private student loans are what their title implies. They are loans that students take out to help pay for the cost of college. Unlike federal student loans that come from the federal government, private student loans come from private institutions, such as credit unions, banks, or even online lenders. They’re generally used to pay the amount left over after the federal student loans, grants, and scholarships have paid all they will pay. Applicants must also meet certain requirements to be eligible for a private student loan.
factors to consider when choosing a private student loan
selecting the best private student loan requires careful consideration of several factors:
- interest rates: compare interest rates offered by different lenders. Fixed rates provide stability, while variable rates may initially be lower but can fluctuate over time.
- repayment terms: look for lenders offering flexible repayment terms that align with your financial situation. Longer terms may result in lower monthly payments but can lead to higher overall interest costs.
- fees: pay attention to any fees associated with the loan, such as origination fees or prepayment penalties. The best lenders often have minimal fees.
- loan limits: check the maximum loan amount a lender is willing to offer to ensure it covers your educational expenses.
- cosigner options: if you have limited credit history or income, explore lenders offering cosigner release options after demonstrating responsible repayment.
- customer service: research customer reviews and ratings to gauge the quality of customer service provided by the lender.
» MORE: Federal student loans Repayment
Tips For Responsible Borrowing
taking out private student loans is a significant financial decision. Here are some tips to borrow responsibly:
- maximize federal aid: before turning to private loans, exhaust all options for federal student aid, grants, and scholarships.
- borrow only what you need: borrow only the amount necessary to cover your educational expenses. Avoid borrowing more than required to prevent unnecessary debt.
- read the fine print: carefully review the loan agreement, terms, and conditions before signing. Understand the interest rates, repayment terms, and any potential fees.
- consider repayment options: look for lenders offering repayment flexibility, such as deferment, forbearance, or income-based plans, in case you face financial difficulties in the future.
How Do Private Student Loans And Federal Student Loans Differ?
you apply for a federal student loan by submitting the fafsa. Taking on a federal loan means you’re borrowing from the government. You apply for a private student loan through a bank, credit union or online lender.
federal student loans only come with fixed interest rates — rates that are locked in for the life of the loan — that are set by congress annually. Private lenders can offer fixed or variable rates that are based on your creditworthiness — and your co-signer’s if you have one. Federal loans also charge origination fees; private loans typically do not.
borrowers of federal student loans get extra protections — like income-driven repayment and public service loan forgiveness — that private loans lack.
» MORE: Student Loan Limit
Do I Need Good Credit To Get A Private Student Loan?
students applying for private student loans should have a good credit score. Many lenders may also require a co-signer, especially if the student has a low credit score or no credit history. It’s not unusual for a student to have no credit history if they’re still in high school or have just graduated. A student may still get a private school loan even if they have poor credit if their co-signor has good credit scores.
typically, the higher the credit scores the lower the interest rates. Credit score requirements can also vary from one lender to another, but most like to see credit scores of 600 or higher. Applicants, either the student or the co-signer, will also be required to meet income requirements so the lender knows the individual is able to pay off the loan. Here is a list of the top best private student loans.
Private Student Loans
1. College ave
company: founded in 2014, college ave is an online lender that provides students with student loans. In addition to offering loans to undergraduate and graduate students, they also offer student loan refinancing as well as parent loans.
apr: fixed apr 2.94 and 12.99 percent; variable apr 0.94 to 11.98 percent.
credit rating needed: they prefer fico scores in the mid-600s.
other info or terms: they offer flexible repayment terms, no pre-payment penalty and zero fees; terms of five, eight, ten, and 15 years
2. Ascent
company: founded in 2015, ascent is an online lender that offers co-signed student loans to both undergraduate and graduate students in more than 2,200 colleges across the nation. They also offer student loans to students that are not permanent residents or u.S. Citizens.
» More: Direct Subsidized Loan
apr: fixed apr is 3.44 to 11.71 percent; variable apr is 1.47 to 9.05 percent.
credit rating needed: ascent requires fico credit scores to be at least 540.
other info or terms: ascent has loan packages for dental school, law school, medical school, mba, and international students.
3. Commonbond
company: founded in 2012, commonbond is a lender that offers student loans to undergraduate, graduate, mba, dental, and medical students as well as refinancing student loans. They have paid student loans totally more than $2 billion.
apr: fixed apr is 3.74 to 10.74 percent; variable apr of 3.79 to 9.35 percent
credit rating needed: commonbond requires a fico credit score of 640 or higher.
other info or terms: they offer flexible payment terms with no application, prepayment, or origination fees.
4. Lendkey
company: originating in 2009, lendkey is a digital platform that connects students and co-signers in need of student loans or refinancing loans with community banks and credit unions.
apr: fixed apr of 4.25 to 12.59; variable apr of 1.13 to 11.23 percent
credit rating needed: lendkey prefers a fico credit score of at least 660.
other info or terms: they provide funding and refinancing loans for both undergraduate and graduate students as well as students in medical, law, and mba students.
5. Sallie mae
company: sallie mae is a lender that offers private student loans to undergraduate and graduate students. They also have loan packages for students in medical, law, dental, and mba programs.
apr: fixed apr of 3.50 to 12.60 percent; variable apr of 1.13 to 11.23 percent
credit rating needed: they prefer a fico score of at least the mid-600s.
other info or terms: they offer competitive rates, have no origination or prepayment fees, and offer several convenient payment options.
6. Discover
company: discover student loan, a part of the discover bank credit card company, was started in 2007. They will borrow from $1,000 to up to 100 percent of college fees.
apr: determined after a soft credit check
credit rating needed: will be determined at the time of application
other info or terms: discover student loans are best used by students who need flexibility in their loan terms. They also charge no late, origination, prepayment or application fees. Undergraduates have up to 15 years to repay the loan; graduate students have up to 20 years.
7. Sofi
company: sofi is a lending institution that offers student loans to undergraduate, graduate, mba, and law students and their co-signers. They also offer parent loans.
apr: fixed apr of 3.22 to 11.16 percent; variable apr of 1.10 to 11.68 percent (both with autopay) for undergraduate students; fixed apr of 4.13 to 11.06 percent; variable apr of 1.95 to 11.06 percent for graduate students
credit rating needed: sofi requires a fico score of at least 660
other info or terms: they offer flexible repayment options and charge zero fees as well as a six-month grace period after graduation.
8. Earnest
company: made up of a group of professionals in various careers, earnest offers private student loans to undergraduate and graduate students and co-signers. They also offer refinancing and consolidation loans.
apr: fixed apr of 3.19 to13.03 percent; variable apr of 1.19 to 11.69 percent (0.25percent with autopay)
credit rating needed: requires fico score of 650 or more
other info or terms: students can pick their payment and loan term; loan terms of five, seven, ten, 12, and 15 years
9. Commonbond
company: commonbond is a lender that offers private student loans to undergraduate students.
apr: fixed apr of 3.74 to 10.74 percent; variable apr of 3.79 to 9.35 percent
credit rating needed: requires fico score of 660 or more
other info or terms: offer friendly and convenient payment options; interest rates based on application, credit history, and loan term chosen
10. Custom choice
company: custom choice is a lending institution that provides student loans to eligible students and co-signers.
apr: fixed apr of 3.20 to 10.77 percent; variable apr of 1.03 to 9.67 percent
credit rating needed: requires fico score of at least 660
other info or terms: they offer various payment options with a 25 percent discount on payments if made with autopay. Students can pre-qualify with no effect on credit.
11. Education loan finance
company: education loan finance offers student loans to undergraduates, graduates, and parents.
apr: fixed apr of 3.20 to 11.99 percent; variable apr of 1.20 to 11.52 percent
credit rating needed: requires fico score of at least 680
other info or terms: students must meet eligibility requirements. There are no fees of any kind. Applicants must meet income requirements.
12. Funding u
company: funding u offers student loans to undergraduate and graduate students.
apr: funding u offers a fixed apr of 7.49 to 12.99 percent so the initial rate will never increase.
credit rating needed: there is no specific credit score required.
other info or terms: there are no hidden fees, and students do not need a co-signer.
13. Mpower financing
company: mpower financing is a lender that offers private student loans to undergraduate students or graduate students that will graduate within two years. Their loans require no collateral or cosigners.
apr: fixed apr of 7.52 to 14.98 percent
credit rating needed: they do not have a credit score requirement.
other info or terms: they offer interest-only payments while the student is in school. They offer flexible loan terms.
14. Isl education lending
company: isl education lending is a not-for-profit company that offers private student loans that are student-friendly. They also offer refinancing options. They offer loan amounts from $1,000 to $300,000.
apr: fixed apr of 4.60 to 7.40 percent; variable apr of 3.51 to 6.14 percent
credit rating needed: requires fico score of 670 or higher
other info or terms: they have no fees of any kind and offer loan terms of five, ten, 15, and 20 years.
15. Advantage education
company: advantage education is a lending company that offers private student loans and is a great choice for part-time students.
apr: fixed apr of 3.75 to 6.99 percent
credit rating needed: required fico score depends on application and loan
other info or terms: no fees of any kind; generous forbearance policy
16. Credible
company: credible is a lending company comprised of several professionals who work alongside several banks with the goal of providing affordable student loans for college students. They offer loans to undergraduate, graduate, mba, law, medical, and parent loans.
apr: fixed apr of 2.94 to 13.16 percent; variable apr of 0.94 to 11.98 percent
credit rating needed: can vary and typically not disclosed
other info or terms: students can choose their loan due date, loan term length, and loan rate. Multiple prepayment options with no fees.
17. Pnc bank
company: pnc bank is a lender that offers student loans to undergraduate and graduate students as well as medical, law, healthcare, and residency loans. The offer students from $1,000 to $50,000.
apr: fixed apr of 2.99 to 9.89 percent; variable apr of 1.09 to 8.19 percent
credit rating needed: not disclosed but a discount applies with autopay
other info or terms: loan terms of five, 10, or 15 years with flexible payment options
18. Citizens bank
company: citizens bank offers a variety of student loans for undergraduate, graduate, medical, law, dental, mba, and parent loans. They borrow from $1,000 to $350,000.
apr: fixed apr of 3.23 to 1.95 percent; students can get loyalty and an autopay discount
credit rating needed: not disclosed
other info or terms: loans available for five, ten, and 15 years
19. Sparrow
company: sparrow is a lending institution that collaborates with several other banks to provide student loans to eligible undergraduate and graduate students.
apr: fixed apr of 2.99 to 14.98 percent; variable apr of .99 to 12.99
credit rating needed: not disclosed
other info or terms: loan terms of five, seven, eight, ten, 12, 15, or 20 years
company: although located in rhode island, this lending institution offers private student loans to students nationwide. They’ll borrow from $1,500 to $45,000 per year.
apr: fixed apr of 2.99 to 4.74 percent
credit rating needed: not disclosed
other info or terms: loan terms of 10 or 15 years; applicants or co-signers must meet income requirements
Conclusion
Choosing the best private student loan requires thorough research and consideration of your individual financial circumstances. Compare interest rates, repayment terms, and benefits offered by different lenders to find the one that best fits your needs. Remember to borrow responsibly, only taking out what is necessary, and exploring repayment options for a smoother financial journey. With the right private student loan, you can focus on your studies and pursue your higher education dreams with confidence