Navigating Higher Education Funding: An In-Depth Look at Edly Student Loans

For many families, bridging the gap between federal financial aid and the actual cost of higher education can be a significant source of stress. While student loans can be a great resource and tool to funding your education, it is not your only option. Private, nonprofit and federal student aid in the form of grants and scholarships can be applied for every year you are attending college to lower your outstanding student loan debt. In this landscape, specialized lenders like Edly have emerged, offering alternative approaches to financing education. This article provides a comprehensive review of Edly student loans, exploring their unique features, benefits, and potential drawbacks to help students and families make informed decisions.

Understanding Edly's Income-Based Repayment Model

Edly distinguishes itself from traditional lenders by utilizing an income-contingent model, often structured as an Income Share Agreement (ISA) or income-based loan, where repayment depends on future earnings. Edly began in 2019 as an income-share agreement (ISA) provider. ISAs offered students funding for their education in exchange for a fixed percentage of their postgraduate salaries for a set period, without charging interest. Since then, Edly made the switch to offering IBR loans in place of ISAs. Its IBR loans are bank-funded by FinWise Bank, though impact investors can also invest. In late 2021, Edly, in partnership with FinWise Bank (a Utah chartered bank, member FDIC) has offered income-based repayment, or IBR, student loans. Similar to an income share agreement, or ISA, Edly's IBR loan asks borrowers to agree to pay a percentage of their post-graduation salary or a predetermined length of time to satisfy repayment. Edly's IBR has many protections and disclosures associated with standard private student loan products. They also feature maximum repayment and maximum APR caps, which prevent unpaid balances growing endlessly. Edly says its average offered income-based repayment rate is 6.8%, though it can range from 1.96% to 20%. This approach provides built-in downside protection: if the graduate’s income is lower than expected, the payments are lower.

Key Features of Edly's IBR Loans

Income-Based Repayment (IBR): Your monthly payments are a fixed percentage of your gross annual income. If your income changes year to year, so will your payments, as long as you make at least $30,000.
No Cosigner Required: Edly does not require cosigners on its private student loans because payments are based on the borrower’s postgrad income, not their credit. Borrowers without a cosigner are 3x more likely to get approved1 for a student loan through Edly than with other private student loan providers and loan programs.
Forbearance Options: If you lose your job, or your income drops below the minimum income threshold, you can defer your monthly payments with forbearance options.
Maximum Repayment Cap: No matter your income-based repayment percentage, you won't pay more than 2.25 times what you borrowed. So on a $20,000 loan, your repayment can be as high as $45,000.
Loan Purpose: You can only use funds from Edly student loans for qualified higher education expenses at approved schools. These include tuition, mandatory fees, and room and board.

Eligibility Requirements

Edly’s income-based repayment student loan options are available to graduate students or undergrads within two years of graduating from one of the more than 1,700 approved schools and select programs Edly supports for the non-cosigned product.

To be eligible for an Edly loan, applicants must generally meet the following criteria:

Citizenship: U.S. citizen or permanent resident. However, DACA students may also qualify depending on current underwriting guidelines.
State of Residence: All states except Colorado, Iowa, Maine, Vermont, and West Virginia.
Minimum Age: 18
Enrolled School: School must be an accredited institution supported by Edly and program must also be supported by Edly for the no cosigner loan (all programs accepted for approved schools for cosigned loan)
Enrollment Status: Enrolled at least half-time and meeting Satisfactory Academic Progress
Minimum Credit Score: Not considered for the student borrower on the cosigned product (cosigner must meet undisclosed requirement). Edly reviews credit history, and adverse events such as loan defaults, bankruptcies, and collections can affect your eligibility.

Loan Amounts and Terms

Edly approves loans and offers amounts based on your academic year, so you must apply for a new loan for each year of school to be funded through Edly. Borrowers can get $15,000 per academic year and $10,000 for summer sessions, up to a $25,000 lifetime maximum.

On the non-cosigned product, once your grace period ends and you secure a job that pays at least $30,000, repayment begins. After your initial payment period ends, your monthly payment is adjusted to reflect a fixed percentage of your pre-tax income. If your income drops below $30,000, payments stop. You can defer payments until your income increases above that threshold again (maximum forbearance of six months applies to the cosigned product). If an Edly loan is not repaid after 144 months, the remaining balance is canceled with no further repayment obligation.

The Application Process

Applying for a student loan through Edly differs from most traditional lenders.

In minutes online, see whether your school, major, and graduation date meet its requirements.
When ready to pursue approved funding, complete Edly’s application, and include all requested information. Edly conducts a hard credit check at this point, which will drop your credit score by a few points. Edly evaluates your future potential to gauge eligibility and terms over credit alone.
You may need to submit enrollment or tuition verification to complete the application.
Once you’re approved, Edly determines the amount you can borrow based on costs remaining after financial aid and family contributions and provides an offer to review. If you accept, you’ll sign electronically. Once the process completes and enrollment is verified, Edly pays the loan funds directly to your school.

Edly Loan Examples

These are examples. Your specific terms will be provided if you are approved.

Loan Example (IBR No Cosigner Student Loan): $10,000 Tuition Amount with Salary of $65,000. Loan is funded in September, borrower graduates in May.
- Tuition Amount: $10,000
- Origination Fee: $400 (4%)
- Loan Amount: $10,400
- Gross income payment percentage: 7%
- Number of Fixed Payments: 12
- Initial Payment Amount: $200
- Number of Payments at gross income payment percentage: 62
- IBR Payment Amount: $379.17
- Final Payment to reach Payment Cap: $91.46
- Total Number of Payments: 75
- Total Payment Amount: $26,000.00
- Effective APR: 24.6%
Additional Loan Example (IBR No Cosigner Student Loan): $10,000 Tuition Amount with Salary at Minimum Income Threshold, $30,000. Loan is funded in September, graduates in May.
- Tuition Amount: $10,000
- Origination Fee: $400 (4%)
- Loan Amount: $10,400
- Gross income payment percentage: 7%
- Number of Fixed Payments: 12
- Initial Payment Amount: $200
- Number of Payments at gross income payment percentage: 72
- IBR Payment Amount: $175
- Total Number of Payments: 84
- Total Payment Amount: $15,000.00
- Effective APR: 9.7%
Additional Loan Example (IBR Cosigner Student Loan): $10,000 Tuition Amount with early payoff with a salary of $65,000. Loan is funded in September, graduates in May, and is paying off early in September of the following year.
- Tuition Amount: $10,000
- Origination Fee: $400 (4%)
- Loan Amount: $10,400
- Gross income payment percentage: 7%
- Number of Initial Payments: 6
- Initial Payment Amount: $100
- Number of Payments at gross income payment percentage: 3
- IBR Payment Amount: $379.17
- Total Number of Payments: Early Payoff after 12 months
- Remaining loan balance: $11,188.20
- Total Payment Amount: $12,925.71
- Effective APR: 27.09%
Additional Loan Example (IBR Cosigner Student Loan): $10,000 Tuition Amount with Salary of $65,000. Loan is funded in September, graduates in May.
- Tuition Amount: $10,000
- Origination Fee: $400 (4%)
- Loan Amount: $10,400
- Gross income payment percentage: 7%
- Number of Initial Payments: 6
- Initial Payment Amount: $100
- Number of Payments at gross income payment percentage: 45
- IBR Payment Amount: $379.17
- Final Payment Amount: $206.86
- Total Number of Qualifying Payments: 46
- Total Payment Amount: $17,869.51
- Effective APR: 24.7%

Weighing the Pros and Cons of Edly Loans

Edly loans offer a unique approach to student loan repayment, but it's crucial to carefully consider both the advantages and disadvantages before making a decision.

Pros:

Flexibility with Income-Based Repayment: The primary advantage of Edly loans is the income-based repayment structure. This can be particularly beneficial for students entering fields with uncertain or potentially lower starting salaries.
No Cosigner Required: Edly's no-cosigner option opens doors for students who may not have a creditworthy cosigner available.
Downside Protection: If your income drops below a certain threshold ($30,000), your payments can be deferred, providing a safety net during periods of financial hardship.
Potential for Lower Payments Early On: If you anticipate a lower income in the initial years after graduation, the income-based repayment plan can result in lower monthly payments compared to traditional loans.
Career Support and Resources: Edly provides access to career coaching and networking opportunities, aligning their incentives with your success.

Cons:

Potentially Higher Overall Cost: While the income-based repayment offers flexibility, it can also lead to a higher overall cost compared to fixed-rate loans, especially if your income increases significantly over time.
Repayment Cap: Even with income-based payments, there's a maximum repayment cap (2.25 times the borrowed amount), which could mean paying significantly more than the original loan amount plus interest.
Limited Eligibility: Edly has specific requirements regarding eligible schools and programs, limiting its availability to certain students.
Geographic Restrictions: As of June 2023, Edly excludes Colorado, Iowa, Maine, Vermont, and West Virginia.
Lack of Loan Forgiveness Options: There are no loan forgiveness, cancellation, or discharge options for Edly private student loans.
Unpredictable Costs: With Edly’s income-based repayment model borrowers sacrifice the predictability of fixed rates found through traditional private student loan lenders, and you can see how overall loan costs can also vary.

Edly Compared to Traditional Student Loans

Edly is selective with schools and programs it supports. With Edly’s income-based repayment model borrowers sacrifice the predictability of fixed rates found through traditional private student loan lenders, and you can see how overall loan costs can also vary.

Read also: Guide to UC Davis Student Housing

Federal student loans should always be your first choice. They offer lower fixed rates and government-backed protections like Public Service Loan Forgiveness (PSLF).

Edly offers private student loans with income-based repayment. Prequalifying for an Edly student loan does not hurt your credit since it doesn’t perform a hard credit check as part of its prequalification process.

Student Loan Myths

It is important to be aware of common student loan myths to make informed decisions.

Myth 1: You should always choose a loan with the lowest interest rate. Interest rates can fool you. Depending on the student loan repayment plan, you could actually be paying more interest than other loan options based on the repayment terms.
Myth 2: You shouldn’t make payments on your student loans until after you graduate. Student loan interest begins the moment you take out the loan. While you are not required to start paying on your loans until 6 months after graduation, for most types of student loans, by the time you start making payments, a significant amount of interest has already accrued, increasing your outstanding student loan debt. One exception to this is for subsidized federal student loans, which do not accrue interest while you are enrolled in school at least part-time. Starting to repay your loans-even if they’re small payments-while you are a college student can help you pay less interest over time, depending on the types of loans you are working to pay off.
Myth 3: Your student loans won’t affect your credit score. Loans are a form of credit and your payment history for that has a big impact on your credit score-more specifically, your FICO score. You can boost your FICO score by making payments within your due date, or lower your score if you consistently miss payments or pay late.
Myth 4: You should consolidate your student loans. When pursuing student loan consolidation, the loan servicer will create an average, weighted interest rate for the loan, which could mean you end up paying more interest over time. Additionally, if one student loan included benefits like income-driven repayment plans and the other didn’t, you could lose access to those benefits, depending on your loan consolidation terms.
Myth 5: You shouldn’t worry about which student loan option you choose because all types of loans are the same. Private and federal student loans have distinct differences you should explore before making your decision. These differences include repayment plans, interest rates, eligibility requirements and more, which may sway you to choose one type of loan vs. another or provide opportunity to utilize both loan types to pay for your higher education.
Myth 6: You can borrow as much money as you need to because your future job will help you pay it back. When you consider how much money you take out in student loans, you should consider the earning potential of your chosen degree. Some career paths don’t pay as much as others, but the amount of money you have to pay for an undergraduate, bachelor’s degree is roughly the same at a given college regardless of major. Becoming a student loan borrower should be done mindfully, especially as you consider your degree program.
Myth 7: You should declare bankruptcy if you can’t make your monthly payment. There may be alternative options to declaring bankruptcy, which should always be pursued as a last resort. Bankruptcy can hurt your ability to apply for credit in the future and doesn’t always eliminate the requirement to pay off your student loans
Myth 8: You should always apply for student loan refinancing to lower your monthly payment. This can sometimes be a good option if you are struggling to make your monthly student loan payments, but it will lengthen your repayment period and increase your total loan amount, so it should not be your go-to solution to lower monthly payments.
Myth 9: You only have one option when it comes to paying for your higher education: Student Loans While student loans can be a great resource and tool to funding your education, it is not your only option.

Alternatives to Edly Loans

Before committing to any student loan, explore all available options, including:

Federal Student Loans: Always exhaust federal student loan options first, as they typically offer lower interest rates and more flexible repayment plans than private loans.
Grants and Scholarships: Seek out grants and scholarships, which don't need to be repaid.
Income Share Agreements (ISAs): Research other ISA providers, as their terms and conditions may vary.
Private Student Loans: Compare Edly's rates and terms with those of other private lenders.

Read also: Investigating the Death at Purdue

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