MyFinancialTimes is a reader-centric site. We may receive compensation from the products and services we mention or recommend in this story, but the opinions are the author's own. Remuneration may impact where offers appear. We may not include all available products or offerings. To learn more you can visit our advertising policy and editorial policy.
Will student loan payments resume? Or will President Biden extend the moratorium? There are many worried parents and students trying to plan for September 2021. And it’s not entirely clear what will happen.
Outstanding student loans have reached what could be called crisis levels. A year ago, Forbes estimated it at $1.5 trillion. The amount borrowed to go to college has, for some time now, been doubling on average every year.
A moratorium on the payment of student loans was one of the natural responses to the pandemic, given all the disruption in people’s lives and livelihoods due to Covid. Yet with the return of something akin to the old normal more payments are likely on the horizon.
Part of the problem is that states have disinvested in colleges, leaving the burden of supporting the institutions on the students’ families, and anyone from whom they can borrow. Tuition at public four-year colleges increased by 36% between 2008 and 2018.
The public policy concern is that the expensive system of higher education in place in the United States, a system that includes everything from community colleges to the Ivy League, has become unsustainable.
Reactions to the Student Loan Payment Crisis
One of the reactions to this crisis has been political: there is a lot of sentiment for a government-ordered forgiveness of much or even all of this debt. This is generally linked with the idea of throwing the whole system aside and offering free college at public expense to, in essence, anyone who wants it and who qualifies academically.
But another reaction is that of the marketplace: lenders offer student loan refinancing, generally to debtors with a minimum credit score of 650. Sometimes they offer the former students perks, such as career planning and job search assistance. The debt is not so onerous that there are no companies willing to take it on as part of such a deal.
There are four lenders that are standouts in the field: Earnest, SoFi, CommonBond, and Citizens.
4 Lenders To Consider in 2021
Earnest, a San Francisco based company founded in 2013, offers a quick eligibility check, to save inquirers what can be the detrimental impact of a “hard inquiry” on their credit reports. Nerdwallet says that its refinancing is best “for those who want to customize their repayment schedule to pay off debt fast.”
SoFi, also known as Social Finance, is San Francisco-based, too, and was founded in 2011. It has issued more than $6 billion in loans in its existence, and maintains a no-fee policy. TechCrunch says that debtors who go to SoFi for help “average $9,400 in savings” in the refinancing of their student loans.
CommonBond is based in New York City and was launched nationally in September 2013, with the backing of Vikram Pandit. Pandit had only recently stepped down as the CEO of Citigroup. CommonBond requires a somewhat higher minimum credit score for those who would borrow from it for this purpose, than do either Earnest or SoFi (the latter require 650 each, the former requires 680). If CommonBond approves an applicant for a loan, the interest rate offered then depends on the applicant’s credit profile, application particulars, and the loan term selected.
Citizens Financial Group is a bank founded in Rhode Island in 1828. Its refinancing loan is available to financially stable borrowers who did not graduate and who are not U.S. citizens, points that may get them disqualified by the other lenders in this space. Citizens offers a loyalty discount for those who have established themselves as Citizens’ customers before applying for a refinancing deal. The discount works both for loans in the student’s name and for loans in parents’ names. Citizens has not publicly disclosed its minimum credit score or income requirements for a refinancing.