How digital lender Earnest is charting its growth path

David Green

At $6 billion in refinanced student loans, digital lender Earnest is rapidly growing its reach. The six-year-old company offers student loans and refinancing options, approving more than 50% of refinancing applications within one minute using its proprietary assessment tool. Clients can choose to customize their loan options, such as their monthly payments, and the student loan product extends accommodations to cosigners. 

Bank Innovation spoke with Earnest’s chief product officer, David Green, about the company’s plans for future growth and how it seeks to differentiate against other offerings on the market. An edited version of that conversation follows.

You’ve just reached a huge milestone. What are the unique elements about your platform that allow you to scale so quickly?
We use a combination of very typical factors, such as your credit history, your income and things like that. And then we use a lot of things that are newer to the industry, such as your cash flow, your assets and other predictors. We don’t necessarily just look at your credit report, but we also take in some of those other factors as well, such as the [transaction] trends of your bank accounts, have you paid off bills over time and [if] you are a saver.

How can you underwrite people so quickly?
We offer what we call our two-minute rate check. You would come to the website and give us some easy, simple information, and we would be able to provide you with a rate estimate, which is almost always accurate if everything is true. After that, you move on to fill out a few more pieces of information in a full application.

If you get approved, you have the ability to customize your loan options. Instead of saying ‘I want a five-year loan, a 10-year loan or a 15-year loan,’ we give you the ranges of what your monthly payment would be at 20 years and at five years and you can pick anything between those.  You upload a statement and we pay off your servicer directly, then you’re an Earnest client. We service you as an Earnest client, on the student loan side, for the life of your loan. We don’t pass you off to anybody else.

See Also: BankMobile expands platform to student loan refinancing

You’ve launched a private student loan product recently. Is that a similar process?
It’s similar. The current student loan options out there, as well as the private loan space, are incredibly outdated. If you look at some of them, they all look like they’re built on Windows 95, so we really started from scratch.

Users in that space are worried about what can they pay in school and what are they going to have to pay after school — they have a lot going on in their lives. They want to know if they can get a loan, very frequently more so than the actual rate, so we built a quick eligibility test. We tried to build a very intuitive user experience and tried to make it easy to invite a cosigner, including them on your journey and allowing them to help you select your loan options. We remind people through text message and email and try to include the cosigner in every step of the process.

What are your plans to continue growing?
We think there’s still a lot of room to grow. We’ve refinanced $6 billion, and the current outstanding student loan debt is, I think, about $1.6 trillion and going up. It’s such a tiny dent in the overall market.

We’re continuing to double down on building a great experience. That includes more automation, an easier process, better servicing and continuing to help people pay off their loans faster.

Rick Morgan contributed to this report.