Have you ever wondered why the interest on your bank account is still so low? It’s because the established banks out there think they can give you very little, invest the difference, and make a ton of profit. You could compare this common experience with banking to student loan refinancing cash back bonuses. No one wants to give you much of anything for reducing your student loan interest rate with a private lender.
I’m going to give you a look under the hood of the way the internet and especially personal finance sites work and make money. I’ll try to be transparent with my own sources of revenue and my conflicts of interest as well.
In today’s environment, a ton of borrowers refinance their student loans through links on popular personal finance sites they found from Google search terms. Borrowers who do this collectively leave tens of millions of dollars in student loan refinancing cash back bonuses on the table. The reason is a lack of understanding how these “free websites” provide their content to you.
Student Loan Lenders Pay Bonuses to Websites for Each Loan Refinanced Through Their Link
Maybe you’ve heard of affiliate marketing. If you’ve ever read a review that you found after doing an online search, you’ve been exposed to affiliate marketing perhaps without even knowing.
Here’s how affiliate marketing works. You write a bunch about a specific topic and get a good reputation as an expert. Eventually, Google and other search engines might rank your content at the top of the search results. You might be able to place links in this content encouraging readers to buy stuff. You’ll get paid every time a reader clicks through your link and makes a purchase.
This can be a mutually beneficial arrangement. Websites and content creators take the time to shuffle out the good and the bad of products and the top ones make their hands into users lives. However, there’s also an incentive to talk about things that might not be that great a deal just because of the high revenue provided.
Let’s extend this idea of affiliate marketing to student loan refinancing. If you click on my link to refinance with Commonbond for example (this is an affiliate link), I would get a bonus if you decided to refinance through them. You would also get a bonus for $500 at the time I’m writing this if you refinanced with them.
If you go to another website and click on a link to refinance student loans, you will probably receive nothing for refinancing. Most likely, that website will keep 100% of the referral bonus.
How Websites Can Use and Do Use Student Loan Referral Bonuses
The idea of getting free money with a student loan referral program sounds tempting.Pretend a lender will give you $500 for referring a friend to refinance their student loans with said company. You have total flexibility in how you share this bonus. You could do $500 to your friend and $0 to you, $300 to them and $200 to you, or $0 to them and $500 to you.
Guess how much of the refinancing referral bonus that the typical personal finance site gives back to its readers?
The refinancing companies care about providing the lowest interest rates with good customer service. They can spend a certain dollar amount on acquiring a new customer, but they don’t care if it comes from TV ads, affiliate marketing bonuses, FB promotions, or refer-a-friend giveaways. They have a certain dollar amount per loan to play with for the student loan rewards, and content publishers like this site can choose how to split it.
The sad state of student loan refinancing right now is that almost all big personal websites keep 100% of the student loan referral bonus given to them by the student loan lenders. Yes, they provide lots of free content that can be incredibly useful. However, their content is anything but free. What difference do you notice between the two images below? The left is another popular student loan site. Student Loan Planner is on the right.
Source: personal finance site 1 vs Student Loan Planner
Why I Think It’s Important Not to Keep All the Referral Bonus for Myself and Share Most of It with You
If you look at the bottom of this post or on my refinancing page, you’ll notice cash back bonus offers for you in the amount of $200 to $500. Sometimes I’ve even gotten these bonuses up to $1,000.
The only reason these cash back bonuses exist is because I negotiate each individual deal for you. I have to take the bonus out of the overall referral amount that I can get with each lender.
In general, the more clicks and revenue you send over to an affiliate marketing partner, the better economics you can negotiate. This presents a challenge. If a lender is willing to offer me an extra $100 for the overall referral bonus, how do I split this up?
Multiple times, I’ve asked that all of this “reward” for sending increasing amounts of traffic to certain partners be applied in the form of higher cash back bonuses to you instead of bigger payouts to me.
I’ll have cases where I ask them to raise my own payout in lieu of a higher bonus for readers like you, but I prefer to make that the exception rather than the rule.
I’ve had trolls comment that I’m unethical for not giving away 100% of the referral bonus to readers. They think I’m a crook for taking anything. To this I say, by all means, spend your Saturday night answering 100 emails, making sure readers get the bonus you posted, and do it all for free.
This is a business, so we have to make a reasonable profit to keep the lights on. That said, my definition of the word “reasonable” is a lot lower than most sites want.
There are a few big sites out there that also offer cash back bonuses. Some of my favorites include Big Law Investor, White Coat Investor, Physician on FIRE, Your Financial Pharmacist, The College Investor, and Mr. Money Mustache. They all push me to try to get the best bonuses for readers.
In many cases, I’ll contribute to pushing these bonuses for readers ever higher, which will cause other sites to have to match the bigger bonus to stay competitive.
I love this because it gets you a better deal. It’s like an arms race to get the best offer in the hands of you, the blog reader.
Why Giving Away Some of the Referral Bonus for Student Loan Refinancing Helps Student Loan Planner
Let’s look at a hypothetical example at the options to refinance student loans. Pretend a reader with $200,000 of debt and $120,000 of income messages me in a panic about what to do with her student loans. Imagine if could make 1% of the loan balance by referring her to a $0 bonus refinancing referral link (in fact, I know some of these websites make as much as 2.5% of the loan amount!).
That referral would be $2,000 with a $0 bonus for the reader in this case.
Because we make custom student loan plans, I could also pitch her our consult service for a few hundred dollars. We could help her decide between going for forgiveness via 20-year PAYE or refinancing.
If I give a $0 cash bonus, I am very biased financially towards suggesting that she not hire us for the plan and just refinance instead. This could be terrible for her. If I give a large percent of my referral fee to her if she refinances, then my advice is more trustworthy.
After all, don’t expect a financial professional to understand something when they’re paid a lot of money not to understand it.
By giving away a significant chunk of money as a cash bonus, I can minimize my own conflict of interest so that I can give objective advice. This is one reason that I don’t tie my team’s pay to refinancing targets. I want them giving the right advice to our clients 100% of the time.
Should You Trust me for Student Loan Refinancing Advice?
Here’s the truth. I’m not going to have the best bonus with each lender 100% of the time. Sometimes a professional society might have a better deal or a site that only lists one lender as the exclusive partner gets a bigger bonus because of it.
You’ll notice that as of this article’s writing, Sofi, the biggest lender in the student refinancing marketplace, is not on my site at all. They used to be, but I couldn’t come to terms with them that I thought were good for my readers, so I made the decision not to list them on my site.
95% of the time, I find better deals than what Sofi offers. My guess is that their heavy expenditures on advertising and brand awareness have lessened the quality of their offers. That said, sometimes they do have the best rates. Sometimes a regional bank I might be unaware of might offer something better than what my partner lenders on this site can give.
You can’t win 100% of the time, but most people cost themselves tons of money by not shopping around outside of the big names that everyone has heard about. Hopefully, I can save you thousands in interest by making you aware of other lenders and by getting you these cash back bonuses as a sweetener.
I won’t always have the best deals, but I can promise you that I’ll always strive to have the most ethical ones.
Examples of Student Loan Sites Offering $0 to their Readers
I made the decision not to list specific names of companies, but if you type any search item about student debt into google you will see their names listed. I used images below from their sites and list the names generically. If any of the companies would prefer their name to be listed or for me to give an image credit, let me know. I just assumed they’d rather not be named.
One strategy to mask the $0 bonus is by creating detailed review articles that overload you with information. You don’t need to know that a Parent PLUS loan can get refinanced to a 12-year variable interest rate, but if you write a thousand random FAQ questions like that then Google will likely rank the site better, which is why you see so much of this.
Here’s one example of a review based $0 bonus link:
Source: Personal Finance Website 2
Here’s another example below of a site using information overload to conveniently not mention that they give you nothing for refinancing when it’s common practice at other sites to give away much of the referral bonus to you.
Source: Personal Finance Website 1
Occasionally Big Sites Will Offer Temporary Student Loan Refinancing Cash Back Bonuses
In fairness, some big sites including the ones I’ve picked on in this article will do temporary giveaways to see if it affects things like click-through rates and net revenue. After all, if you could do twice as much loan volume with a small bonus then it would make sense to offer that.
Here’s one site experimenting with a temporary $200 bonus with some of its lenders with a gift box icon next to each one:
Source: personal finance site 3
Another site offered hundreds of dollars as a bonus for each friend you referred even though the friend would get $0. All of these promotions for big corporate personal finance sites have been temporary in nature. That might change if I’m successful in making you want one.
Student Loan Refinancing is Too Serious to Let a Referral Bonus Influence the Decision
When I’ve seen websites defend their position of giving $0 cash bonuses to readers and keeping it all internally for their company profit, the most common reason given is that cash bonuses are a gimmick. They say that refinancing is such an important decision that the cash bonuses are a dangerous gimmick.
In my view, this is a copout.
You should absolutely be super careful before refinancing your student loans. I’ve built a whole consulting business that usually recommends against it. If you’re an obvious refinancing case (you owe less than 1 times your income in the private sector for example), you can use my links to shop on your own without paying us anything. I’d encourage that.
However, if you’re unsure of what to do, we promise to give you our unbiased opinion and to make a custom plan so you don’t have to worry.
I think the reason the big websites don’t give cash back bonuses for refinancing is frankly because they think they don’t have to and because they like making a lot more money by giving you nothing.
Yes, they invest in content, tools, and resources that you don’t have to directly pay for. However, I’ve often found that “free services” are very rarely free. In fact, sometimes free is the most expensive way to pay for something.
I’m passionate about getting you the best deals on your student loans no matter what the right path is. Hopefully you’ll join me in demanding student loan refinancing cash back bonuses by not going through other sites that think you’ll settle for nothing for you and big money for them.
Have you ever thought about refinancing your student loans before? Have you earned a student loan refinancing cash back bonus?