Here are the 16 Best Private Student Loans Right Now + a Bonus

As of this year, the average student loan debt is $37,113. This number comes from a combination of federal and private student loans. This puts the total student loan debt nationwide at just over $1.75 trillion.

However, college is a vital part of any young adult’s journey since an increasing number of positions require a college degree. Because of that, it’s not surprising that students and their families continue to take out loans to fund their education.

Still, choosing between federal and private student loans can be tricky — after all, both have their pros and cons. But where private loans excel is their unique combination of eligibility requirements, repayment terms, interest rates, and other perks. Plus, there’s a much greater variety of private lenders out there than there are federal student loan options.

Table of Contents

Best Private Student Loans

While federal student loans can cover much of the cost of attending university, they do have some limitations. For example, they’re limited based on the individual’s (or their family’s if they’re still a dependent) financial need.

Private lenders don’t require borrowers to have a maximum income. If anything, a higher income could mean a larger offer. The right private student loan can bridge the gap between a student’s federal financial aid package and academic expenses. This includes things like tuition, room and board, school administrative fees, books and supplies, and more.

With that in mind, here are the best private student loans.

A.M. Money

Terms

  • Variable Interest Rates: N/A
  • Fixed Interest Rates: 7.08% – 8.85% APR
  • Fees: Origination fee of 4.5% but no prepayment or late fees.
  • Loan Amounts: $2,000 to $50,000 per year
  • Repayment Terms: 10-year repayment term. No payments until six months after graduation. Income-based options.
  • Autopay Discount: The lender does offer autopay, but it’s limited and you cannot may bi-weekly payments through this feature.

Application and Qualification

A.M. Money has a unique style of risk assessment that’s specially made for student borrowers. They recognize that students often have no control over their credit or even access to a cosigner, so they use GPA and academic achievements to judge creditworthiness. You don’t even need a cosigner to qualify. 

Drawbacks

Unfortunately, A.M. Money isn’t the cheapest option. Their APR is fixed at Federal Plus loan rates, and they charge a significant origination fee. At their maximum balance of $50,000 (which is also a bit low), that origination fee alone would be over $2,000. They also only work with a limited number of schools, so it’s not accessible to everyone, even if you’d be accepted otherwise.

Best For

Despite the drawbacks mentioned above, A.M. Money is a wonderful solution for students who would otherwise not have access to funding because they have no credit or cosigner. If you’re struggling to get a loan but have a strong academic track record, A.M. Money’s student loans could be right for you.

Ascent

Terms (Undergraduate)

  • Variable Interest Rates: 1.47% to 9.05% APR (cosigned) or 4.05% to 11.31% APR (non-cosigned)
  • Fixed Rates: 3.44% to (cosigned) 11.41% APR or 6.11% to 13.16% APR (non-cosigned).
  • Fees: No application, origination, or prepayment fees
  • Loan Amounts: $1,000 to $200,000
  • Repayment Terms: 5, 7, 10, 12, or 15-year repayment terms. Loan repayment can be deferred until up to 9 months after graduation.
  • Autopay Discount: The APR listed here is based on Ascent’s autopay discount, with is 0.25% for all credit-based student loans and 1.00% for outcomes-based student loans.

Application and Qualification

Ascent’s loans are available to both undergraduate and graduate students that are enrolled at least half-time. They also allow certain non-citizen students to apply as long as they have an American co-signer. They encourage applying with a cosigner to help your odds of qualifying, though they also offer a future income-based option. 

Drawbacks

Unfortunately, only 2,200 colleges are eligible for Ascent loans. Make sure yours qualifies before you apply. Additionally, it’s not the best deal for cosigners. They have to take a financial wellness course as part of the application and will have to wait at least two years before you can release them from the loan. 

Best For

The most intriguing option Ascent offers is their non-cosigned future income-based loan. If you don’t have a cosigner or a credit history, getting private lending is going to be tough in most places, but you can still qualify with Ascent based on your school’s statistics and your academic performance. Along with this, students do receive a $525 referral bonus for each person they refer who takes out a loan.

Advantage Education Loan

Terms (Undergraduate) 

  • Variable Rates: N/A
  • Fixed Rates: As low as 3.50% APR
  • Fees: No application, origination, default, late, or prepayment fees.
  • Loan Amounts: $1,000 up to 100% of education costs (as certified by your school).
  • Repayment Terms: 10-year repayment term. Payments begin up to six months after graduation.
  • Autopay Discount: Fixed APR starts at 2.84% with autopay, which is approximately a 19% discount.

Application and Qualification

Advantage’s application is pretty standard. You’ll need to be enrolled at an eligible school, be a citizen (or have proof of residency card), and have an “acceptable income and credit history or an “approved cosigner” to qualify. Unfortunately, they don’t disclose much about what that last part means to them. 

Drawbacks

Advantage’s loans are only available in select states, so they might not be accessible to you if you live or attend school outside of their territory. Additionally, their repayment terms are less flexible than other lenders, with the 10-year plan being their only offer. Cosigner release is also slower than others and isn’t available until after 36 months of on-time payments. 

Best For

Advantage has a few noticeable perks, most notably their forbearance allowance of 24 months, which is far above the industry average. They also have low fees, allow you to pre-qualify without a hard inquiry on your credit, and offer loans to students who are enrolled less than half-time. Plus, they offer three repayment options, including immediate repayment, interest-only payments that start upon loan disbursement, and deferred payment.

Citizens One

Terms (Undergraduate)

  • Variable Rates: 1.99% to 8.27% APR
  • Fixed Rates: 3.23% to 11.70% APR (rates may be higher for bar student loans)
  • Fees: No application, origination, or prepayment fees.
  • Loan Amounts: $1,000 to $150,000
  • Repayment Terms: 5, 10, or 15-year repayment terms. Payments begin up to 6 months after graduation.
  • Autopay Discount: The lender’s Automatic Payment Discount gives borrowers a 0.25% discount. The discount is not available during periods of forbearance.

Application and Qualification

Citizens One allows you to apply just once and qualify for funding for your entire education instead of having to come back for another round every year. However, they don’t disclose minimum credit score or income requirements for borrowers or the cosigners that they suggest using. 

Drawbacks

Citizens One isn’t super transparent about their qualification requirements and they don’t provide any form of soft-check assessment tool. That means that if you do choose to apply, your credit score could take a hit and you might end up with nothing to show for it.

Best For

Citizens One is best for existing Citizens Bank customers. You’ll already have a relationship with them, which means that you’ll have a better understanding of their minimum approval requirements and be more likely to get approved. They also offer a loyalty discount, which is always a nice incentive. 

College Ave

Terms (Undergraduate)

  • Variable Rates: 1.09% – 11.98% APR
  • Fixed Rates: 3.49% – 12.99% APR
  • Fees: No application, origination, or prepayment fees.
  • Loan Amounts: From $1,000 to 100% of your education costs (as certified by your school).
  • Repayment Terms: 5, 8, 10, or 15 years, with extra flexibility on the timing of your principal and interest relative to graduation.
  • Autopay Discount: With autopay, APR ranges from 0.94% to 12.99%.

Application and Qualification

College Ave Student Loans boasts an extremely quick turnaround time on their applications. It’s free, and you can get an answer back regarding qualification within just a few minutes. In general, you (or your cosigner) will need a credit score in at least the mid 600s to get approved. 

Drawbacks

As is the case with many private student loans, if you’re an undergraduate student with a low or no credit score, then you’ll need a cosigner to qualify. And unfortunately, College Ave doesn’t let those cosigners off the hook easily. You won’t be able to apply to release them until half the loan term has elapsed. 

Best For

College Ave’s lack of fees and low APRs make it a great option for a wide range of borrowers. Their flexibility all but ensures that they’ll be able to accommodate your needs, so if you want to design a very specific borrowing plan, College Ave might be the best fit for you.

CommonBond

Terms (Undergraduate)

  • Variable Rates: 3.79% to 9.35% APR
  • Fixed Rates: 3.74% to 10.74% APR
  • Fees: No application, origination (for undergraduate students), or prepayment fees. However, there is a $10 or 15% late fee (whichever is less).
  • Loan Amounts: $2,000 to 100% of your education costs (as certified by your school).
  • Repayment Terms: 5, 10, 15, and 20-year repayment plans. Payments begin up to 6 months after graduation.
  • Autopay Discount: 0.25% interest rate reduction with autopay (rates shown above).

Application and Qualification

CommonBond requires all undergraduate students to apply with a creditworthy cosigner, which is usually only a suggestion at most other lenders. They also require you to reapply every year, which can be tiresome and possibly damaging to your credit score.

Drawbacks

The cosigner requirement can be an issue for some undergraduate borrowers who don’t have access to one. They don’t offer a soft credit check option, so you’ll have to take a hard inquiry to apply. Additionally, they’re a bit more expensive than average, with a 2% origination fee for graduate loans and a higher floor on their variable rates.

Best For

CommonBond caters well to the socially conscious, as they’ve partnered with  Pencils of Promise to provide scholarships to children in Ghana whenever you take out a loan or refinance with them. They also provide a personal finance expert to support you, which might entice borrowers who struggle with money. 

Custom Choice

Terms (Undergraduate)

  • Variable Rates: 1.22 to 9.70%
  • Fixed Rates: 4.26 to 10.74%
  • Fees: No application, origination, late, or prepayment fees.
  • Loan Amounts: $1,000 to $99,999 annually. $180,000 maximum amount borrowed.
  • Repayment Terms: 7, 10, or 15-year repayment term. The 15-year repayment term is only available to those who take out $5,000+. Payments begin up to 6 months after graduation.
  • Autopay Discount: You get a 0.25% discount on the interest rate when you set up automatic payments through your bank account. This feature is not available during forbearance or deferment.

Application and Qualification

Custom Choice offers a quick and easy pre-qualification tool that will help you get an estimate of your rate without impacting your credit. They suggest a cosigner since it may lower your rates and increase your chances of approval, but it’s not a requirement. 

Drawbacks

Custom Choice isn’t available in Arizona, Iowa, or Wisconsin which might impact your ability to take out a loan from them. Additionally, they have a longer than average cosigner release period at 36 months of on-time payments. 

Best For

Custom Choice is a great option for the budget-conscious due to their complete lack of fees, even for late payment. They also offer competitive rates, with discounts available for automated payments plus additional seasonal discounts. To top it off, at graduation they’ll grant you a 2% principal reduction.

DiscoverDiscover Private Student Loans

Terms (Undergraduate)

  • Variable Rates: 1.24% to 11.99%
  • Fixed Rates: 4.24% to 12.99%
  • Fees: No application, origination, late, or prepayment fees.
  • Loan Amounts: $1,000 to 100% of your education costs (as certified by your school).
  • Repayment Terms: 15-year repayment plan.  Payments begin up to 6 months after graduation.
  • Autopay Discount: With Discover’s Auto Debit Reward, you receive a discount. Variable rates will be 1.29% to 10.59%, while fixed rates will be 3.99% to 11.59%.

Application and Qualification

Discover offers multi-year application options, so you might not have to reapply every year you’re in school. They require that you be making satisfactory academic progress as defined by your school to apply and actually reward you with cash for a 3.0 GPA or higher. They suggest a cosigner, but it’s not required if you have good credit.

Drawbacks

Discover doesn’t have a public cosigner release policy, which might make it difficult to find someone willing to cosign for you. They also only offer one repayment term of 15 years, which might be longer than some would prefer.

Best For

Discover is another good option for those looking to save, especially if you have a high GPA. There are no fees of any kind, and they have cash back rewards in place for getting a 3.0 GPA, as well as a graduation reward equal to 2% of your loan balance when you graduate. For example, if your loan balance was $10,000 when you graduated from college, you’d get $200 back.

Earnest

Terms (Undergraduate)

  • Variable Rates: 1.05% to 11.44% APR
  • Fixed Rates: 3.49% to 12.78% APR
  • Fees: No origination, disbursement, prepayment, or late fees.
  • Loan Amounts: $1,000 to 100% of your education costs (as certified by your school).
  • Repayment Terms: 5, 7, 10, 12, and 15-year repayment terms. Payments begin up to 9 months after graduation.
  • Autopay Discount: 0.25% interest rate reduction with automatic payments.

Application and Qualification

Earnest is refreshingly upfront about their application and qualification requirements, which are listed below. You and/or your cosigner must:

  • Be a U.S. Citizen or Permanent Resident
  • Have 3+ years of good credit history, a minimum credit score of 650, and no history of bankruptcy
  • Have a minimum yearly income of $35,000 (in USD)
  • Live in the District of Columbia or a state that Earnest lends in (all but Nevada)

They also offer a pre-qualification option which will tell you if you qualify within just a couple of minutes without hurting your credit score. 

Drawbacks

Earnest only loans to full-time students, so this isn’t the option for you if you’re currently (or planning to be) attending part or half-time. They also don’t offer any cosigner release, though they will allow you to refinance out of your loan without a cosigner if you qualify.

Best For

Earnest offers much more flexible repayment options than most lenders, which makes it a great choice for those who are worried about being able to pay back their loans effectively. They have a wide range of repayment terms, a longer than average grace period before payments start, and the option to skip one payment a year without penalty.

Funding U

Terms (Undergraduate)

  • Variable Rates: N/A
  • Fixed Rates: 7.49% – 12.99% APR
  • Fees: No application, origination, prepayment, or late fees.
  • Loan Amounts: $3,000 to $15,000
  • Repayment Terms: 10-year repayment term. Payments are required while in school.
  • Autopay Discount: There is no autopay discount.

Application and Qualification

Funding U doesn’t require students to have a cosigner or credit score to qualify. Instead, they use “historical data” to identify the trends of successful students and compare your track record to those students. 

Drawbacks

The biggest downside to borrowing from Funding U is the requirement for in-school payments and the subsequent lack of a grace period. You’ll have to be able to afford at least some form of monthly payment while in school to take out a loan from this lender. Also, their maximum loan amounts are considerably lower than average. 

Best For

Funding U is best for strong students who already have federal loans and scholarships to pay for most of their education costs, especially when combined with the lack of a cosigner or credit score.

LendKey

Terms (Undergraduate)

  • Variable Rates: As low as 1.49% APR
  • Fixed Rates: As low as 3.99% APR
  • Fees: No application, origination, or prepayment fees.
  • Loan Amounts: $1,000 to 100% of your education costs (as certified by your school).
  • Repayment Terms: 5, 10, or 15-year repayment terms. Principle payments start up to 6 months after graduation.
  • Autopay Discount: LendKey offers a standard 0.25% autopay discount on interest rates.

Application and Qualification

LendKey’s application process is par for the course in the industry. They base their lending decisions on your credit score and credit history, and you’ll need to undergo a hard credit inquiry to see if you qualify. If you don’t have much of a credit score, you’ll need a cosigner to help you out. 

Drawbacks

Most private lenders allow you to defer both your principal and interest payments until after you graduate, plus a short grace period. LendKey believes that it’s best to make students pay interest while in school to teach them good financial habits, which might turn some borrowers off. 

Best For

LendKey offers a longer period of forbearance than most of its peers. They allow you 18 months, while 12 months is fairly standard. If you like the added comfort that extra wiggle room brings, LendKey could be a good fit for you. 

MPower Financing

Terms

  • Variable Rates: N/A
  • Fixed Rates: 7.52% to 14.98% APR (depending on if you’re an international student or resident, as well as if you’re an undergrad or graduate student)
  • Fees: 5% Origination Fee
  • Loan Amounts: $2,001 to $25,000 annually. $50,000 lifetime limit.
  • Repayment Terms: 10-year repayment term. Principal payments begin up to 6 months after graduation.
  • Autopay Discount: 0.50% automatic payment discount. There’s an additional 0.50% discount for those who successfully make 6 consecutive payments on time. Further, those who graduate receive another 0.50% discount.

Application and Qualification

MPower doesn’t require a credit score, credit history, or cosigner to apply. In fact, they’re among the most flexible when it comes to application and qualification requirements and lend liberally to over 190 different nationalities of international students. You don’t need to be a citizen, just attend one of their 350 approved schools in the US or Canada. 

Drawbacks

One significant downside to borrowing from MPower is their 5% origination fee, which can’t be overlooked. Additionally, you’ll need to make interest payments while you’re in school and during your grace period, and their lifetime limit of $50,000 might be an issue for many. 

Best For

Those limitations aside, MPower is one of the best options in the industry for international students. They require no cosigner, collateral, or American credit history, and you can repay your loan with any form of currency you prefer. And while they supposedly base their underwriting on your future earnings, they also support all majors and career tracks. 

PNC Bank

Terms (Undergraduate)

  • Variable Rates: 1.09% to 8.19% APR (with autopay)
  • Fixed Rates: 2.99% to 9.89% APR (with autopay)
  • Fees: No application, origination, or prepayment fees.
  • Loan Amounts: $50,000 annual maximum: $50,000. $225,000 lifetime maximum (including loans from other sources).
  • Repayment Terms: 5, 10, and 15-year repayment plans. Payments begin up to 6 months after graduation.
  • Autopay Discount: 0.50% autopay discount.

Application and Qualification

PNC doesn’t have a pre-qualification tool, so if you want to apply then you’ll have to be fine with the hard inquiry on your credit report. They require the borrower to be at least enrolled half-time, and borrowers or their cosigners must meet the typical credit and income requirements. If you want to use self-employment income to qualify, then the business must be at least two years old. 

Drawbacks

Again, PNC doesn’t have a soft credit check option available. They also don’t seem to offer any forbearance options for borrowers who are facing difficulty with cash flow or employment, and their cosigner release terms are longer than average at 48 months of on-time payments. 

Best For

PNC gives a 0.50% discount for borrowers who enroll in automatic payments, which is twice the industry average. However, interest-only payments don’t count, so you’ll need to make payments during school to qualify during that period. If you’re going to be paying while in school, PNC might be right for you.

Sallie Mae

Terms (Undergraduate)

  • Variable Rates: 1.25% – 11.10% APR
  • Fixed Rates: 4.25% – 12.35% APR
  • Fees: No application, origination, or prepayment fees.
  • Loan Amounts: $1,000 to 100% of your education costs (as certified by your school).
  • Repayment Terms: 5 or 15-year repayment.
  • Autopay Discount: 0.25% autopay discount

Application and Qualification

Sallie Mae’s loan application is, as they put it, “fast and easy.” All you need to do is visit their website and provide some details about yourself and your school. They don’t disclose their minimum credit score requirements, but they do suggest most students get a cosigner, even if they have some credit, to help lower their rate. 

Drawbacks

As we mentioned above, Sallie Mae doesn’t disclose their credit requirements, so it may be hard to gauge whether you or your cosigner will qualify. Additionally, they don’t allow you to choose your repayment term, so you’ll have to take what they give you. 

Best For

Sallie Mae is a well-rounded option. They have affordable rates, low fees, and some nice perks like free tutoring and credit monitoring. One of the traits that really sets them apart is their quick cosigner release (just 12 months), which is a fraction of many of their competitors. Sallie Mae also offers graduate student loans.

SoFi

Terms (Undergraduate)

  • Variable Rates: 1.10% – 11.68% APR (with autopay)
  • Fixed Rates: 3.22% – 11.16% APR (with autopay)
  • Fees: No origination, disbursement, prepayment, or late fees.
  • Loan Amounts: $5,000 to 100% of your education costs (as certified by your school).
  • Repayment Terms: 5, 10, or 15-year repayment terms. Payments begin up to 6 months after graduation.
  • Autopay Discount: SoFi offers the standard 0.25% autopay interest rate reduction.

Application and Qualification

SoFi offers a quick and easy pre-qualification process, so you can shop around with them without damaging your credit score. They suggest a cosigner and note that their whole application process from filling the online questionnaire to sending the money to your school takes about 4-6 weeks. 

Drawbacks

SoFi is a great all-around option for the borrower, but it’s only average for the cosigner. Cosigners can be released from their liability, but only after two years of on-time payments. 

Best For

SoFi has a lot to offer, and their lack of fees, flexible repayment terms, and loyalty discounts are all appealing. Unlike some of their competitors, SoFi also offers unemployment protection so that you’re covered for up to 12 months if you lose your job. If you’re worried about potential job loss, SoFi might meet all of your needs. 

Stride

Terms (Undergraduate)

  • Variable Rates: N/A
  • Fixed Rates: N/A
  • Fees: $10 late fee only.
  • Loan Amounts: $3,000 to $25,000 annually. $50,000 lifetime maximum.
  • Repayment Terms: 5 or 10-year repayment plan. No deferrals.
  • Autopay Discount: N/A

Application and Qualification

Stride is another unique case. Instead of judging you on your credit score or asking for a cosigner, they consider your academic program and income expectations when considering lending to you. 

Drawbacks

Stride’s loan model functions as a percentage of your income. This is a gamble: If you make a significantly larger income than you expected, you might lose. The sharing percentage starts at 2% for every $10,000 you borrow, though they cap your repayment at twice the principal balance. 

Best For

Stride’s income-sharing agreements are an intriguing idea, but you’ll want to assess your other options and do the math before you commit to one to make sure that you don’t end up paying more than you would with a traditional loan. Still, they’re a welcome alternative for those without a credit score or a cosigner.

What is Credible?

Since 2012, Credible has been a reliable online loan comparison marketplace that matches prospective borrowers with lenders. There are many financial products available through the platform, including:

  • Student loan refinancing
  • Private student loans
  • Credit cards
  • Home loans
  • Mortgage refinancing
  • Debt consolidation loans
  • Other personal loans

Through Credible, you can find lenders to refinance federal, parent PLUS, or private student loans for a lower interest rate or more affordable monthly payment. Or you can consolidate multiple student loans into one, which could make it easier to make payments on time.

Although you can find loans and other financial products using the platform, Credible is not a lender or financial institution. Instead, the company has an expansive list of lenders it partners with to show you an array of loan options.

It’s easy and free to use Credible. It only takes a couple of minutes to get the best, prequalified rates and loan options through their online application. Plus, prequalification doesn’t have an impact on your credit score, so there’s no risk involved.

Once you’ve filled out their secure application, you get matched with private lenders, including those offering student loans. You can then compare products and shop around until you find the best rates and terms available.

One thing to note is that every lender has its own repayment options, interest rates, and terms. For student loans, some lenders will require repayment while still attending school. Others offer a grace period so you won’t have to pay until after graduation.

Depending on things like your credit score and financial situation, you might need a cosigner to officially qualify. However, this is not required for all lenders.

Here are just a few other things worth noting about Credible:

  • Once prequalified, you can compare 10+ lenders at once on the Credible Dashboard. Unlike other loan comparison marketplaces, Credible only shows personalized rates and options to make shopping for loans easy.
  • Credible is a free service. If you choose to take out a loan with one of their partner lenders, that lender will pay them a small sum.
  • Interest rates vary, with some being highly competitive. Private student loan lenders on the platform have variable interest rates ranging from 0.94% to 11.98%. Fixed interest rates range from 2.99% to 13.16%.
  • There are no hidden fees.
  • Credible’s system is secure. They will not share or sell your data.
  • The prequalification application is easy. The platform features a streamlined, reliable application process.
  • Cosigners are allowed. But they’ll need to fill out their information separately from yours using an online portal.

Credible has helped over 2.2 million people compare loan options. On Trustpilot, they have 4,998 reviews with an excellent rating and 4.7 stars.

What’s the Difference Between Private Student Loans and Federal Student Loans?

According to a recent report, the average federal student loan debt is just over $37,000. The average private student loan balance is $54,921 per borrower.

Most student borrowers turn to federal loans before they ever consider taking out a private loan. Part of the reason for this is that federal student loans are typically included in the financial aid package students get from completing their FAFSA application.

As with any loan product, there are benefits and drawbacks to both federal and private student loans. That’s why it’s important to fully understand the difference between the two before taking out either one.

Federal Student Loans

There are two main types of federal loans for college:

  • Federal student loans
  • Federal parent loans

Both types are made and funded by the federal government and are usually automatically included in the borrower’s federal financial aid package. Individuals can apply for student loans through the FAFSA (Free Application for Federal Student Aid).

Federal student loans come in three different options:

  • Direct subsidized loans: The government pays any interest that accrues while the borrower is enrolled half-time or full-time in school. During some payment postponement periods, the government may pay interest as well. After leaving school, or dropping to below half-time status, the borrower becomes responsible for the interest. Eligibility for these loans is dependent on financial need. No credit check is required.
  • Direct unsubsidized loans: Undergraduate, graduate, and professional-level students may be eligible for these loans. Eligibility is not determined based on financial need or credit score. However, the borrower is responsible for any interest for the duration of the loan, regardless of enrollment status.
  • Direct PLUS loans: Available to both undergraduate and graduate students, these loans require a credit check to determine eligibility. However, it’s possible to qualify even with adverse credit history.

Since federal student loans are government-backed, their terms and conditions are highly regulated. This means you won’t end up with sky-high interest rates or unexpected loan terms. However, it also means the maximum loan amount you can get depends on your income (or family income for dependents).

Parent Loans (Direct PLUS Loans)

The Department of Education also makes Direct PLUS loans for parents. This federally-backed loan is only available through participating schools.

Eligible parents can take out a Direct PLUS loan if their child didn’t receive enough funding in their financial aid package to fully cover education costs. However, since the parent is the one with the loan, they are wholly liable for making payments on it. Additionally, they must have good credit to qualify.

Parent loans do not have a grace period, meaning the borrower must start making payments as soon as the funds are disbursed. It’s possible to request delayed payments for the first 6 months after the student leaves school or when their enrollment status changes to less than half-time.

Even during postponement periods, interest will still accrue on the loan. Due to the COVID-19 pandemic, interest rates on PLUS loans have been suspended until May 1, 2022. However, they typically have a fixed interest rate of 6.28%.

Some Parent PLUS Loans are eligible for student loan forgiveness programs. To qualify, you must make at least 120 consecutive payments on time and be currently employed. You must also meet certain income requirements.

Besides Parent PLUS loans, there are also Grad PLUS loans for student borrowers. To qualify, you must either be a graduate or professional student. You must also be enrolled half-time or full-time in a participating school. These loans also require that you pass a credit check or have a cosigner or endorser if you don’t.

Benefits of Federal Student Loans

Here are the main advantages to taking out federal student loans:

  • Various repayment plans are available, including an income-driven repayment plan that bases payments on the borrower’s income and household size.
  • Fixed interest rates are usually lower than private student loans.
  • Payments are not due until after the student leaves school or drops to below half-time status.
  • Tax-deductible interest, in some cases.
  • Option to postpone payments through forbearance or deferment, which is beneficial for those who are struggling to make payments.
  • Option to consolidate multiple loans through a Direct Consolidation Loan. This lets you make one monthly payment, usually at a more affordable rate, and extends the repayment period.
  • No prepayment penalty.
  • The loans may be eligible for student loan forgiveness. However, the forgiven amount could be taxable.
  • No need for a cosigner.
  • They come with a grace period up to 6 months after leaving school, during which time you don’t need to make payments.
  • They’re difficult to default on. The borrower must miss 3 consecutive payments (or be 90 days past due) before an account ends up in collections.
  • Some may be discharged if the borrower has a permanent, full disability.

Until May 1, 2022, federal student loan borrowers who’ve been affected by COVID-19 also benefit from:

  • Suspended loan payments
  • No accounts in collections
  • 0% interest rates, even during forbearance periods

Although federal loans can still be expensive, it’s smart to exhaust all options for federal aid before taking out a private student loan.

What is FAFSA?

The FAFSA is the Department of Education’s Free Application for Student Aid. It’s something prospective college students need to fill out before they start college. The FAFSA is easy to fill out and can be done entirely online. You will, however, need the following information:

  • Social Security Number or Alien Registration Number (for non-US citizens)
  • Federal income tax returns, W-2s, pay stubs, etc.
  • Bank statements showing account balances for the past several months
  • FSA ID to sign the application electronically

Dependent students will also need the above information from their parents or legal guardians.

Once you’ve completed the FAFSA, the college will determine your eligibility for federal loans, grants, and work-study. They’ll use the data provided to create an award package that includes all available financial aid for the upcoming school year. Some private lenders will also use information from the FAFSA when deciding to offer a loan.

The deadline for filling out the FAFSA is June 30th of the year you plan to attend college. However, the application opens up on October 1st of the previous year.

Private Student Loans

Finally, there are private student loans, which are an option for those who don’t receive enough federal aid. Most private loans come from private lenders such as credit unions, banks, or even the college or university. Rates, terms, and eligibility requirements often depend on things like income, credit score, and enrollment status or GPA.

In most cases, private loans have higher interest rates (variable or fixed) than federal loans. For example, the Federal Direct Unsubsidized and Subsidized Loans have a fixed interest rate of 4.53%. Some private loans have an 8.00% APR or higher. Still, with good credit or a cosigner, you could qualify for competitive interest rates with a private loan.

The best private lenders will work with borrowers and offer flexible repayment plans. However, private loans don’t come with many borrower protections. This means no income-driven repayment plans, deferment periods, or student loan forgiveness. If you default on payments, you could also face high fees and, in some cases, garnished wages. 

Always compare multiple lenders when taking out any loan product, including student loans. That way, you can ensure you get the best rates and the most favorable terms.

Student Loan Forgiveness Programs

Some student loans are eligible for student loan forgiveness programs. These programs help alleviate the high financial burden many people face after college. However, there are strict requirements involved.

For example, you might be eligible for student loan forgiveness if you’ve worked in the public service industry for 10 or more years and have been making consistent payments. You might also qualify if you’ve been making on-time payments for the past 20 or 25 years on an income-based payment plan.

There’s also a program called the Total and Permanent Disability discharge program. The purpose of this program is to cancel the federal student loans of borrowers who have a proven disability or impairment that prevents them from working.

Other cases where student loan forgiveness could come into play include:

  • Death of the borrower or student. Parents who took out a Parent PLUS Loan on behalf of their child may also be able to discharge their loan
  • The school fails to refund any required loans to the lender.
  • Identity theft.
  • For-profit college closure. If a degree-seeking student’s college closes down while they’re still enrolled, they could request student loan forgiveness.

While most people don’t qualify for student loan forgiveness, it never hurts to try. If you believe you have a legitimate reason to get your federal loans canceled, contact your loan servicer.

How to Evaluate Private Student Loan Lenders

Private student loans differ in many ways, so it can be hard for student loan borrowers to identify which of the many options is best for their situation. But at the end of the day, three factors have the most impact on the quality of a loan.

To quickly evaluate private student loans, focus on optimizing the following:

  • Loan type
  • Student loan interest rates and other fees
  • Repayment term
  • Deferral options

Loan Type

Do you need an undergrad loan or a graduate school loan? Are you headed to medical school or law school? Different lenders offer different options and loan limits depending on where you are in your education, and how much student loan debt you already have.

Student Loan Interest Rates and Fees

The total cost of the loan is most important, so low interest rates are a good starting point. You’ll want to look for the lowest fixed APR possible, but you should also watch out for fees. Are there any rate discounts you might qualify for? Application and origination fees add up quickly, and prepayment fees might not seem like an issue when you’re in college but they’ll make a big difference over the life of the loan. 

Repayment Term

Your repayment term has a significant impact on the size of your monthly payment, so look for one that matches your preferences. Try to find a lender that allows you to choose your repayment term so you can work toward debt freedom at a pace that makes you comfortable.

Deferral Options

Last but not least, pay close attention to the timing of your principal and interest payments as well since they’ll have an impact on your APR. Make sure you choose a loan that gives you a multi-month grace period to set yourself up for debt repayment after your graduation.

There are other things to consider that can impact your options, like a lender’s credit requirements or cosigner release policies, but these three are the most important. 

The “Best” Private Student Loans Depend on Your Situation

The diversity of private student loan options can feel overwhelming at first, but it’s actually a good thing. Every borrower is unique, and your situation might demand a vastly different private student loan than someone else’s. 

Some of the different groups you might fall into that will affect which private student loan is best for you include:

  • Borrower type: Like native student as opposed to international student or parent of a student
  • Education program: Do you need an undergraduate loan, medical school loan, law school loan, or a graduate school loan?
  • Personal background: Such as having a low credit score or lacking a cosigner
  • APR: Is there a fixed interest rate, or a variable APR? Variable-rate loans fluctuate, which can be a disadvantage. You want to find the lowest rates possible.

When you’re evaluating private student loans, take into account the special considerations that are unique to your situation. Don’t settle for a generic loan if your needs are more specific.

How Do You Get Approved for Private Student Loans?

Private student loans are very similar to all the other traditional forms of credit that you might take out with a bank or credit union, and that includes the approval process. 

Like when you apply for a credit card, private lenders usually evaluate your creditworthiness based on your credit score, income (if any), and other outstanding debts. They try to put a number on how big of a risk it is to lend to you, which will be reflected in the interest rate that they offer you. 

It’s easiest to get approved for a private student loan with a solid credit score, a good income, and no other outstanding debts. Of course, most students (especially undergrads) fail to meet at least the first two eligibility criteria. 

Can You Get Private Student Loans with Bad Credit?

Attending school is often predominately about becoming qualified to enter the workplace in some professional capacity. The overwhelming majority of students have had no time to build a credit score and have no source of income other than their parents.

If banks only gave student loans to those with a good credit score, the industry would be virtually nonexistent.  So yes, you can get a private student loan with bad (or no) credit, but it almost always requires you to get a cosigner to help you out. 

Cosigners take on equal responsibility for the loan payments, which will make a lender feel much more comfortable about giving a student money. It can be a parent, a spouse, or even a good family friend. 

Of course, they only benefit you if your cosigner has a proven credit history and a reliable source of income, so choose wisely. 

What If You Don’t Have a Cosigner?

If you don’t have a qualified cosigner to help you out, it’ll be a lot more difficult to get approved for a private loan as someone with a low or nonexistent credit score. 

Still, there are a couple of options that you can try. Some lenders, like A.M. Money, MPower, and Stride will be willing to judge your creditworthiness on something other than your score. 

The Bottom Line

While the majority of student loans are held by the government, private student loans can be a helpful supplement for those who need additional financing — particularly with the rapid increases in the cost of attendance.

Just remember that they don’t come with the same benefits as federal loans, and it’ll be difficult to consolidate your student loans into one payment if you have a mix of federal and private loans.

Still, if you’re unable to cover all of your expenses with federal student loans, it’s perfectly viable to work with a private lender. Just make sure that you know what you’re getting into and that you thoroughly explore your options before committing.

FAQs

What is Student Loan Refinancing?

Student loan refinancing is when you take your current loan with its interest rate and try to get a lower rate. For example, if your current interest rate is 7.00%, you might be able to get it down to 5%.
This means reduced monthly payments, but also potentially a longer repayment term. If you refinance a loan you’ve already partially repaid, you might end up paying more in the long run, though. This is because refinancing a loan is essentially starting over with payments.
Additionally, you can’t directly refinance a student loan from the government. Refinancing can only be done through private lenders. The downside is that you’ll no longer be eligible for any borrower protections offered by the government since you’re working with a private lender.
Every private lender has its eligibility requirements for refinancing. You’ll probably need a 670+ credit score, low credit utilization, and solid income. You might also need to have proof of an earned college degree.

Which Online Lenders Offer Student Loans?

These days, there are plenty of online and storefront lenders offering private student loans. College Ave Student Loans, for example, is one such lender. Other online lenders include A.M. Money and Ascent. Every lender has its own requirements, loan terms, and interest rates, so read through everything carefully before agreeing to any loan.

What is the Difference Between a Student Loan and Financial Aid?

Financial aid is an overarching term that refers to things like loans, scholarships, work-study programs, and grants. Unlike loans, grants and scholarships don’t need to be repaid, though scholarships are mainly given based on academic merit. Work-study requires the student to work part-time for the college or a related entity.
Any financial aid you receive for college must be used for academic purposes. This includes things like tuition, room and board, and books or school fees. Student loans, on the other hand, can sometimes be used for other things not related to education. Any loan must be repaid unless the borrower qualifies for a student forgiveness program.