Earnest is a technology-enabled fintechlender, headquartered in San Francisco that offers student loan refinancing and private student loans. The company uses software and algorithms to evaluate a person’s full education, employment, and financial profile, looking beyond a traditional credit score in order to obtain a complete financial profile of each applicant. This type of credit is referred to as "merit-based lending."
History
Earnest was co-founded in 2013 by Louis Beryl, a former partner at Silicon ValleyVC firmAndreessen Horowitz, and by Benjamin Hutchinson, who was Head of Commercial Finance at BBC and was a finance executive at the U.K.’s HM Treasury during the banking meltdown. Beryl got the idea for the company when he was attending Harvard to receive his M.B.A. and a degree in Public Policy. He needed a loan and was turned down despite his earning potential, having worked on Wall Street for a few years, and receiving a degree in financial engineering from Princeton University. He learned that traditional banks took a narrow view of loan applications and felt they were too hard and expensive for many Americans. Earnest received $15M in seed funding from several VC firms, including Andreessen Horowitz, First Round Capital, Maveron, Collaborative Fund, and Atlas Venture in 2014. This funding was a combination of equity and lending capital. The company first launched a personal loan product in Boston, Massachusetts, as a test market, due to the high concentration of young professionals in the area. The company officially launched in March 2014. In 2014, Earnest distributed $8M in loans and by the end of the year had a growth rate of 70%. On January 27, 2015, Earnest announced Series A equity funding of $17M led by Maveron. That same day, it also announced the launch of student loan refinancing for undergraduate and graduate students on both private and federal loans, with variable interest rates as low as 1.92% APR. On November 17, 2015, Earnest announced a $75M funding round led by Battery Ventures, plus $200M warehouse line of credit from New York Life. The company said it would use the funds to assist in building out the company’s offering and expanding its workforce. In 2016, Earnest was included on the Fast Company World’s 50 Most Innovative Companies list. In August 2017, it was announced that Earnest would open a new office in Salt Lake City, Utah in its first major expansion. In October 2017, Earnest announced it had agreed to be acquired by student loan servicer, Navient Corp., for $155M. The acquisition allowed Earnest to be backed by a larger company with Navient planning to maintain the brand as a separate unit. In January 2018, Louis Beryl stepped down from his position as CEO. In July 2018, Navient hired Susan Ehrlich as the new CEO. In April 2019, Earnest launched its private student loan product.
Model
Earnest provides private student loans and student loan refinancing to borrowers but does not focus on standard measures such as credit scores and existing debt. The company leverages software algorithm and machine learning technology to consider around 100,000 data points including education, income potential, and spending and saving habits. The company uses an online dashboard that gives clients tools to control and customize their loan payments by payment, amount, and time. As of January 2020, Earnest had refinanced $10.2 billion in student loan debt. As of May 2019, the company offers student loan refinancing in 47 states and the District of Columbia.
