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Best Private Student Loans of April 2021

Students aren’t just leaving school with new friends and undergraduate degrees — they’re also bringing the stress of student loan debt along for the ride. In fact, most students now finish post-secondary school owing more than $30,000 and spend anywhere from 10 to 25 years paying back these loans. While there’s no way to make student loan debt disappear, it’s possible to lower interest payments and reduce total term lengths by finding the best student loans for your finances.

Lending Partner

Min. Loan

Fixed APR

Eligible Degrees

  • College Ave

    Min. Loan

    $5,000

    Fixed APR

    Starting at 3.34%

    Eligible Degrees

    Undergraduate & Graduate

    NEXT

    on lender’s secure website

  • Credible

    Min. Loan

    Varies

    Fixed APR

    2.79% – 9.15%

    Eligible Degrees

    Undergraduate & Graduate

    NEXT

    on lender’s secure website

  • Education Loan Finance

    Min. Loan

    $15,000

    Fixed APR

    2.79%

    Eligible Degrees

    Undergraduate, Graduate & Parent Loans

    NEXT

    on lender’s secure website

  • LendKey

    Min. Loan

    Varies

    Fixed APR

    2.95%–7.63%

    Eligible Degrees

    Undergraduate & Graduate

    NEXT

    on lender’s secure website

  • SoFi

    SoFi LogoSoFi Logo

    Min. Loan

    $5,000

    Fixed APR

    2.99%–6.94% (with AutoPay)

    Eligible Degrees

    Undergraduate & Graduate

    NEXT

    on lender’s secure website

Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

In this article

While public student loans are always an option to help pay for schooling, private student loans offer more choice for students looking to get out of debt and get on with their lives. We used our SimpleScore methodology to compare rates, fees, loan amounts, transparency and perks of the best private student loans of 2020.

The best private student loans of 2020

The best private student loans at a glance

Lender Min. Loan Amount APR Terms SimpleScore
Citizens Bank $1,000 as low as 3.99% fixed; as low as 1.18% variable 5, 10 or 15 years 3
Discover $1,000 4.24%–12.99%1 fixed; 1.24%–11.99%1 variable 15 years 4.6
Sallie Mae $1,000 4.25%–12.59% fixed; 1.13%–11.23% variable 5 to 15 years 4
Earnest $1,000 as low as 3.49% fixed; as low as 1.05% variable 5 to 20 years 4.2
SoFi $5,000 4.23%–11.26% fixed; 1.87%–11.66% variable 5, 7, 10, 15 and 20 years 4.6
Ascent $1,000 6.92%–13.91% fixed; 5.84%–12.37% variable 5, 10 and 15 years 3.6

Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

*Rates accurate as of April 2021

Best for multi-year approval – Citizens One

No one loves their student loans — but Citizens Bank makes it easier to like the little things with multi-year approval.

Fixed APR

as low as 3.99%

Loan Amount

$1K–$150K

SimpleScore

3 / 5.0

SimpleScore Citizens One 3

Max Fixed APR 3

Transparency 4

Loan Amount 1

Citizens Bank offers a low-hassle way for students to pay back loans with multi-year approval. Citizens Bank makes the list of best student loans thanks to its multi-year approval process. After successfully applying for your initial student loan, subsequent term years don’t require re-applying. Instead, Citizens Bank performs a soft credit check each year. And while Citizens Bank does require a cosigner for most student loans, the cosigner can be released from their obligation after 36 months of on-time payments. If the student or cosigner already has an account with Citizens Bank, they’re eligible for a 0.25% interest rate reduction on their private student loan.

Read our full Citizens Bank private student loans review.

Best for student rewards – Discover Undergraduate Loan

If you make the grade, Discover will make with the money and pony up 1% of your loan total as a cash reward.

Fixed APR

4.24%–12.99%1

Term

15 years

Loan Amount

N/A

SimpleScore

4.6 / 5.0

SimpleScore Discover Undergraduate Loan 4.6

Max Fixed APR 3

Transparency 5

Loan Amount 5

Discover’s good grades program makes it possible to get a cash reward2 if your GPA is 3.0 or better.

The Discover brand is typically associated with credit cards, but it also offers low-interest student loans. Discover student loans include the benefit of no origination, application or late fees, and students can apply for funding entirely online. What really sets Discover apart from the competition, however, is its good grades program. For each year students maintain a 3.0 GPA, Discover offers a cash reward of 1% of the total loan amount.

2Get a cash reward on each new Discover undergraduate and graduate student loan when you earn at least a 3.0 GPA (or equivalent) in any academic period covered by the loan. Limitations Apply. Visit DiscoverStudentLoans.com/Reward for terms and conditions.

interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest and highest interest rates offered on the Discover Undergraduate Loan. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of April 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Your APR will be determined after you apply. Learn more about Discover Student Loans interest rates at DiscoverStudentLoans.com/Rates.

Check out our full Discover student loans review.

Best for part-time students – Sallie Mae

Need a part-time partnership? Shake hands with Sallie Mae for full coverage of any courses at a degree-granting institution.

Fixed APR

4.25%–12.59%

Term

5–15 years

Loan Amount

100% of the costs of attendance

SimpleScore

4 / 5.0

SimpleScore Sallie Mae 4

Transparency 4

Loan Amount 5

Sallie Mae earns a spot as one of the best student loan companies because it offers financing for any students.

While many private student loan lenders will cover full- or half-time students at accredited colleges and universities, few lenders offer support for students taking night classes, career certification courses, winter classes or summer courses falling outside typical school structure. Sallie Mae, however, offers up to 100% financing for any student — so long as they’re attending a degree-granting institution. Even better? Interest rates from Sallie Mae slide to the lower end of the scale, making this a cost-effective choice if you’re only taking a few classes.

The Best Student Loans of 2020]

The cost of private student loans varies considerably across providers. Some charge fees for application, origination and even early prepayment, while others streamline the process but have higher interest rates. Some offer perks like cash back, while others make it easy to apply online or offer multi-year approval options to reduce unnecessary paperwork.

How private student loans work

Private student loans are similar to personal loans — applicants will need to provide financial and personal data including their Social Security Number, address and telephone number, current income levels, information about any other debts or loans and the value of any assets.

Next, students need to specify how much money they’re applying to borrow and how it will be used. Then, they’ll need to complete loan application forms — many providers now offer online or mobile options, but some still require paper forms — and then wait for a response from the lender. If approved, students sign all documents, and the funds are disbursed electronically. If rejected, some lenders will provide an opportunity to resubmit documents once specific issues are addressed.

[More: Will Consolidating Your Student Loans Help Your Credit Score?]

Repayment

Most private student loans don’t require repayment until after you’ve completed school. Many offer a grace period during which you won’t be charged interest — six months is the most common, but some providers offer nine or even 12 months depending on the amount of your loan and the program you’ve completed. Private lenders typically offer repayment terms ranging from five to 20 years, but bear in mind the longer your repayment period the more interest you’ll pay over time.

Cosigners

Many students don’t have the income levels, financial history and credit score necessary to qualify for a student loan on their own. As a result, private student loan providers often ask for a cosigner — typically a financially stable parent or guardian — who also provides their personal information and signs the loan documents.

Cosigners are jointly responsible for the repayment of the loan, which means that defaulting on payments could negatively impact their credit score. Some providers do offer no-cosigner loans under specific circumstances, while others allow students to remove cosigners after enough on-time payments are made.

How to choose the best private student loan for you

When it comes to choosing the best student loans, it’s worth approaching the process step-by-step:

  1. Do your research. Evaluate multiple providers and see what specific benefits they offer. Some make it easy to apply and manage your loan online, while others offer cashback rewards for good grades.
  2. Compare interest rates and terms. Check the range of possible interest rates for different private loans for college. If you’re looking for a fixed rate, long term loan with no cosigner, expect higher interest rates. If you’re willing to take on a shorter-term with variable rates, you can often find low-interest student loans.
  3. Calculate the amount you need. Most providers have a minimum lending amount of $1,000 and will cover up to 100% of your school expenses. Others — such as Citizens Bank and Ascent — have maximum amounts of $150,000 and $200,000, respectively.
  4. Consider the grace period. Longer grace periods mean more time to pay back your loan without accruing interest. While six months is the standard, some offer longer (or shorter) grace periods.

Pros and cons of private student loans

Private student loans have a different set of advantages and disadvantages from federal loans. While they can be an effective way to fill a funding gap, even the best private loans don’t come with the same federal protections.

Pros Higher borrowing limits
Lower rates for good credit
Special borrower incentives
Cons Eligibility based on credit history
Ineligible for income-based repayment
No subsidized interest

How to maximize your student financial aid

Before you turn to private loans to help fund your college education, you’ll first want to maximize the financial aid options the federal government offers. The U.S. Department of Education has several grants available to students with financial need. One of the most popular is the Federal Pell Grant, which goes to undergraduate students with exceptional financial need. To be eligible for any federal grant money, you’ll have to fill out a FAFSA (Free Application for Federal Student Aid).

In addition to federal grants, students can apply for scholarships. Like grants, this money doesn’t have to be paid back after you graduate. Scholarships are often based on merit or financial need.

Taking advantage of these other sources of funding can help students reduce the amount of money they have to borrow, and ultimately pay back, from the federal government and private lenders.

[Read: Eight Common Myths About the FAFSA, Busted]

How to get a private student loan

Applying for a private student loan is a fairly quick process. Unlike applying for federal loans, private loan applications don’t require you to fill out a FAFSA. However, you will have to provide financial information so the company can run a credit check.

Here’s what you’ll need to do to apply for a private student loan:

  1. Fill out the application. Providing any necessary personal and financial information. Depending on your credit, the company may either provide you with an instant decision or have someone review your application and get back to you.
  2. Get a cosigner, if needed. Unlike federal loans, private loans require you to meet certain credit qualifications. If the lender doesn’t feel confident you’ll pay back your loan, they may ask you to add a cosigner to your application.
  3. Select your loan terms. Some companies may give you a variety of options for your interest rate (fixed vs variable) and repayment plan.
  4. Sign your loan documents. Once you and the lender have agreed to the loan terms, you’ll have to sign any necessary documents to get the loan money.

FAQ

Your interest rate primarily comes down to two factors: your lender and your creditworthiness. Every lender offers different rates, and you can only get a rate as low as your lender currently offers. Your creditworthiness is the other big factor — the better your credit, the better the rate you can get. Other factors may also include the size of the loan, the repayment plan you choose, and whether you qualify for any rate discounts.

A private student loan can be an effective tool to help you fund your college education. Private loans don’t come with all of the same perks as federal loans. You usually aren’t eligible for income-based repayment plans or federal loan forgiveness. But private loans usually have higher borrowing limits and can help fill the gaps if your federal loans aren’t enough to meet your needs.

1Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest and highest interest rates offered on the Discover Undergraduate Loan. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of April 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Your APR will be determined after you apply. Learn more about Discover Student Loans interest rates at DiscoverStudentLoans.com/Rates.

We welcome your feedback on this article and would love to hear about your experience with the student loans we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com