Earnest (company)
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Earnest is a technology-enabled
fintech Fintech, a portmanteau of "financial technology", refers to firms using new technology to compete with traditional financial methods in the delivery of financial services. Artificial intelligence, blockchain, cloud computing, and big data are r ...
lender A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...
headquartered in
San Francisco San Francisco (; Spanish for " Saint Francis"), officially the City and County of San Francisco, is the commercial, financial, and cultural center of Northern California. The city proper is the fourth most populous in California and 17th ...
,
California California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the m ...
that offers education financing products, including student loan refinancing and private student loans. The company evaluates a person’s full education, employment, and financial profile, in addition to their credit score (also known as a
FICO FICO (legal name: Fair Isaac Corporation), originally Fair, Isaac and Company, is a data analytics company based in Bozeman, Montana, focused on credit scoring services. It was founded by Bill Fair and Earl Isaac in 1956. Its FICO score, a me ...
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 Valley VC firm
Andreessen Horowitz Andreessen Horowitz (also called a16z, legal name AH Capital Management, LLC) is a private American venture capital firm, founded in 2009 by Marc Andreessen and Ben Horowitz. The company is headquartered in Menlo Park, California. Andreessen H ...
, and by Benjamin Hutchinson, who was Head of Commercial Finance at
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and was a finance executive at the U.K.’s
HM Treasury His Majesty's Treasury (HM Treasury), occasionally referred to as the Exchequer, or more informally the Treasury, is a department of His Majesty's Government responsible for developing and executing the government's public finance policy and ...
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 Princeton University is a private research university in Princeton, New Jersey. Founded in 1746 in Elizabeth as the College of New Jersey, Princeton is the fourth-oldest institution of higher education in the United States and one of the ...
. 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 Boston (), officially the City of Boston, is the state capital and most populous city of the Commonwealth of Massachusetts, as well as the cultural and financial center of the New England region of the United States. It is the 24th- mo ...
,
Massachusetts Massachusetts (Massachusett: ''Muhsachuweesut Massachusett_writing_systems.html" ;"title="nowiki/> məhswatʃəwiːsət.html" ;"title="Massachusett writing systems">məhswatʃəwiːsət">Massachusett writing systems">məhswatʃəwiːsət'' En ...
, 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 A series A round (also known as series A financing or series A investment) is the name typically given to a company's first significant round of venture capital financing. The name refers to the class of preferred stock sold to investors in exc ...
equity funding of $17M led by
Maveron Maveron is an American venture capital firm that invests in consumer-only and early-stage companies, with offices in Seattle, Washington and San Francisco, California. The firm was co-founded by Dan Levitan and former Starbucks chief executive Ho ...
. 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 Battery Ventures is an American technology-focused investment firm. Founded in 1983, the firm makes venture-capital and private-equity investments in markets across the globe from offices in Boston, Silicon Valley, San Francisco, Israel and Lon ...
, plus $200M
warehouse line of credit {{Technical, date=July 2015 A warehouse line of credit is a credit line used by mortgage bankers. It is a short-term revolving credit facility extended by a financial institution to a mortgage loan originator for the funding of mortgage loans. Th ...
(since retired) from
New York Life New York Life Insurance Company (NYLIC) is the third-largest life insurance company in the United States, the largest mutual life insurance company in the United States and is ranked #67 on the 2021 Fortune 500 list of the largest United State ...
. 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 ''Fast Company'' is a monthly American business magazine published in print and online that focuses on technology, business, and design. It publishes six print issues per year. History ''Fast Company'' was launched in November 1995 by Alan Web ...
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 Salt Lake City (often shortened to Salt Lake and abbreviated as SLC) is the Capital (political), capital and List of cities and towns in Utah, most populous city of Utah, United States. It is the county seat, seat of Salt Lake County, Utah, Sal ...
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. In April 2021, Susan Ehrlich announced her retirement and stepped down as CEO to focus on board service. On April 16, 2021, Earnest announced that David Green will be replacing Ehrlich as CEO. Green has held many roles at Earnest over a six-year tenure with the organization. Previously, Green was Head of Credit Operations, General Manager, Head of Student Loan Refinance, Chief Product Officer, and Chief Operating Officer.


Model

Earnest provides private student loans and student loan refinancing to borrowers. The company does not focus solely on standard measures such as credit scores but takes a more individualized approach when evaluating borrowers by looking at their education, income potential, 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 April 2021, Earnest had refinanced $14.5 billion in student loan debt. As of June 2021, the company offers student loan refinancing in 48 states (all but Kentucky and Nevada) and the District of Columbia.


References

{{reflist Financial technology companies Companies based in San Francisco American companies established in 2013 2017 mergers and acquisitions Financial services companies based in California Financial services companies established in 2013