Best Private Student Loans of 2018
Best Private Student Loans

Getting federal student aid is the best way to kickstart the funding of your college education. Federal student loans, grants, and work-study jobs are all excellent ways to get the money you need to pay for tuition and all of the other expenses that come with college.

But with costs soaring for American students across the country, federal aid often isn’t enough to cover all your needs.

That’s where private student loans come in.

When you’ve exhausted all of your other options and still come up short, working with a private student lender can help you get the funds you need.

female student studying

They’re not as borrower-friendly as a federal student loan, but you can still find some with attractive rates and terms. Here are our top picks for best private student loans to help your search get started.

Credible

CredibleCredible is a student loan marketplace that helps you find multiple private financing options for your college tuition — all using a single application.

Rates are also extremely competitive through Credible’s network of student lenders. When picking a fixed rate, you could find deals as low as 3.5% APR. Comfortable with a variable interest rate? Those start at just 2.14%.

Another perk of using Credible to find your student loan is to take your pick from a variety of repayment options. You can choose deferred payments, interest-only, and others. It just depends on what you need.

In addition to matching you with loan originators, you can also find refinancing options through Credible. In fact, they claim that their users average a savings of $18,668 when going through this process. That’s a lot of money saved!

Credible’s network also allows the option of applying for a student loan or refinance along with a cosigner. So if your credit history is poor or simply limited, you may qualify for better terms with the help of a cosigner. Once you start making on-time payments, you can typically release the cosigner after 24 to 36 months.

Read our full review of Credible

SunTrust

SunTrustFor flexible repayment terms and competitive interest rates on student loans, SunTrust is a strong contender.

You can borrow between $1,001 and $95,000 over a 7, 10, or 15-year term. And with deferral and interest-only payments available while you’re in school, you don’t have to worry about stretching your pennies too far until you graduate.

When you do, you could also qualify for a 1% deduction on your principal balance. On a $50,000 private student loan, that would amount to $500 — not bad!

It’s a nice benefit assuming all other things are equal (particularly your APR). Once you start making regular payments, you could also get up to a 0.5% discount on your interest rate, which is one of the highest we’ve seen.

So what exactly are SunTrust’s interest rates for student loans?

For a fixed loan, the range is 4.75% to 11.5% APR. For a variable loan, the range is 3% to 10.05% APR. You’ll likely need a cosigner, particularly for undergraduate loans but there’s a simple release process once you’ve made enough consecutive payments on time.

Read our full review of SunTrust

Discover

DiscoverNot only does Discover offer undergraduate, graduate, and parent loans, it also rewards students for academic achievement.

You can earn a 1% cashback reward on each new loan when you earn a 3.0 GPA or higher. Discover also boasts no fees, including no late fees.

So what are the specifics for a Discover loan?

Rates start a bit higher than some of the other private lenders. Fixed loans are between 6.24% and 12.99% while variable loans are between 3.87% and 11.12%. Despite slightly higher fixed rates, you do get some flexible repayment terms, including forbearance for a financial hardship and the ability to temporarily reduce your payments.

Another unique benefit is that Discover gives you ongoing access to loan specialists who can assist you at any time, day or night. So if you think you’ll have questions or feel insecure in the student loan process, this could be a worthwhile option for you.

Read our full review of Discover

Sallie Mae

Sallie MaeOffering a broad range of student loans, Sallie Mae can fit a lot of different needs. You can get private student loans for both undergraduate and graduate programs, as well as parent loans if they’d rather take on the financial burden instead of the student.

What kind of interest rates can you expect?

For fixed-rate loans, interest rates start at 5.75% and go up to 12.87%. Variable loans come with rates between 3.25% and 12.62%. If you can get on the lower end of that fixed rate range, it’s just about 1.25% more than a direct federal student loan.

When you’re in school, you can defer payments until after a six-month grace period upon graduation, but interest still accrues. Alternatively, you can make interest-only payments during your school years to help lower the financial burden.

Another option is to make a fixed payment during school and your grace period, which can save you money over time compared to the deferred payment option.

For example, a $25 monthly payment during that period could save you 12% compared to deferring payment altogether. It’s easy to apply for any student loan online with Sallie Mae, and you can receive a decision in about 15 minutes.

Read our full review of Sallie Mae

SoFi

SoFiSoFi doesn’t provide loans directly to students, but they do offer parent loans. Fixed rates are low, starting at 4.25% APR and can go up to 8% APR.

Variable rates, on the other hand, range between 3.69% and 7.12%. These rates all assume that you’ve signed up for autopay, which gives a discount when you enroll. If you don’t, expect to pay slightly more on both types of rates.

According to SoFi, parents can actually save with their loan product compared to the Federal Direct Parent PLUS loan. Not only are their rates lower, they also don’t charge an origination fee. However, SoFi doesn’t offer any type of income-contingent repayment plan as the federal PLUS loan does.

Unlike a typical student loan SoFi’s parent loans don’t include any type of deferment period, so you’ll begin making payments as soon as you get funded. The minimum borrowed amount is $5,000 and goes up to the total cost of attendance.

If you ever need another kind of loan offered by SoFi, you will receive a member rate discount of 0.125%. Another member perk is that you receive access to wealth advisors and career coaches.

Read our full review of SoFi

Ascent

AscentFor flexible private student loan options, consider Ascent. You can get either a tuition loan that requires a cosigner, or an independent loan that’s just for students, either undergraduate or graduate.

Rates start off quite low for private loans, with fixed loans beginning at 7.21% and going as high as 13.91%. For a variable loan, expect to pay between 5.64% and 12.94%.

You can also receive a 0.25% reduction in your interest rate if you sign up for autopay on your monthly bill. Loan amounts range from $2,000 up to your cost of attendance, although your total loan amount can’t exceed $200,000.

This is actually a pretty low minimum, so if you need a smaller private student loan to bridge the gap in your financing, Ascent may be a good fit.

Terms last either 5, 10, or 15 years but choose carefully because you can’t change the timeline once you receive the funds. While you’re still in school, you can choose to defer payments (with interest accruing, of course) or make interest-only payments.

Want to cut back on the amount of interest you pay over time?

Ascent also offers the ability to do a $25 minimum payment plan while you’re in school. It’s not a huge financial burden but can save you more compared to deferred payments.

They also just launched a 1% Cash Back at Graduation program.

Worried about your future job prospects? After graduation, you can apply for financial hardship forbearance if needed — something many private lenders don’t offer.

Read our full review of Ascent

CommonBond

CommonBondCommonBond actually allows for student loans designed specifically for students, not their parents. You can find loans for both undergraduate and graduate programs, catering to a larger amount of borrowers.

Since the loans aren’t for parents with more established credit and higher income levels, CommonBond’s rates are slightly higher.

How much higher?

Fixed rates start at 5.48% and cap out at 9.67% while variable rates start at 3.87% and go to 8.95%. Still, compared to the current federal student loan rates for graduate loans, you might actually get a good deal.

Another factor to consider when applying for a CommonBond student loan is the fact that you’ll need a cosigner. Once you make two years of payments, however, you can apply for a release so that you’re the only borrower on the loan.

You’ll receive a six-month grace period after graduation, but your loan still gains interest during this time.

If you ever experience economic hardship, you may also apply for forbearance, which is a pretty nice perk for a private lender. While you never want to have to use that type of protection, it’s good to have the option in your back pocket.

Read our full review of CommonBond

When to Use a Private Student Loan

Step 1: Apply for Federal Aid

To make sure you’re getting the best funding for your college education, make sure you fill out the Free Application for Student Aid (FAFSA). You need to do this each and every year you’re in school, not just for your freshman year.

Applying for the FAFSA offers need-based financing and can include several different types of aid. Grants are available, which don’t need to be repaid as long as you continue to meet their eligibility criteria. This is obviously the best choice because it’s free money! But of course, it won’t cover your total cost of attendance.

Step 2: Apply for Federal Student Loans

The federal government also offers student loans. While many private lenders are managing to offer interest rates that are somewhat competitive with federal loan rates, they can’t beat the flexible repayment options.

There are a variety of income-based repayment plans, as well as student loan forgiveness for certain types of professions. A final type of aid offered by the federal government is the work-study program.
This lets students qualify for (usually) on-campus part-time jobs that are related to their area of study. You can also apply for scholarships through your college, corporations, and community organizations.

Step 3: Apply for Private Student Loans

Once you’ve exhausted all of these options and still come up short for your college funds, then it’s time to consider a private student loan.

It seems like a lot of work to apply for each type of student aid, but it’s an extremely important process.

Borrowing tens of thousands of dollars may not seem like a big deal right now, but those monthly bills are going to stick with you for a long time. Give yourself the time and space to maximize your aid so that you can minimize your financial load in the future.

How to Pick the Best Private Student Lender

Determine Your Direct Needs

Once you determine that you do in fact need a private student loan to meet your college costs, make sure you make the right choice. Start by figuring out if you need a private student loan that goes under your name or your parents.

For direct student loans, decide if you’ll have access to a cosigner (like a parent) or if you’ll take on the burden entirely on your own. Those decisions alone can narrow down your lender.

Next, think about what your income will be like when you’re attending school. Will you have a part-time job or ample savings on hand to take care of any payments due? If not, you may need to find a lender who offers deferred payment, even if it means accruing more interest.

Gauge Your Future Needs

You may also be interested in future forbearance options. No one wants to imagine themselves as going through financial hardship once they’ve earned their degree, but it’s a very real possibility for anyone.
If you don’t have a strong financial safety net, you may benefit from choosing a private lender that has some type of financial hardship repayment flexibility.

Predicting your future needs for student loan repayment is like gazing into a crystal ball, which we simply can’t do. So the best way to tackle the issue is to hope for the best but prepare for the worst.

You likely don’t know what your job situation or income will be like by the time you graduate, so try to buffer in as much flexibility as possible. Also be careful with your spending and refrain from racking up unnecessary debt. Your future self will thank you!

Picking the Best Private Student Loan

Not all student lenders are created equally so be sure to shop around before choosing one to work with. The things you’ll want to compare are fees, interest rates, and loan terms. Some lenders may charge an origination fee, which can decrease the funds you actually get from your loan amount.

The interest rate can be either fixed or variable. If you choose a fixed rate, you’ll never have to worry about your payments changing if you keep on top of your payments. With a variable rate, your interest (and consequently, your monthly payments) can change regularly.

The loan term determines how long you’ll repay your private student loan. A shorter term saves you in interest over time but also results in higher monthly payments. You can always refinance if your financial situation is different than you expected after you graduate.

Other Eligibility Factors for Private Student Loans

Another factor to consider when researching student lenders is what enrollment and academic standards they require. You may need to maintain a certain enrollment status such as half-time or full-time to be eligible, for example. Alternatively, you may have to achieve certain academic standards in order to keep receiving student loans each year.

Also, find out how the student lender treats repayment while you’re still in school. Sometimes you can defer payments altogether, but interest keeps accruing. That means you’ll graduate with a higher loan balance than what you started with.

Another option is to make interest-only payments, which can maintain your principal balance. Alternatively, you may be able to choose a fixed amount to pay each month that fits your budget while in school, such as a $25 monthly payment.

How to Apply for Private Student Loans

Applying for a private student loan is quite simple. Once you’ve narrowed down your list of lenders you’d like to work with, you can generally start the application process online. Expect to submit some basic personal information as well as details regarding your upcoming education costs.

You’ll most likely need the following information:

  • Contact information
  • Social security number
  • School and program information, including your expected graduation date
  • Requested loan amount and other financial aid you’ve received
  • Current financial information, such as income
  • Personal contacts
  • Cosigner information

If you do apply with a cosigner, most lenders ask for their contact information and then reach out to the cosigner directly in order to get more details from them.

Once you submit your application, the lender will review and also pull a credit report on you and, if applicable, your cosigner. You’ll then receive a decision on your application. If you’re approved, you’ll see one or more offers.

You can compare how the interest rate and monthly payment amount change with different loan term and repayment options. Pick one, sign the loan agreement, and your lender will disburse the funds directly to your school.

Frequently Asked Questions

What is a private student loan?

A private student loan is a loan made by either a bank, credit union, or state-based organization. It’s not made by the U.S. government and does not require a FAFSA application.

What is the difference between federal and private student loans?

A federal student loan is a loan given out by the U.S. government. Payments aren’t due until after you graduate, and interest rates are fixed. No credit check is ever required (except for PLUS loans).

Multiple repayment plans are available and borrowers can change their payment plan if needed. Loan forgiveness is also possible after a certain amount of years has passed if the borrower works in public service.

Private student loans are made by banks, credit unions, or state-based organizations. Terms and rates are set by the lender. Payments are often required while the borrower is still in school, and although payments can be deferred, interest often still accrues. This increases the principal balance. As for interest rates, they can either be fixed or variable.

Another unique trait is that private student loans often require a cosigner, which often lowers the interest rate. Refinancing is always possible with a private student loan, and doing so can also possibly lower the interest rate as well as the monthly payment.

How do private student loans work?

Private student loans don’t require the student to submit a FAFSA application prior to applying. If approved, the funds can be used for any education-related expense.

Payments begin after graduation or when enrollment drops below part-time. For most lenders, the grace period for either option is 6 months. After the six month grace period has elapsed, students are expected to make payments in full.

Depending on the lender, you may have a few payment options while you’re still enrolled in school. Usually, you have the option to defer until you have graduated, make interest-only payments, or make full payments while you’re still enrolled. Many borrowers choose to make interest-only payments so their loan principal is smaller when they graduate.

What is the difference between certified and non-certified student loans?

A certified loan is distributed by a lender who talks directly with the borrower’s chosen college about his or her loan. Funds are sent directly the college, and any remaining amount is then sent to the borrower by the college. Certified loans usually have lower interest rates than non-certified private loans and are often tax-deductible.

Uncertified private student loans are distributed by lenders who are not in any contact with the borrower’s school. All money goes directly to the borrower to be used at his or her discretion. Non-certified private student loans usually have higher interest rates than certified private student loans and are often not tax deductible.

How do I find a private student loan lender that works with my school?

The simplest thing to do is call your school’s financial services department and ask. Some schools have links to certified lenders on their websites, but they don’t always. If they don’t, call or email the financial services department for a list of certified private student loan lenders.

What are the advantages of applying for a private student loan with a creditworthy cosigner?
There are two advantages. The first advantage is that a cosigner can help you qualify for loans for which you would normally be denied. The second advantage is that a cosigner can help you get a better interest rate, which will save you a lot of money over time.

If you don’t like that your cosigner’s credit score is at stake, most lenders allow for a cosigner release after a certain amount of on-time payments are made during the repayment period.

If I applied with a cosigner, how long are they responsible for my loan?

It varies from lender to lender. Some lenders allow for cosigner release after 24 months of on-time payments, whereas others want 36 months. In addition to on-time payments, some lenders also require that your gross annual income reach a minimum amount when compared to your loan principal. This is not as common as the requirement for 24 months of on-time payments.

Can I get a private student loan without a cosigner?

You can if you have a strong credit profile. If you’ve been in the workforce and made monthly payments on credit cards or car loans, it’s very possible you won’t need a cosigner. However, students who are fresh out of high school and have a zero payment history will more than likely need a cosigner to take out a private student loan.

Do private student loans build credit?

Absolutely. Any loan that you make regular monthly payments on will help you build a stronger credit profile.

How long does it take to get a student loan?

That depends on whether the loan is a certified or a non-certified student loan. A certified loan first needs to be distributed to your school, and it can take 1-2 weeks before the remaining funds will be sent to you.

Non-certified private student loans can be obtained much faster, sometimes in as little as a few business days. Regardless of how quick your loan will be processed, always start loan shopping as early as you can.

How much can you get in private student loans?

It depends on the student loan lender. Some of the larger lenders can guarantee total cost of attendance, no matter what it is. Smaller lenders usually have a cap, which is usually around $100,000 to $150,000. Verify with your school what the total cost of attendance will be, and then use that number when lender shopping.

How is the interest calculated on my student loans?

Student loan interest is compounded daily. So each day a little bit of interest is added to your loan principal. With every monthly payment you make, interest is the first thing to get paid before any amount goes towards your loan principal.

To figure out your daily interest rate, first, take your rate and divide it by 365. If your rate is 4.5%, your daily interest rate would be .012%. That amount on a $20,000 loan equals out to $2.40. So for the next day, your loan principal is then $20,002.40, which is then taken into account when calculating interest accrual.

How do I consolidate private student loans?

You must apply with a lender who offers loans large enough to pay off your existing student loan debt. If your credit profile is strong, you may qualify on your own, but another option is to use a cosigner for a better rate and term. Many student loan lenders offer refinancing options.

Other types of loans you can use include personal loans, home equity loans, and consolidation loans. Before you start applying to lenders, call your student loan lenders and ask what the payoff amount is. Add them all up. The total is what you need to borrow from a new lender.

The benefits to consolidating your student loans include:

  • One monthly payment
  • Lower monthly payment
  • Possible lower interest
  • Possible better loan term

Can I consolidate my private and federal student loans together?

Yes, you can, but it may not be to your advantage to do so. If you consolidate your federal loan with your private student loans, you may miss out on potential student loan forgiveness, lower interest rates, and federal student loans’ unique payment options.

If your credit score is strong, it may very well be in your interest to do so, however, since private student loans revolve around credit profiles and scores. It’s very possible to get a better rate than what you originally received on your student loan — if you don’t mind giving up the benefits that come with federal student loans.

How can I refinance my private student loans?

Refinancing is similar to consolidating. To refinance, you’ll want to have a strong credit score and report. If your credit profile is weak, it’s unlikely refinancing will be to your advantage.

However, if you do have a good credit score, search for a lender who offers student loan refinancing. Compare their rates to what you currently have, and make sure your remaining principal doesn’t exceed their loan limits.

When should I apply for private student loans?

It’s always best to apply as soon as possible so you don’t miss any deadlines your school has, regardless of whether you’re working with a certified or non-certified lender.

Sometimes approval can take only minutes, while in other cases it can take as long as a few weeks. If you plan to apply with a cosigner, make sure you give yourself and the banks a bare minimum of at least a month. This gives them enough time to request additional paperwork they may need and gives you enough time to find and collect it.

Even if you don’t plan to apply with a cosigner, give yourself over a month for any potential back and forth with the lender. It’s also wise to wait until you’ve received potential financial aid results from your FAFSA application.

How do private student loans get disbursed?

It depends on whether your lender is certified or non-certified with your school. If it’s certified, your lender will pay the school directly, and your school will send you any remaining balance once tuition and fees have been taken out.

If you’re working with a non-certified lender, the check will be sent directly to you, either through direct deposit or mail.

What are my repayment options?

Repayment options depend on the lender you choose. Overall, there are four repayment plans that most lenders tend to use:

  1. Deferment: With a deferment, the borrower pays nothing while he or she is enrolled in school. Interest still accrues, and the loan balance grows a little bit every day.
  2. Partial Interest: Some lenders offer a flat rate monthly payment that covers part of the monthly interest. This keeps the loan balance growth to a minimum.
  3. Interest Only: The borrower pays only interest each month. This keeps the loan balance the same until the borrower is able to make full principal and interest payments.
  4. Principal and interest: This is a full monthly payment, which is the same payment the borrower would make after he or she graduates or drops below part-time enrollment.

How can I pay off my student loans faster?

There are a variety of ways to do this.

  1. Make interest or interest and principal payments while you are still enrolled. This prevents your principal from growing while you are in school.
  2. Make an extra student loan payment whenever you can. To do this, always pay your minimum monthly payment. After that, try to set aside as many extra payments as you can. Many people like to make an extra payment every three months, which accounts for a total of four extra payments each year.

    Before you make the extra payment, be sure to write your lender and explain what you are doing with the extra money. If they don’t get the letter, they may just assume the money is to be put towards your next monthly payment rather than going wholly towards your principal.

  3. Make a large lump sum payment. Many people do this by putting their tax returns towards their student loans.
  4. Pay more than the minimum each month. Pay more than the minimum each month and your principal will go down more quickly. Interest accrues daily and is based on your principal. The sooner you principal goes down the sooner you’ll start paying less in interest.
  5. Refinance: By refinancing, you may get a lower interest rate and better loan term.

Are there options for private student loan forgiveness?

Unfortunately, private student loan forgiveness does not exist. Yes, some employers may pay off your student loan for working with them for a set period of time, but these jobs are in hard-to-fill areas. Other options that exist may destroy your credit score and profile and are not recommended.

What happens if you default on private student loans?

Your credit score is negatively impacted, first and foremost. From there the lender may seek repayment from your cosigner if you have one. More than likely, you’ll start receiving calls from a collection agency. It’s even possible the lender could demand you repay the full amount, take you to court, garnish your wages, or seize any assets you may have.