times, even after it had been mailed and faxed as instructed.

Another reviewer expressed frustration with Sallie Mae's rejection of co-signer applications, stating that the company is "in the business of making the rich richer and keeping the poor uneducated." This reviewer also mentioned the long wait times to reach a human customer service representative, which can take up to 30 minutes.

Sallie Mae's customer service can be contacted by phone, email, or mail. The phone number for existing student loan customers is 800-472-5543, while the general customer service number is (888) 272-5543. The email addresses for queries are [email protected] and [email protected]. The mailing address for the company's headquarters is 300 Continental Drive, Newark, Delaware 19713, United States, and the address for general correspondence is P.O. Box 3319, Wilmington, DE 19804-4319.

Earnest's eligibility criteria for refinancing

Earnest, an online-only lender, takes a unique approach to student loan refinancing. Each Earnest loan product has its own eligibility requirements. Here are some of the common eligibility criteria for refinancing with Earnest:

Citizenship and Residency

To be eligible for refinancing with Earnest, you must be a U.S. citizen or permanent resident and be at least 18 years old, the age of majority in most states.

Income and Employment

Lenders assess your income as part of the eligibility criteria. Stability and sufficient income are essential to ensuring your ability to repay the refinanced loan. Lenders may also consider other sources of income, such as rental properties or investments, as long as they are consistent. You must be employed in the U.S., and your income must be in U.S. dollars. Generally, the higher your income, the better rate you'll qualify for.

Credit History

Lenders will also consider your credit history, including your existing student loan debt. They will check to make sure you don't have a recent bankruptcy, default, or accounts in collection, which could negatively impact your eligibility for a refinance loan.

Education

To refinance your student loans with Earnest, you must have received a degree or be close to graduating. Although you may be able to qualify with an associate's degree, some lenders offer refinancing even without a degree.

It's important to note that Earnest was acquired by Navient in 2017, and there was a restriction on refinancing Sallie Mae loans due to an agreement between the two companies. However, this restriction was lifted in January 2019, and Earnest can now refinance Sallie Mae loans as long as the borrower meets their eligibility criteria.

Earnest's precision pricing option

Earnest, an online-only lender, takes a unique approach to student loan refinancing. The company was acquired by Navient in 2017 as an independent subsidiary. Navient had an agreement with Sallie Mae Bank that prohibited Earnest from refinancing Sallie Mae loans. This restriction was lifted in January 2019.

Earnest's Precision Pricing™ is a feature that allows student loan borrowers who are refinancing to customize loan terms and interest rates according to their personal budget. The company uses smarter technology to save money for clients through personalized loan terms, departing from traditional loans limited to terms of 5, 10, 15, or 20 years. With Precision Pricing, borrowers can pinpoint the exact interest rate they should be paying based on their budget and total loan amount. This liberates borrowers from the one-size-fits-all terms that other student loan refinancers use. For example, a borrower with a budgeted payment of $1,000 per month can pay off their loan in just over 10 years at an interest rate of 4.74%, saving them $2,350 compared to other refinancing companies.

Earnest offers both fixed-rate and variable interest rate options for its borrowers. With a fixed interest rate, borrowers are locked into a set rate for the life of the loan, providing stability and the potential for securing a low interest rate. Variable rates, on the other hand, can be lower initially but may fluctuate over time. Earnest allows borrowers in good standing to request a review of their interest rates after making a set number of on-time payments. The company also provides in-school repayment options such as full deferment, fixed payments, interest-only payments, or full payments (principal and interest).

Precision Pricing at Earnest aims to find the balance between affordability and interest payments. The company provides a 0.25% interest rate reduction for borrowers who set up and maintain Auto Pay, helping them save more and improve their credit score. Additionally, Earnest does not charge any origination, prepayment, or late payment fees, potentially making their loan refinance options more cost-effective over the full term of the loan. Borrowers can also choose between different repayment options, such as biweekly auto pay, to manage their finances effectively.

Frequently asked questions