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College Students and Recent Grads

CommonBond Student Loan Review: Pros and Cons

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

CommonBond Student Loan
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If you’re seeking a private student loan for your first or second degree, it’s hard to go wrong with CommonBond. The online lender’s interest rates, customer service and repayment flexibility beat many competitors — if you meet its sometimes restrictive eligibility criteria.

Of course, the operative question is whether CommonBond is the best provider for your loan. Let’s review the company to find out.

CommonBond student loans in a nutshell

CommonBond offers in-school financing for just about every type of borrower except for parents (although it does offer Parent PLUS refinancing if you want to lower your federal loan rates down the road).

Whether you’re an undergraduate, graduate, MBA student, dental student or medical student, you can check your potential interest rate without affecting your credit. In fact, you’ll just need to input your school name and degree type as well as your income (and your cosigner’s) and credit score before possible rates display.

Image credit: CommonBond – Individual results may vary

If you decide to proceed with a formal loan application — you can apply on any device — here’s what you can expect from CommonBond student loans:

  • No application, origination or prepayment fees (MBA, dental and medical loans carry a 2% origination fee)
  • Fixed and variable interest rates
  • Option to borrow from $2,000 to up to 100% of your school’s cost of attendance
  • Repayment terms of 5, 10 and 15 years available for undergraduates and terms of up to 20 years for dental and medical students
  • 4 in-school repayment options, including full deferment
  • 6-month grace period
  • A 0.25% discount for enrolling in autopay
  • Option to apply to pause your payments for up to 12 months of forbearance
  • Ability to release your cosigner after 2 years of timely payments

The highlights of CommonBond student loans

A competitive interest rate is a key feature when comparing lenders. CommonBond not only features relatively low fixed and variable rates, but it also provides discounted rates to borrowers who make automatic payments (0.25% reduction) and begin repayment while enrolled in school (discount varies). If you qualify for an 8.03% rate, for example, you might reduce it to 7.30%, saving you at least hundreds of dollars of interest in repayment.

Aside from attractive rates, here are other highlights of CommonBond loans:

Receive a free ‘Money Mentor’

If you and your cosigner want some assistance with the college financial aid process, you might welcome the free support provided by CommonBond. The online company pairs you with a Money Mentor — a trained college student who’s been there, done that and is ready to answer your questions over text.

“We make sure to empathize with students — going to and paying for college is a really stressful and emotional time,” Money Mentor CEO Kelly Peeler told Student Loan Hero. “Not only is it confusing figuring out how loans are, it’s also overwhelming doing that while trying to find housing, pick out classes and live with new people.”

If you have questions that are specific to CommonBond, the lender’s customer service team is also available over the phone and live chat on weekdays until 8 p.m. EST.

As for other unique perks of borrowing from CommonBond, MBA students could participate in CommonBond’s New York-based internship program and take part in the company’s summer workshop series.

Rest easy with repayment protections

Although it falls well short of federal student loan’s safeguards, CommonBond’s private loans come with a safety net. If your finances are in trouble after leaving school, you could request to postpone your monthly payments via forbearance. CommonBond awards up to 12 months of forbearance during your repayment.

In addition, dental students can defer repayment until after completing their residency, while medical students could limit their monthly payments to $100 during residency programs, including internships, fellowships and research.

Give back to other students

You might not feel great about borrowing student loans, but CommonBond delivers a silver lining. When a new customer takes out a loan, the lender funds the education of a child in a developing country, such as Ghana.

CommonBond claimed on its website to have raised over $1 million and built more than 470 schools through its work with the nonprofit Pencils of Promise.

The fine print of CommonBond student loans

CommonBond, which also refinances graduates’ student loans, is able to award decreased rates and increased perks, in part, because it’s more choosy than your average lender. It doesn’t lend to every student.

The strict eligibility criteria could leave you looking elsewhere, either because you’re ineligible or want to avoid a hassle.

Here’s what to keep in mind if you’re considering CommonBond:

A cosigner could be required

Many lenders request undergraduate student loans to bring a cosigner aboard because teens and 20-somethings usually have thin credit histories. A parent or someone else could help them qualify or receive a lower interest rate.

If you’re a creditworthy undergraduate or graduate student, however, you might bristle at the fact that CommonBond requires you to recruit a cosigner. For its part, CommonBond doesn’t require a cosigner if you’re an MBA, dental or medical school student, though.

If you don’t fall into one of these categories and want to try to qualify on your own, compare rates at lenders like Earnest that don’t require a cosigner.

There are other narrow eligibility requirements

Attaching a cosigner to your application (in the case of undergraduate and graduate students) isn’t the only hard-and-fast rule among CommonBond’s eligibility criteria.

The online-only lender cherry-picks its borrowers in other ways, too. Fortunately, if you don’t meet one or more of these criteria, you could probably find another, more accessible lender.

 CommonBond criteriaCompetitor to compare
Residency statusMust be a citizen or permanent residentProdigy Finance works with international students
Enrollment statusMust be currently enrolled at least half timeCollege Ave lends to part-time students
Credit scoreMust have a score of 660 and upCitizens Bank’s credit score requirement starts lower, at 620

Are CommonBond student loans right for you?

With competitive interest rates, responsive customer support and more repayment protections than your average private lender, CommonBond is worth considering for students of all levels. That doesn’t mean it serves all students equally.

Without cosigner requirements, MBA, dental and medical students seem to benefit most from CommonBond loans. Included are benefits like internship and career resources for MBA students and a residency deferment for dental and medical residents.

Of course, even if you have the cosigner or credit score to qualify, you might find a better student loan elsewhere. To set yourself up for a successful borrowing and repayment experience, compare CommonBond with other highly-rated private student loan companies listed on our site.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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College Students and Recent Grads

Guide to Paying for College in 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Tuition rates have been steadily rising over the years, and the cost of college has never been so high. According to College Board, the cost of tuition and fees at public four-year colleges is more than three times what it was 30 years ago. At private four-year colleges, the cost has more than doubled since 1988.

But even though higher education is expensive, a college degree remains valuable. In fact, those who hold a bachelor’s degree make an average of $1 million more over the course of their lives than those who don’t, according to the Department of Education. So a degree can still worth investing in — but first you need to know how to pay for it.

To that end, we’ll explore the costs of college and how you can piece together scholarships, grants, savings and student loans to fund your education.

Part I: How Much Does College Cost?

When you first look at the cost of tuition and fees, room and board and meal plans, most colleges appear oppressively expensive. But appearances can be deceiving. The first number you see is the “sticker price,” and it’s usually much more than you end up shelling out for your education.

The number you actually pay — the net price — is lower for most students. Net price is how much the school charges minus the amount of financial aid you’re awarded.

Net price vs. sticker price

If you already know how much financial aid you’ll be receiving, you can subtract that number from your school’s nominal cost of attendance. The difference will be your net price.

Colleges are required to have a net price calculator on their websites to help you estimate costs. Before using one of these calculators, however, keep these points in mind:

  • The numbers they produce will be estimates only and aren’t guaranteed.
  • Some calculators base their calculations on in-state tuition. If you’re an out-of-state student, your costs could be higher.
  • Some calculators also factor in financial aid opportunities available to first-year students. There’s usually more funding for freshmen, so you can expect your subsequent three years to be more expensive than your first one.

Nonprofit vs. for-profit schools

For-profit schools tend to cost a good deal more than non-profit schools, even private non-profit schools. This is partly because for-profit schools offer less institutional aid (financial aid given through the college itself). Instead, they rely heavily on federal financial aid for the funding of their students’ education.

As a result, students who attend for-profit schools generally wind up with more student loan debt after graduation. At for-profit schools, 88% of graduates had loans, and the average debt burden was $39,950. At private nonprofit schools, those numbers were lower, with 75% of graduates having loans, and at an average total debt of $32,300.

Before going into debt for a for-profit school, be careful to weigh net prices at nonprofit institutions. Remember, the sticker price won’t necessarily be what you end up paying. Also note that nonprofit institutions will usually offer more scholarships and grants, reducing the number of loans — and therefore debt — you have to take on.

Public vs. private school tuition

Undoubtedly, the sticker prices for public colleges tend to be lower than that of private institutions. However, some private schools also have large endowments providing substantial student aid at the institutional level.

For example, Cornell University offers significant grants to students from low-income families. In an example generated by the university, a traditional student from a household with under $40,000 in annual income could receive a Cornell grant of $41,911.

In this example, the student’s net price is only $2,700 for one year at this Ivy League university.

Also note that private college institutional aid can also be extended to students from middle-income families as well, even if they don’t qualify for a large amount of aid through federal programs.

Part II: How to Pay for College

There are several different ways to find money for college expenses. If you stay on top of financial aid application deadlines and have a high GPA and strong test scores, you may be able to shave many thousands of dollars off your cost of attendance.

In this section, we’ll cover the most common sources of college funding.

Understanding the FAFSA: The key to financial aid

Paying for College
Source: iStock

The Free Application for Federal Student Aid (FAFSA) is likely the single most important document you’ll fill out as a college student.

Why? Because you need to submit the FAFSA to access the majority of financial aid options we’re going to cover in this guide. These include:

  • Grants
  • Work-study opportunities
  • Federal student loans
  • Direct PLUS Loans for parents

Not only will the FAFSA tell you how much aid you’re eligible for through the federal government, but it’s also usually a required step to getting institutional financial aid from your college or university.

How to fill out the FAFSA

It’s important to remember that you don’t have to pay to file the FAFSA — it’s entirely free. Go to https://fafsa.gov/ to create a Federal Student Aid account and start your application.

Important: You must fill out a FAFSA every year you attend college in order to receive aid.

Learn more with our in-depth FAFSA Guide >

Expected Family Contribution

The Expected Family Contribution (EFC) is how much the federal government determines you or your parents should be able to contribute to your education costs. This number is then used to figure out how much aid the government is willing to extend to you.

For example, to qualify for a full Pell Grant in the 2019-20 school year, your family’s Expected Family Contribution can’t be higher than $5,576.

FAFSA deadlines

Filing for aid for the 2019-2020 school year began in Oct. 1, 2018 but remains open until June 30, 2020. For the 2020-2021 year, you can file anytime after Oct. 1, 2019.

Ideally, you should apply as soon as possible, as the aid is doled out on a first-come, first-served basis, and some awards can in fact run out of funds.

You should also note that some states have stricter deadlines than the federal government; be sure to check your state’s deadline to be sure you get your application in on time.

Student Loans: Explained

Paying for College
Source: iStock

Another form of aid distributed by the federal government is student loans. You will know which federal student loans you qualify for after you fill out your FAFSA.

Because student loans have to be repaid with interest, they should only be pursued after you’ve exhausted all grant, scholarship and work-study options.

Types of federal student loans

As an undergraduate student, there are a variety of federal student loans you may be offered.

Direct Loans, both subsidized and unsubsidized, come with the advantage of income-driven repayment options, as well as deferment, forgiveness and cancellation programs.

Try to max out your federal student loan eligibility before turning to private loans. Federal student debt typically has better rates than private loans, as well as those flexible repayment options.

Private student loans

If federal student loans aren’t enough, you can turn to private student loans for college financing. These loans from banks, credit unions and online marketplace lenders might not have the same generous repayment programs, though some do have deferment options in certain situations, such as unemployment.

Private loans come with variable or fixed interest rates. If you take out a variable interest rate loan, the rate could go up over the course of your loan. Fixed interest rates, meanwhile, remain stable throughout the course of repayment.

Should I get a cosigner?

If you haven’t established credit yet, you’ll likely need a cosigner to qualify for private student loans. If you’re a non-traditional student and have a less-than-stellar credit history, you’ll also probably benefit from having a cosigner.

Borrowers with very good credit scores can skip the cosigner, but if you do decide you need some help, look for loan options with a cosigner release. This lets the cosigner off the hook after a certain period of time — generally once your payment history has allowed you to establish a better credit history yourself.

How much should I borrow?

You don’t want to borrow more than you can reasonably afford to pay back. Certain professions that require extensive education, like law and medicine, will have considerably more student loan debt than other professions. But while these kinds of professions are likely to garner higher incomes, there is no guarantee — recent reports show stagnation in doctors’ salaries and a difficulty in finding employment amongst lawyers.

Others, such as teaching, might require a master’s degree but won’t necessarily lead to an entry-level salary that makes up for all your educational expenses.

Before taking on a lot of debt, talk to professionals in your target field to get a sense of the entry-level pay and rate of salary growth over the course of a career. While using online sources to find this information is great, it’s not going to replace the knowledge of a professional working in the field.

You can then plug that number into CollegeBoard’s Student Loan Calculator, along with how much money you intend to borrow. It will analyze the figures and tell you if your monthly payments will exceed 10% to 15% of your income — which is generally considered to be the maximum you should allot to student loan payments.

If you take out federal student loans, you may be able to borrow more, as most loan options allow you to pay based on your income level. Just be careful not to bury yourself in debt — you don’t want to be paying student loans into your 70s.

Scholarships

Scholarships are among the most valuable forms of financial aid, since they give you free money for school that you never have to pay back. They’re a little different from grants (see below) and come in various forms. Here are features to look for:

Merit-based vs. need-based scholarships

While the majority of grants are need-based, most scholarships are merit-based. There may be maximum income levels or priority given to those in dire financial straits, but for most scholarships, you’ll be judged based on your achievements.

Many of these awards require you to maintain a certain GPA, and almost all will involve some type of essay, portfolio or video submission.

If your family’s income doesn’t help you establish a strong financial need, don’t lose hope. There are plenty of scholarships out there that have no financial requirements and are completely based on your essay — on rare occasion, they won’t even ask about grades.

Recurring vs. one-time scholarships

Most scholarships only last one semester or one school year. However, there are some you can apply for that will cover your entire tenure as an undergrad. Keep in mind, though, that these options are likely to require you to maintain a certain GPA throughout your studies.

How do I find scholarships?

The first place you can look is your financial aid office. Many schools have endowments, not just for grants, but for scholarships as well.

After you’ve exhausted scholarship options at your school, look in other places, such as:

  • Professional organizations in the field you want to enter
  • Professional organizations or unions your parents may belong to
  • National student organizations related to your major
  • Potential future employers — especially if they’re a larger company
  • Groups within the community you grew up in
  • Organizations based on your ethnicity or heritage
  • Religious organizations
  • Organizations related to any extracurricular activities or hobbies

You can look for scholarships on specialty search engines, like Fastweb, CollegeBoard and Scholarships.com, but you’ll find a ton of competition. On the other hand, if you search for scholarships focused on what makes you unique, you might find a dramatically smaller applicant pool, boosting your chances of winning an award.

How soon should I start applying?

Start applying for scholarships as soon as possible. It is even possible to fund your entire education this way, though you would have to fill out a lot of applications and write a lot of essays. The sooner you get started, the better.

Each scholarship has a window, which is typically opened annually or once a semester, during which you can file an application. While high school sophomores will be able to apply for some scholarships, opportunities really start opening up in your junior year.

Beware of scholarship displacement

Although scholarships can be a great tool for paying for college, you also need to be careful about scholarship displacement. Some colleges will take away some need-based aid if you have a lot of outside scholarship help. Before applying far and wide to scholarships, it could be worth checking with your financial aid office to see if it engages in this practice.

Grants

A grant, like a scholarship, is money you never have to pay back, unless you drop out of school or violate the terms of the agreement some other way. For undergraduates, grants are typically need-based.

In order to qualify for federal grant programs, you must fill out the FAFSA and meet eligibility requirements. Here are some types of federal grants, along with other opportunities from your state or school:

Pell Grants

Federal Pell Grants are distributed based on income-eligibility only. They can be awarded regardless of whether you’re in school full-time, half-time or less than half-time.

For the 2019-20 school year, the maximum Pell Grant award is $6,195 for full-time students. Pell Grant awards are distributed in two parts over two semesters.

Students taking summer courses might also receive a summer Pell Grant, which is an additional 50% of your full award to spend on summer studies. This extra grant money can be particularly helpful for community college students whose course of study typically runs through the summer.

Federal Supplemental Educational Opportunity Grants

Federal Supplemental Educational Opportunity Grants (FSEOGs) are available to students with financial needs in excess of what the Pell Grant can address. These funds are distributed to schools upfront and then awarded on a first-come, first-served basis. Notably, not all schools participate, so you would need to consult your school’s financial aid office.

The maximum award is between $100 and $4,000, depending on your personal financial situation.

Iraq and Afghanistan Service Grants

If you lost a parent or guardian while they were serving in the military in Iraq or Afghanistan after 9/11, you may qualify for the Iraq and Afghanistan Service Grant — which offers funds almost equal to that of a full Pell Grant — regardless of your family income.

To qualify, you must:

  • Meet all Pell Grant requirements, except for the EFC requirements.
  • Have been 24 years old or younger and enrolled in college at least part-time at the time of your parent or guardian’s death.

TEACH Grants

If you’re planning on becoming a teacher, you may be interested in a Teacher Education Assistance for College and Higher Education (TEACH) Grant.

In order to qualify, you must be enrolled in a TEACH-eligible program. Not all schools participate, and the ones that do determine which of their programs qualify for TEACH Grants, so be sure to sit down with your financial aid counselor to determine your eligibility.

When you accept a TEACH Grant, you’re agreeing to serve four out of your first eight years in the workforce in a high-need specialization in a low-income area. You can also meet this obligation by teaching at a Bureau of Indian Education school.

High-need specializations include:

If you do not keep your promise to serve in this capacity, your grant will turn into a Direct Unsubsidized Loan, which will have to be repaid.

The maximum grant amount is $3,752 if disbursed after Oct. 1, 2018 and before Oct. 1, 2019. For grants paid out after Oct. 1, 2019 and before Oct. 1, 2020, the maximum award is $3,764.

State grants

Your state government may also issue need-based grants. Generally, you will be redirected to your state’s application page at the end of your FAFSA application, but if you want to check out your options beforehand, you can find information from your state’s department of higher education here.

Institutional grants

Your college or university may also issue need-based grants. While your EFC is not likely to be measured in the same way, a FAFSA application is still required.

Some colleges, though typically not Ivy League schools, will also offer merit-based grants. Your grades will likely be a factor here.

Work-Study Programs

Work-study programs are another form of aid that will not be accessible unless you complete your FAFSA.

Many schools participate in federally backed work-study programs for students with financial need. With work-study, you’re assigned a set amount of hours working for the school, in a community service role, or in a field relevant to your course of study.

You should get a paycheck at least once per month, and you can often choose whether to receive the funds directly or to have it applied against any money you owe the school.

529 college savings plans

529 accounts are tax-advantaged accounts to help you save for future college expenses. Contributions go in after you’ve paid taxes on your income. That money is invested and grows tax-free — as long as you spend the money on qualified educational expenses.

Types of 529 accounts

Not all 529 accounts are created equal. They are issued under state law, and each state has its own specific rules on how 529 accounts can be used. However, some states will let you purchase their 529 accounts even if you aren’t a state resident.

There are two basic kinds of 529 accounts:

College Savings Plans

The College Savings Plan structure allows your money to grow in traditional investments, as made available by your state. You can use this money to pay for school at almost any U.S. institution — and even at some schools abroad.

With a College Savings Plan, whatever you have saved can be applied toward any allowable educational expenses, though you’ll have to cover the remaining costs after exhausting the money from your 529.

A good example of a College Savings Plan is Utah’s 529 plan, which even offers a few investment options insured by the Federal Deposit Insurance Corporation.

Prepaid Tuition Plans

Prepaid Tuition Plans allow you to save for tomorrow’s college at today’s rates. There may be different tiers of saving for different types of schools.

For example, Pennsylvania’s Guaranteed Savings Plan 529 option currently allows you to buy credits at today’s rates. These credits will be valid when your child goes to school in the future — even if tuition rates have skyrocketed.

One thing to be careful of with Prepaid Tuition Plans is that if you save at the state school level, and your child ends up not wanting to attend a state school when they graduate from high school, you could run into some funding problems. Pennsylvania allows you to change your investment tier at any time, but this is a potential point of friction you should consider if you decide to go with this type of 529.

You’ll also notice that price per credit is quite high at Ivy League schools. As discussed earlier with the example of Cornell, Ivy League schools tend to have extensive grants. If you’re making a median income, saving in this manner may reduce your child’s future institutional aid, costing you more money than you would have had to pay without the dramatic savings.

What can I use my 529 account for?

You can only use the money in your 529 account for qualified educational expenses. If you use the money for anything else, you will have to pay taxes on the withdrawal.

Qualified educational expenses include:

  • Tuition and fees*
  • Room and board — though you must be enrolled at least half-time to claim this expense
  • Books
  • Technology required for school — including internet access
  • Other required equipment and materials, as assigned by your instructor

*Some Prepaid Tuition Plans cover tuition and fees only.

How to make a 529 withdrawal

Most programs allow you to make a withdrawal online or via postal mail. Your 529 account issuer will not keep records of how that money was spent. Producing documentation to show that the money was spent on educational expenses falls squarely on your shoulders.

Pros of 529 accounts:

  • Studies show that regardless of how much you save, the fact that you are saving for college makes your child more likely to attend college.
  • If you have a high enough income level, your child might not qualify for need-based financial aid. Saving in a 529 plan is a generous investment in their future, given that they won’t have as many funding opportunities available to them.
  • Because you are investing, your money is likely to grow — and it will grow federally tax-free. This means you won’t have to save as much in a College Savings Plan in order to meet your goals.

Cons of 529 accounts:

  • The amount you have saved could reduce institutional aid — especially if you open the account in your child’s name. Open the account in your name and list your child as a beneficiary instead.
  • When saving in a Prepaid Tuition Plan, do your best to ensure you’re saving at a level your child will actually be able to use. If they don’t end up going to school in state, you could hit a bump in the road if you’ve been saving at state school tuition levels.
  • Because you are investing, there’s no guarantee of growth. You could conceivably lose money in a 529 account.

FAQ

To see if your college degree is worth the cost, you need to figure out the net price of your education and your expected salary. A good tool to crunch these numbers is the College Scorecard, provided by the Department of Education, which shows data on net cost of attendance, alumni salaries and debt upon graduation.

Be wary of relying too heavily on the data here, though. Your future salary, for instance, likely depends more on your major and profession than on the undergraduate institution you attended. Often, an even better way to figure out potential future earnings is by talking with someone who is already working in your field.

Technically, you’re only allowed to spend federal student loans on educational expenses. These can include:

  • Tuition and fees
  • Room and board
  • Books, supplies and equipment
  • Transportation while at school
  • Dependent child care expenses

Unlike with 529 funds, no one will be monitoring how you spend your federal loan money. However, if you end up having the money to go on shopping sprees after you’ve paid for all of the above expenses, you’re probably borrowing too much. Consider returning the money rather than paying interest on it after you graduate.

If you’re borrowing from a private lender, check your loan agreement for any restrictions on how you can spend your private student loans.

Most of the time, you don’t have to live in on-campus housing. Some colleges and universities require their traditional freshmen to live on campus, but even these stipulations can sometimes be worked around if you’re commuting from your parents’ home.

If at all possible, yes, try to make student loan payments while you’re still in school. Make an effort to pay the interest at least, so it won’t accrue while you’re in school (or during your grace period or deferment) and cost you more money in the long run.

The only time when in-school payments don’t matter is when you have Direct Subsidized Loans — those loans won’t accrue interest while you’re in school. Even then, making principal payments early isn’t a bad thing if you can swing it.

If you take out a Direct Loan, you’ll be assigned one of nine loan servicers and will make payments through that assigned servicer.

Those who have taken out Perkins Loans may repay them directly through their school or via a loan servicer designated by their school.

Likewise, you can repay private loans directly to your lender or assigned servicer.

If you miss one payment on your federal student loans, you will have to make it up within 90 days — otherwise you’ll get reported to the credit bureaus.

If you miss several payments on your Direct Loans and don’t make payments for 270 days, you will be in default, which puts you at risk of not only being reported to the credit bureaus, but also losing all benefits of federal student loans, such as income-driven repayment options. You could also end up in court.

The consequences for missing payments on Perkins Loans and private student loans depend on the agreement you signed prior to disbursement. Private lenders can report you to the credit bureaus as soon as you’re 30 days late with a payment.

If you can’t afford your Direct Loans, apply for an income-driven repayment plan. These plans cap your maximum payment at a percentage of your disposable income to ensure that they are affordable.

If you have a private loan, you may want to look into refinancing for lower monthly payments.
And if you have a Perkins Loan, set up an appointment with your financial aid office or loan servicer to discuss your options.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne here

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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Refinance with Earnest

Refinancing rates from 1.99% APR. Checking your rates won’t affect your credit score.

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College Students and Recent Grads

Earnest Student Loan Review: Pros and Cons

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Being able to skip a monthly student loan payment when you need to might sound like pie in the sky, but one student loan company serves up the special to its customers.

Earnest has long been known for refinancing education debt but, as of April 2019, it’s also lending it to current students.

Aside from the ability for borrowers to forgo one payment per year, the online-only lender offers other perks, including competitive rates and an easy application process. Here’s our full Earnest student loan review.

Earnest student loans in a nutshell

Acquired by Navient in 2017, Earnest now features education loans for both undergraduate and graduate students. To be eligible, you must be a full-time student seeking a bachelor’s or an advanced degree at an eligible university. You can confirm that you meet the criteria — without affecting your credit — simply by providing your school name and estimated credit score.

Earnest offers student loans of between $1,000 (unless specified by the state of residence) and 100% of your school’s cost of attendance. Other features include:

  • Choice of a fixed or variable interest rate
  • Loan terms spanning 10, 12 or 15 years, with cosigned loans also eligible for a five- or seven-year term
  • A longer-than-usual nine-month grace period after leaving school
  • Option of flat, interest-only or full payments while in school — or you can defer payments until the end of the grace period (unless specified by the state of residence)
  • No loan fees, even for late payments
  • 0.25% rate discount for enrolling in autopay

The highlights of Earnest student loans

With so much jargon, student loans can be confusing. For its part, Earnest attempts to demystify the borrowing process.

The company is extremely transparent about its eligibility criteria, for example. To qualify, you (or your cosigner) would need a 650 credit score, three years of credit history and at least $35,000 in annual income.

Clear-cut and up-front guidelines such as these, along with a solid customer service department — which it calls its “Client Happiness” team — might help explain why Earnest enjoys a five-star rating on review sites like Trustpilot.

Here are three more reasons you might like Earnest as your potential lender.

Competitive fixed and variable rates

Earnest offers variable rates for student loan refinancing starting at 1.99% and fixed rates beginning at 3.20%, counting its 0.25% rate reduction for signing up for autopay.

Those are relatively low rates when compared with many of the competing banks, credit unions and online companies out there. That may also be true if you’re a graduate student considering federal student loans: Direct Unsubsidized Loans (6.08%) and PLUS Loans (7.08%) both carried higher rates in 2019 — and that’s before accounting for the government’s loan origination fees.

With Earnest, you may be able to score an interest rate on the lower end of their range by including a cosigner, even if you could qualify on your own.

A seamless loan application process

If you’re ready to apply with Earnest, you can carry out the entire process on your desktop or mobile device.

1. Confirm your eligibility: Input your school name, approximate credit score and other information to receive a decision within two minutes.

2. Complete a full application: After being invited (or possibly required) to include a cosigner, you would provide additional details, such as your housing costs and tax forms, to formally apply for a loan. Earnest prides itself on considering more factors than most lenders, including your (or your cosigner’s) savings and assets, as well as employment history and career trajectory.

3. Select your loan term: Once your application is approved, you’ll be offered a rate and a potential loan term. As noted above, independent borrowers could choose to repay their debt over 10, 12 or 15 years, and cosigned loans are also eligible for a five- or seven-year term. Once you receive your formal loan offer, you would have up to 30 days to accept it.

Flexible repayment options

As an enrolled student, you might like the idea of Earnest’s nine-month grace period — three months longer than the industry standard. It might allow you to put off repayment until you’ve found your footing in the real world.

Once you’re in repayment on your loans, however, you could still find yourself overwhelmed by other financial obligations, such as finding a job or dealing with medical or credit card debt. Fortunately, Earnest is also one of the lenders with payment postponement options if you need a break from your monthly bill.

Military members, for example, are eligible for a deferment while on active duty. More broadly, any Earnest borrower can skip one payment per year — though this would lengthen your loan term and increase your interest payout over the life of the loan.

To skip a payment, you need to have previously made at least six consecutive and full payments toward your debt, and you must file your request at least five days before your next payment due date.

The fine print of Earnest student loans

No Earnest student loan review would be complete without full context, including some of the downsides.

It’s wise to consider how the company might fall short of your borrowing needs, so before zeroing in on this lender as your choice, keep these three facts in mind:

You might not be eligible at all

Like other lenders, Earnest has strict eligibility requirements. Even if you (and your cosigner) have the credit score and income to qualify, you could be turned down if there’s a prior collections notice or bankruptcy proceeding.

Beyond meeting thresholds for your or your cosigner’s credit history and financial records, your eligibility with Earnest also depends on your residency status. International students will need a Social Security number and permanent resident cosigner to qualify; without a cosigner, you’ll need to be a U.S. citizen or green card-holder yourself.

Other cases where you could be deemed ineligible include:

  • Attending school part-time
  • Attending a two-year college or trade school
  • Seeking an associate’s degree
  • A parent borrowing on behalf of your child
  • A resident of Alaska, Connecticut, Delaware, Hawaii, Illinois, Kentucky, Nevada, New Hampshire, Texas or Virginia

Keep in mind that there are reputable lenders serving borrowers who fall into some of the categories above. For example, Sallie Mae, College Ave and Wells Fargo all lend to part-time students. Likewise, if you’re comparing Earnest versus SoFi, you’ll see that the latter lender offers products in all 50 states and Washington D.C.

You can confirm your eligibility — but not your rate

It’s wise to shop around with multiple lenders before sitting down to apply for a student loan, as each application could result in a hard credit check that may ding your credit score, especially if the different checks aren’t conducted around the same time.

Earnest offers on-demand confirmation of your eligibility for a loan, but it doesn’t provide specific rate quotes. You would need to complete the formal application (and submit to the hard credit check) to see what fixed or variable rate would be available to you.

Other lenders, including CommonBond, allow you to view your potential interest rate in the same amount of time it takes Earnest to deem you eligible.

That said, however, Earnest’s student loan product just debuted in April 2019, so if you’re applying later, you could check back to see if it adds a quick rate-quote option in the future.

You can’t release your cosigner until the loan is paid off

Earnest scores a point for allowing eligible borrowers to apply without a cosigner — some of its competitors do require undergraduates to tack a cosigner onto their application.

However, Earnest loses a point in our eyes for not providing a cosigner release program. Lenders like Sallie Mae offer borrowers the ability to drop their guarantor after as few as 12 full and prompt payments. If awarding your mom, dad or non-parent cosigner with an early removal is important to you, you might be better off borrowing elsewhere.

Still, you could always remove your cosigner by refinancing your student loans — either with Earnest or a competing lender — sometime down the road.

Are Earnest student loans right for you?

There are a handful of to-dos before resorting to a private student loan at Earnest or any lender for that matter: completing the Free Application for Federal Student Aid (FAFSA), seeking private scholarships and state grants, applying for work-study and tapping into savings. The FAFSA is especially important, since federal student loans provide protections that private lenders don’t.

With those items crossed off, keep Earnest in mind for your private loan needs. Thanks to its competitive interest rates and flexible repayment options, it’s among our favorite lenders.

On the other hand, it won’t serve your needs if, for example, you’re attending school part-time or as an international student. Earnest could also fall short if you prefer a lender featuring a cosigner release policy.

And regardless of how you think Earnest stacks up, be sure to compare it with some of the other best private lenders offering student loans today.

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Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here