Juno is a student loan company with a unique strategy.
Juno doesn’t fund student loans. Instead, they pool borrowers together in order to negotiate a group discount on student loans and student loan refinancing.
As a company new to the student loan space, it is a bit too early to review Juno’s borrower feedback or provide any data on borrower success rates.
However, due to the innovative structure of the Juno process, we can review the different ways that Juno might help borrowers as well as pitfalls that borrowers should avoid.
How Does Juno Work?
Juno combines borrowers together to negotiate lower interest rates.
Typically, most student loan lending is done on an individualized basis. Lenders market to borrowers, borrowers apply, and lenders offer terms to that specific borrower.
With Juno, things work a bit differently. Juno first collects applicant information to put together a collection of potential borrowers. Juno uses this large block of borrowers to negotiate a group discount with lenders.
In this process, everybody gets something out of the deal. Borrowers potentially get lower interest rates. Lenders get access to a large block of customers without having to do any advertising and Juno gets a commission on the deal.
The nice part about the process for borrowers is that they can check rates with Juno without being committed to using the lender selected by Juno.
The Advantage to the Group Strategy
A group strategy for student loan borrowing and student loan refinancing works like most other bulk discounts. If a company can make an extremely large sale, it can offer a better deal. This is why 24 rolls of toilet paper cost less per roll than the pack of four.
We have seen this group strategy work in the student loan space for some professional organizations. If a lender wants to market directly to members of a professional association or large company, they might approach the leadership with a special discount or deal for members.
Those of us who are not members of select organizations with access to group discounts have previously been forced to find the best deal on an individual basis. Juno allows borrowers who previously had no connection to come together as a group to get the best deal.
The Potential Flaw in the Juno Process
Depending upon where Juno is in their negotiations, potential borrowers may have to wait weeks or even months while lenders are engaged in the bidding process.
We reached out to Juno to discuss this potential lag issue. They explained that student loan deals were now live and that they expected these deals to remain in place through Spring 2021, but they could not guarantee that there wouldn’t be any changes. They also said that borrowers would get plenty of time to utilize their deals before tuition due dates.
On the one hand, the negotiation aspect of Juno is the whole reason for its existence. Taking the time to get the best possible deal for borrowers is an essential part of the process. On the other hand, many borrowers have come to expect an instant, or relatively quick, response from lenders when they apply.
Depending upon where Juno is in the bidding process, some applicants may have to wait a while before getting an answer. Many other applicants should still get a fast response.
Reviewing Juno vs. Federal Student Loans
One area where Juno has been a bit inconsistent in their messaging is on the subject of federal student loans.
On the page of their website for undergraduate student loans, Juno provides the following warning:
“Consider Federal Student Loans before Private Student Loans
Please be aware the Federal Stafford loans are typically your first best option for undergraduate student loans. Only consider our negotiated deal if you need to borrow more than Federal lending limits. If you aren’t sure whether you hit those limits, ask your financial aid advisor.”
This warning is sound advice that should be followed by all borrowers. We like seeing Juno provide this valuable information, even though it might mean less business for them.
Unfortunately, in several locations of their website, they point out that federal student loans have origination fees that borrowers may want to avoid and that federal loans may have higher interest rates than private loans.
They even provide a form letter for declining federal loans in order to get a private loan. We would rather see Juno focusing on supplementing federal loans rather than replacing federal loans.
Deciding Between Federal and Private Loans:It is the opinion of this reviewer that almost all student loan borrowers should use all federal loans available before even considering a private loan. Due to student loan borrowing limits, undergraduate borrowers may need a private loan to help pay for school, but graduate students shouldn’t require any private loans.
Over the years, we have seen many private lenders make the argument that a private loan is a better option due to the potential for lower interest rates and the lack of origination fees. For the vast majority of borrowers, the federal protections, such as repayment plans based upon income and loan forgiveness programs, make federal loans the better choice.
The Juno Mistake Borrowers Should Avoid
Juno is an excellent tool for borrowers who are out to find the lowest possible interest rate.
However, this review of Juno finds that Juno shouldn’t be the only tool utilized.
Even if Juno can secure a large discount, it doesn’t necessarily mean that the negotiated deal will be the best option.
Each student loan company uses its own unique formula for determining the rates offered. Some lenders might place a higher emphasis on credit score, while other lenders might place a larger emphasis on debt-to-income ratios.
These formulas are tightly guarded secrets. Thus, here is no way of knowing which lender will offer the best rate to any particular borrower. It is for this reason that we encourage all borrowers to shop around before selecting a lender.
For some borrowers, the Juno discount may not be enough to overcome the higher rate offered by that particular lender. As a result, shopping around is still a necessary step in finding the best possible deal.
Juno Review: Final Thoughts
Borrowers looking to refinance their student loans should seriously consider Juno as one of the many companies they investigate. As part of a strategy to shop around to find the best rate, Juno is definitely worth a look and could potentially save borrowers a bundle.
For undergraduate and graduate students looking for new loans, federal options are going to be the better choice for the overwhelming majority of students for the reasons previously explained. Graduate students shouldn’t need to get any private loans, and undergraduate students should only consider private lenders to the extent they have maxed out their federal options.
Ultimately, Juno is worth a close look for student loan refinancing and only useful for the portion of students who are still in school who can’t get additional federal loans.