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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.
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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
- Best for Multi-Year Approval: Citizens Bank
- Best for Student Rewards: Discover Undergraduate Loan
- Best for Part-Time Students: Sallie Mae
- Best for Long Grace Period: Earnest
- Best for Member Perks: SoFi
- Best for No Credit: Ascent
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 |
*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.
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.
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.
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.
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.
Best for long grace period – Earnest
Earnest makes an earnest effort to help students repay student loans, including a nine-month grace period and absolutely no fees.
Instead of six months’ grace period, Earnest gives you an extra three months before you have to start paying.
After graduation, most lenders require repayment starting in six months. However, with Earnest, borrowers have up to nine months before repayment begins. This is quite handy for graduates who need more than six months to lock down gainful employment. Furthermore, Earnest’s interest rates are comparable to other lenders in the private student loan market, making it a solid choice for students who need financing for college. And it’s mobile app is pretty robust — borrowers can make and change payment dates, skip one payment a year and check on their balances.
Best for member perks – SoFi
SoFi, is so good — stay on track for student loan payback with great member benefits.
SoFi offers a host of great benefits for members to help manage their student loan repayment and get out of debt faster.
SoFi is all about helping its members manage their finances and pay back their student loans as quickly as possible. The entire application process can be completed online, there are no extra fees associated with any SoFi loans and students get flexible payment options that fit with their budget. Most of SoFi members asked said they would recommend the company to a friend — and with benefits like $400 off SAT/ACT prep courses, this is no surprise.
Best for no credit – Ascent
Scaling intellectual heights without a solid credit score? Rise to the occasion with Ascent.
If you don’t have great credit — or if you’ve got no credit — Ascent student loans are a solid choice.
Ascent is one of the only private student loan lenders to offer loans without a cosigner and for students with little or no credit history. That’s because the company looks at more than just your credit score to approve loan funding. Along with your current school, GPA and major, Ascent also takes into account your predicted future income for its Non-Cosigned Future Income-Based Loan for Undergraduate loan — which is available to juniors and seniors exclusively.
What is a private student loan?
Private student loans are issued by private lenders — these include traditional banks, credit card companies and specialty lending services. Many providers offer loans covering up to 100% of all post-secondary expenses, but different lenders have different rules about exactly how this money can be spent and what type of proof you’ll need to provide.
[Read: 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:
- 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.
- 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.
- 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.
- 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:
- 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.
- 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.
- Select your loan terms. Some companies may give you a variety of options for your interest rate (fixed vs variable) and repayment plan.
- 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.
Too long, didn’t read?
Private student loans offer the benefit of competitive interest rates and flexible terms. Students can also access provider-specific benefits — such as cash back or multi-year approval — but must consider overall rates, term lengths and fees to find the best fit for their finances.
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.