Finimpact

Finimpact Ratings Methodology for Student Loans

Thomas J. Brock
Written by:Thomas J. Brock
Chartered Financial Analyst (CFA) and a Certified Public Accountant (CPA)

Reviewed by: Somer G. Anderson, Accounting and Finance Professor Ph.D., CPA, CGMA, CFE

Here at finimpact.com, we strive to provide you timely, transparent, and relevant information on the various lenders, loan aggregators, and peer-to-peer solutions we cover. To this end, we’ve established a comprehensive rating system to quantitatively assess each of them.

It entailed researching each platform and categorizing loan offerings across the following two categories: undergraduate loans and graduate loans. Then, following the categorization exercise, our experts evaluated each platform based on seven parameters. All parameters were evaluated using a five-point scoring system

  • Excellent = 5
  • Good=4
  • Average=3
  • Subpar=2
  • Poor=1

The seven parameters are outlined below. The first three reflect loan-type specificity; the latter four were rated at the platform level.

  • Loan Features: This parameter considers loan term lengths, loan limits, and loan structure optionality (fixed and variable rate offerings). For each loan type offered, each of these features was evaluated using the five-point scoring system. Then, the various scores were aggregated and averaged to establish an overall loan features score.    
  • Interest Rates and Fees: This parameter considers borrowing/origination fees, prepayment fees, late payment fees, maintenance fees, and minimum/maximum interest rates. For each loan type offered, each of these features was evaluated using the five-point scoring system. Then, the various scores were aggregated and averaged to establish an overall interest rates and fees score.
  • Qualification Leniency: This parameter considers the extent of enrollment limitations, minimum credit score requirements, and co-signer/joint application optionality. For each loan type offered, each of these features was evaluated using the five-point scoring system. Then, the various scores were aggregated and averaged to establish an overall qualification leniency score.
  • Application Process: This parameter considers the invasiveness of application information requirements, “hard-pull” credit score impact, application processing time, and any distinctively competitive offerings. Collectively, these features were evaluated using the five-point scoring system.
  • Customer Support: This parameter considers a platform’s accessibility to a live CSR rep during standard hours, accessibility to a live CSR rep during extended hours, the degree of multi-channel support, and the availability of supplemental information and tools. Collectively, these features were evaluated using the five-point scoring system.
  • User Reviews: This parameter considers the scores achieved from independent user review sites, such as Trustpilot. Ideally, each platform’s rating reflects scores from three distinct user review sites. However, this isn’t always possible. Ultimately, the various scores were aggregated and averaged to establish an overall user reviews score.
  • Perks Bonus: This parameter gives each loan platform the opportunity to boost its overall score, if it satisfies specified service offering requirements across the following categories: flexibility, mentorship, and technology. If a lender satisfies the requirements, it receives a 5-point score that is factored into its overall rating. If a lender does not meet the criteria, this parameter does not factor into the overall rating.

The overall score for each loan platform reflects an average of the underlying parameter scores (seven for Perks Bonus qualifiers and six for non-qualifiers). All of the parameters receive equal weighting. Finimpact believes this approach is optimal; however, if the environment evolves, we may look to weight some parameters more heavily than others.

Details by Loan Type

The criteria used to determine the scores for the seven parameters differ by loan type (undergraduate loans and graduate loans.) Below, we outline the parameter details for each.

Undergraduate Loans

An undergraduate loan is an unsecured financing arrangement that facilitates the attainment of an undergraduate education. Typically, it includes all postsecondary coursework associated with obtaining a bachelor's degree at a college or university. Undergraduate loans are structured similarly to graduate loans, but they tend to carry lower interest rates.

The scoring criteria for the seven parameters are outlined below.

Loan Features

One star Two Stars Three Stars Four Stars Five Stars
Term Length 5 year or less Between 5 and 9 years Between 9 and 14 years Between 14 and 18 years Over 18 years
Loan Amount Less than $50,000 Between $50,000 and $100,000  Between $100,000 and $200,000 Between $200,000 and $400,000 Less than $400,000
Loan Structure Optionality Only Fixed or Only Variable Offering N/A N/A N/A Fixed & Variable Offerings

Interest Rates and Fees

One star Two Stars Three Stars Four Stars Five Stars
Origination Fees Over 6% Between 4-6% Between 2-4% Between 0-2% None
Prepayment Fees Prepayment fees exist N/A N/A None None with discounts
Late Payment Fees 2.5% or more From 0% to 2.5% From $25 to $50 or unspecified Between $0 and $25 None
FIxed Interest Rates - Min Over 3.9% Between 3.6% and 3.9% Between 3.3% and 3.6% Between 3% and 3.3% Under 3%
Fixed Interest Rates - Max Over 13% Between 12% and 13% Between 11% and 12% Between 10% and 11% Under 10%

Qualification Leniency

One star Two Stars Three Stars Four Stars Five Stars
Minimum Credit Score Over 675 Between 651 and 675 Between 626 and 650 Between 601 and 625 600 or lower
Enrollment Limitations (Institution Type & Course Load) N/A N/A Enrollment limitations exist N/A None
Co-signer/Joint Application Optionality Prohibited Required without Release Required with Release Optional without Release Optional with Release

Application Process

Default score Subtraction of one star (-1 star) Addition of one star (+1 star)
Informational Requirements 3 stars Overly Invasive Informational Requirements N/A
Hard/Soft Credit Pull 3 stars Hard-pull N/A
Turnaround Time 3 stars N/A Application Processed in less than 24 hours
Distinctively competitive offerings 3 stars N/A Exist

Customer Support

Access to Live Chat Customer Service Rep +1 star
Standard Call Center Support 9 - 6 EST +1 star
Expended Call Center Support +1 star
Multi-channel Support +1 star
Supplemental Support +1 star

User Reviews

This Parameter reflects the scores achieved from independent user review sites such as Trustpilot.com, WalletHub, and ConsumerAffairs.com

Perks Bonus

This is a bonus parameter that gives a loan platform the opportunity to boost its score. A 5.0 score is attainable, if a lender satisfies at least one of the flexibility items listed below, at least one of the mentorship items, and at least one of the technology items. If a lender does not meet the criteria, this parameter does not factor into the overall rating.

Flexibility:

  • Offers rewards and/or discounts (aside from prepayment discounts, which are incorporated in the “Interest Rates & Fees” parameter)
  • Allows for payment deferral or payment skipping optionality during times of hardship
  • Allows for modification of loan terms

Mentorship:

  • Career guidance/counseling services
  • Financial education/advice

Technology:

  • Offers the ability to pay online
  • Offers autopay optionality
  • Provides mobile functionality
  • Provides loan management tools

Graduate Loans

A graduate loan is an unsecured financing arrangement that facilitates the attainment of a postgraduate education. Typically, this includes all coursework associated with obtaining a master's degree at a university. Graduate loans are structured similarly to undergraduate loans, but they tend to carry higher interest rates.

The scoring criteria for the seven parameters are outlined below.

Loan Features

One star Two Stars Three Stars Four Stars Five Stars
Term Length 5 year or less Between 5 and 9 years Between 9 and 14 years Between 14 and 18 years Over 18 years
Loan Amount Less than $50,000 Between $50,000 and $100,000  Between $100,000 and $200,000 Between $200,000 and $400,000 Less than $400,000
Loan Structure Optionality Only Fixed or Only Variable Offering N/A N/A N/A Fixed & Variable Offerings

Interest Rates and Fees

One star Two Stars Three Stars Four Stars Five Stars
Origination Fees Over 6% Between 4-6% Between 2-4% Between 0%-2% None
Prepayment Fees Prepayment fees exist N/A N/A None None with discounts
Late Payment Fees 2.5% or more From 0% to 2.5% From $25 to $50 or unspecified Between $0 and $25 None
Fixed Interest Rates - Min Over 4.7% Between 4.3% and 4.7% Between 4.9% and 4.3% Between 3.5% and 3.9% Under 3.5%
Fixed Interest Rates - Max Over 13% Between 12% and 13% Between 11% and 12% Between 10% and 11% Under 10%

Qualification Leniency

One star Two Stars Three Stars Four Stars Five Stars
Minimum Credit Score Over 675 Between 651 and 675 Between 626 and 650 Between 601 and 625 600 or lower
Enrollment Limitations (Institution Type & Course Load) N/A N/A Enrollment limitations exist N/A None
Co-signer/Joint Application Optionality Prohibited Required without Release Required with Release Optional without Release Optional with Release

Application Process

Default score Subtraction of one star (-1 star) Addition of one star (+1 star)
Informational Requirements 3 stars Overly Invasive Informational Requirements N/A
Hard/Soft Credit Pull 3 stars Hard-pull N/A
Turnaround Time 3 stars N/A Application Processed in less than 24 hours
Distinctively competitive offerings 3 stars N/A Exist

Customer Support

Access to Live Chat Customer Service Rep +1 star
Standard Call Center Support 9 - 6 EST +1 star
Expended Call Center Support +1 star
Multi-channel Support +1 star
Supplemental Support +1 star

User Reviews

This Parameter reflects the scores achieved from independent user review sites such as Trustpilot.com, WalletHub, and ConsumerAffairs.com

Perks Bonus

This is a bonus parameter that gives a loan platform the opportunity to boost its score. A 5.0 score is attainable, if a lender satisfies at least one of the flexibility items listed below, at least one of the mentorship items, and at least one of the technology items. If a lender does not meet the criteria, this parameter does not factor into the overall rating.

Flexibility:

  • Offers rewards and/or discounts (aside from prepayment discounts, which are incorporated in the “Interest Rates & Fees” parameter)
  • Allows for payment deferral or payment skipping optionality during times of hardship
  • Allows for modification of loan terms

Mentorship:

  • Career guidance/counseling services
  • Financial education/advice

Technology:

  • Offers the ability to pay online
  • Offers autopay optionality
  • Provides mobile functionality
  • Provides loan management tools