Private Student Loans - Best lenders, interest rates and repayment options

A quick and simple introduction to private student loans followed up by some of the important lenders like Salie Mae, College Ave, Citizen One and a few others that provide loans with the best interest rates, terms, and repayment options.

Updated by Sharan Kumar on 4th July 2019

A Private student loan is a good way to cover costs for students. It has usually a less tedious process to apply and get one since it is handled by private banks, credit unions and lenders other than these.

It is a non-federal loan used to cover education-related expenditure. It may be advised to take these loans, once individuals have already exhausted other forms of free and federal financial aid. These loans are typically based on good credit history and verified proof of income or employment history.

The loans are given based on credit and are usually easier to get if applied with a co-signer as most students don't have a good credit score or a long enough history.

They have better limits than the standard federal loans hence they are the go-to option after exhausting all other federal loans, grants, and scholarships.


Table of Contents


Top 10 Private Student Loan Banks

The places where one can find the best private student loans are from the following -

The values of these factors may change on a yearly basis.

Lender Known for Interest (Fixed and Variable ) Loan Terms (years )
Sallie Mae Flexible options F- 5.74% - 11.85%, V - 4.62% - 11.47% 5,15
College Ave Vast repayment plans F- 5.29% - 12.78%. V - 4.20% - 11.44% 5,8,10,15
Citizens Bank Major bank corp F- 5.25% - 12.09%, V- 4.47% - 12.34% 5,10,15,20
Ascent Undergrads and 2X Max loans F- 5.38% - 14.46%, V - 4.26% -  13.26% 5,10,15
CommonBond Choice of repayment and interest rates F- 3.67% - 7.25%, V - 2.7% - 7.44% 5,7,10,15
Sun Trust 2% principal reduction on graduation F- 5.35%-14.05%, V- 4.38% - 13.38% 7,10,15
LendKey Community backed lenders F - 3.49%-8.93%, V- 2.70%-8.96% 5,7,10,15,20
Discover Good grades crash rewards F-5.99%-13.99%, V- 4.49%-13.49% 15,20
Earnest Refinancing options F -3.89%, V- 2.55% 5,20
Laurel Road Refinance/Consolidation F- 3.50%-7.02%, V-3.23%-6.65% 5,7,10,15,20

For Sallie Mae, you would require a co-signer in 12 months, for Citizens Bank in 36 months, for Ascent in 24 months, SunTrust in 36 months, and LendKey in 12. 


Difference between a Federal and a Private student loan

Federal and private student loans differ in many ways such as their lenders, the interest rates, the approval basis, the cosigner requirement and many more. We shall discuss a few in the following lines - 

Factors Federal student loans Private student loans
Lenders Federal Government Private banks, Credit Unions and others
Interest rates Fixed Fixed and Variable
Repayments options Not until you graduate While attending school or sometimes after graduation
Approvals based on FAFSA and expected family contribution Credit scores, income, debt, school, the field of study and other factors
Co-signer requirements Not required Mostly expected

Factors of differentiation between Federal and Private loans

Lender

Federal loans are lent out by the Federal government.

Private loans are lent out by Private banks, Credit unions, and other financial institutions. 

Interest rates

Federal loans usually have a fixed rate of interest.

Private loans have both fixed and variable rate of interest.

Repayment options

Federal Loans do not require repayment until after you graduate.

Private loans may be required to be paid while you attend a school or not until after graduation.

Approval is based on -

Federal loans are approved based on FAFSA and expected family contribution (EFC).

Private student loans are approved based on Credit scores, income, debt, school, occasionally field of study and other associated factors.

Co-signer requirements

Federal loans do not require a co-signer.

Private loans or most of them expect you to have a co-signer.


Private student loan lenders

Sallie Mae

Sallie Mae offers private student loans for undergraduate, graduate students, and parents.

It has a shorter co-signer release term. There is a 0.25% interest rate reduction available with automatic payments.

  • No application, origination, disbursement or prepayment fees are required.

  • Borrow up to 100% of the school's certified cost of attendance.

  • Free FICO credit score reports are available.

  • Fixed APR - 5.74% - 11.85%

  • Variable APR - 4.62% - 11.47%

  • Loan Terms - 5 to 15 years

 

[ Learn more: Sallie Mae student loans review ]

 

  • Repayment while in school - Interest-only, fixed monthly payments, or full deferment until graduation.

  • Co-signer release - Yes, after 12 on-time monthly payments.


College Ave

College Ave is one of the student loan lenders that offer student loans for undergraduates, graduate students, and parents, and offer student loan refinancing.

They have a short and easy application form.

  • Undergrad, graduate and Parent loans are available.

  • There is a 0.25% interest rate reduction for auto debt plans while in school.

  • No application, origination fee or prepayment fees.

  • Minimum loan amount of $1,000 and a maximum loan amount equal to the cost of attendance certified by the school of attendance.

 

[Also Read: College Avenue reviews 

 

  • Fixed APR - 5.29% - 12.78%

  • Variable APR - 4.20%-11.44%

  • Loan terms - 5, 8, 10, or 15 years

  • Repayment while in school - Full payments, interest only, fixed monthly, full deferment until graduation

  • Co-signer release - N/A.


Citizens Bank

Citizens One is the student loan division of the well-established Citizens Bank. It offers undergraduate & graduate student loans, plus refinancing of already existing student loans.

It has great customer service. They have the availability of undergraduate, graduate, and Parent loans.

  • Up to 0.5% reduction in interest rates for making automatic payments and having a citizens bank account.

  • No application, origination or prepayment fees.

  • Minimum loan to refinance - $10,000

  • Up to $90,000 for undergraduate student loans and up to $295,000 for graduate student loans.

  • Refinancing and consolidation of federal and private student loans with an Education Refinance Loan from Citizens Bank.

  • Fixed rate student loan refinancing featuring an interest rate as low as 3.90% to 9.99% APR with automatic repayments for eligible candidates.

  • Variable interest rates range from 3.00% - 9.74% APR with automatic repayments and will fluctuate over the term of your loan with changes in the LIBOR rate.

 

[Learn more on Citizens Bank student loans and review

 

  • Loyalty discount - 0.25 percent point interest rate reduction on a new Education Refinance Loan if you or your co-signer (if applicable) has a qualifying account in existence in our system at the time of application.

  • Automatic payment discount - 0.25 percent interest rate reduction by authorizing our loan servicer to automatically deduct your payments each month from any bank account of yours.

  • Co-signer release - Co-signer may be released from loan responsibility right after making 36 consecutive, on-time principal and interest payments.

  • No application, origination or disbursement fees

  • Fixed APR - 5.25% - 12.09%

  • Variable APR - 4.47% - 12.34%

  • Loan terms - 5, 10, 15, 20-year repayment term plans

  • Repayment while in school - Full payments, interest-only, full deferment until graduation.


Ascent

As an online lender Ascent offers two private student loan plans - One for borrowers who have a co-signer and one for independent students who do not have a co-signer or certified credit scores.

They offer Undergraduate and Graduate student loans.

  • 1% of principal balance cash back post-graduation.

  • 0.25% interest reduction for automatic repayments.

  • No application, origination or prepayment fees.

  • Loans amounts between $2,000 and $200,000.

  • Fixed APR - 5.38% - 14.46%

  • Variable APR - 4.26% - 13.26%

  • Loan terms - 5, 10, or 15 years

  • Repayment while in school - Interest-only, fixed monthly payments, or full deferment until graduation.

  • Co-signer release - Yes, after 24 on-time monthly payments

[ Read more on Ascent student loans here ]


Common Bond

Refinancing and consolidation of private and federal student loans are done here. 

The refinancing options are available for undergraduate, graduate, and Parent PLUS student loans.

  • 0.25% interest rate reduction with the use of automatic payments through the ACH.

  • Unemployment protection loan payments are paused and it helps able graduates find new jobs and also hire them for short-term consulting projects.

  • Access to CommonBond Community Borrowers comes with perks such as access to events in their cities, networking opportunities, and lifestyle perks.

  • Social good for every fully funded degree through CommonBond's loan program, it also funds the education of a student in need abroad for a year through Pencils of Promise Division.

 

[Learn more about CommonBond student loans, repayment plans and more

 

  • No application, origination or disbursement charges.

  • Fixed APR - 3.67% – 7.25% APR refinancing with automatic repayments.

  • Variable APR - 2.70% – 7.44% APR refinancing with automatic repayments.

  • Mixed APR - 4.35% – 6.30% APR hybrid rate refinancing with automatic repayments.

  • Loan term - 5, 7, 10, 15, 20 year repayment terms.


SunTrust

SunTrust offers private student loan options for undergraduate and graduate student loan borrowers with good credit or a co-signer with good credit and stands out for a wide variety of repayment choices.

  • 2% principal reduction after graduation.
  • Undergrad, Grad and Grad Business loans available.

  • No application, origination or prepayment fees.

  • Loans amounts range from a low amount of $1,001 to $65,000 per year (aggregate max of $150,000)

  • Fixed APR - 5.35% - 14.05%

  • Variable APR - 4.38% - 13.38%

  • Loan terms - 7, 10, or 15 years

  • Repayments while in school - Full payments, interest-only, fixed monthly, full deferment

  • Co-signer release - Yes, after 36 on time monthly payments


LendKey

There are greater chances of loan approval with LendKey’s network of not-for-profit lenders.

You get to check real refinancing rates in 2 minutes with one form with no impact on your credit score.

There are no handoffs – You will be with their fully trained customer service team from the point of your application to the point of your final payment.

  • Refinancing and consolidation of private and federal student loans are possible.

  • Available for both undergrad and graduate school student loans.

  • 0.25% interest rate reduction is made available to all borrowers while making automatic payments.

  • Unemployment protection – The longest period of 18 months available of paused loan payments while in-between jobs.

  • Minimum balance to avail refinance - $5,000

  • Minimum income requirement of $24,000/year

  • No application or origination fees, and no prepayment fees

 

[Also Read: LendKey student loan reviews

 

  • Keep payments low with interest-only repayment available for the initial four years of some 15year term loans for payment during school terms.

  • Fixed APR - 3.49% to 8.93% APR with automatic payment options

  • Variable APR - 2.70% to 8.96% APR with automatic payments options

  • Loan term - 5, 7, 10, 15, 20-year repayment plans

  • Cosigner release - Yes, available after 12 on-time payments.


Discover

Discover offers student loans and student loan refinancing for undergraduates and graduate students. Discover’s flexible payment options for borrowers experiencing financial hardship are exceptional and worth making a note of.

They offer undergraduate, graduate, and professional student loans.

  • 0.25% interest rate reduction while enrolled in automatic payments.

  • No application, origination or prepayment fees.

  • Cover up to 100% of your school-certified college expenditure.

  • Fixed APR - 5.99% - 13.99%

  • Variable APR - 4.49% - 13.49%

  • Loan terms - 15 or 20 years

  • Repayment while In school  - Interest-only, fixed monthly payments, or full deferment until graduation.

  • Co-signer release - No


Earnest

Earnest is a good bank that is known to have great customer service and value its relationship with them very high.

Refinancing is available for undergraduate or graduate student loans from both private and federal lenders.

There are no specific income requirements as Earnest looks at thousands of data points to evaluate financial responsibility and then arrives at the lowest possible rate.

  • Commitment-free 2 minute rate checkups.

  • Earnest will never pass you off to a third party. Their on-site team is your customer service partner for the entire life of your loan.

  • No origination fees, application fees, or prepayment fees.

  • Must have completed undergraduate or graduate degree or expected graduation within 6 months of application.

  • Must be currently employed or with an employment offer starting within 6 months of application.

  • Must be a U.S. citizen or permanent resident.

  • Fixed APR - 3.89% APR fixed for automatic repayment plans

  • Variable APR - Rates start at 2.55% APR variable for automatic repayment plans.

  • Loan term - Wide flexibility to pick any monthly payment and term between 5 and 20 years – saving you more than standard rates and terms comparatively

  • Ability to change your loan as your life and needs change – refinance your loan for free, change payment dates, can even skip a payment once a year and make it up later.

  • Unemployment protection to stop your monthly payments when in-between jobs.


[ Read more on Earnest student loans ]


Laurel Road

The refinancing and consolidation of private and federal student loans are done here, all under one roof. You must have completed an undergraduate or graduate degree program which qualifies.

It also allows parents of Bachelor degree students the opportunity to refinance student loans they took out to help finance their children's education as long as their child has graduated and is currently working.

 

[Also Read: Laurel Road student loan refinancing review

 

Parents can refinance their Parent PLUS loans in their own name or their child's name.

  • No origination fee or prepayment fees

  • 0.25% Interest rate reduction with automatic payments via ACH

  • Max variable rates capped at 9% for 5-10 year terms.

  • For greater than 10 year term, the max rate cap is 10% APR

  • Fixed APR - 3.50% – 7.02% with automatic repayments in fixed rates

  • Variable APR - 3.23% – 6.65% with automatic repayments in variable rates

  • Loan term - 5, 7, 10, 15, 20, year repayment terms.


SoFi

SoFi offers to refinance and also the consolidate your private and federal student loans.

A student must have completed an eligible undergraduate or graduate degree program.

It is available for both undergraduate and graduate students.

  • No origination fees or prepayment penalties.

  • Unemployment protection – Loan payments are paused and they help find a new job.

  • Career support – Complimentary coaching for SoFi members.

  • Entrepreneur program – Qualified applicants can avail loan deferrals and mentorship.

  • Fixed APR - 3.90% APR to 8.02% APR (with autopay) fixed rates.

  • Variable APR - 2.56% to 7.30% APR  variable rates, capped at 8.95% / 9.95% APR depending on term of loan.

  • Loan term - 5, 7, 10, 15, 20, year repayment plans.


PNC Bank

A 0.50% interest rate reduction on automatic payments for the duration while you attend school.

Loans available for Undergraduate, Graduate, Health Professionals, Residency, and Bar Study.

  • No application, origination or prepayment fees.

  • Borrow up to $40,000 for undergrads and up to $65,000 for grads per year.

  • Fixed APR - 5.58% - 11.79% APR

  • Variable APR - 4.94% - 10.10% APR

  • Loan terms - Up to 15 years

  • Repayment while in school - Full payments, interest-only, or full deferment

  • Co-signer release - Yes, after 48 on-time monthly payments.


How to get a Private student loan?

Requirements for applying to the best private student loans can be pretty easy. Most private student loan lenders these days prefer that you apply online. Many are offering mobile-friendly applications for easy access for you on the go.

Typically, after choosing a lender, you will be asked to first fill out some basic personal and educational information. If you are electing to use a co-signer, they may have to provide some information about themselves as well.

In general, you will need to have at least an average credit score of close to 700 (on a scale of 300 to 850). Otherwise, you will likely need a co-signer to qualify for a private student loan.

If you are meeting the initial requirements, you will next most likely be required to upload documents so as to allow the student loan lender to determine your eligibility and interest rates.

Within a few days or sometimes within a few hours, the lender will inform you if you are eligible and, if so, what interest rates and repayment terms you can choose from for your loan.

The last step is to sign the Master Promissory Note. This is a legally binding contract that requires you to pay back the student loan, over time, with interest.

After signing this note, your student loan funds will be sent to your school for disbursement to you.


What should a good private loan offer?

  • No application, origination, prepayment or late fees.

  • Provide highly competitive interest rates.

  • Supplement and help with other financial aids to meet the total cost of your education.

  • Help pay for your undergrad, grad school and professional degrees as well as career training.

  • Cover any education-related expenses including books, computers and more. 

  • Also, aid in building your credit, especially with a credit-worthy co-signer.

  • Make a co-signer release available

  • Provide a variety of repayment plans.


How do I choose a Private student loan?

Compare the offers from various lenders including banks, credit unions, and online lenders to find the lowest interest rate. Depending on the lender, you may be given the choice to choose a fixed or a variable interest rate.

A fixed rate stays the same all through the life of a loan. A variable rate may start out lower than a fixed rate but could go up or down over time depending on economic conditions.

Consider any borrower protections your private lender give you, including deferment and forbearance, as well as repayment options.

You may also have the option to choose your loan term, which implies you could pay off your loan faster and with less interest by making more payments over shorter periods of time or make fewer payments with more interest over a longer period of time.


What is co-signing a Private student loan?

A co-signer is a person who signs a loan agreement in addition to the primary borrower. He/She agrees to continue paying the loan if the borrower cannot do so or ceases to do so, regardless of the reason. They must have a higher credit score than the borrower to ensure they have a positive impact on the application.

Some lenders do offer co-signer release programs after a certain number of on-time payments are made usually mentioned in terms of number of consecutive timely monthly payments made.

Benefits of using a co-signer

  • The loan becomes more likely to be approved

  • The borrower receives a lower interest rate

  • You have someone to motivate you to stay on top of loans

  • The cosigner may be discharged later through refinancing the loan

Risks of using a co-signer

  • The credit of primary borrower and co-signer will both be affected if payments happen to miss deadlines.

  • Co-signer's retirement could be delayed until released.

  • They will be required to make payments if the primary borrower does not make them.


Will I need a co-signer for a Private student loan?

If you have no income and either bad or no credit, you’ll need a co-signer to get a private student loan. Without bills in your names, such as a credit card, car loan or utility, you have no way to show that you can pay bills on time.

Your co-signer will need to have a steady income as well as good to excellent credit scores, typically at least above the 650s. Signing with a co-signer means they’re responsible for your loan bill if you can’t pay.

Some lenders offer loans exclusively for student borrowers that don’t have credit to take into consideration. Instead, these lenders look at the school you’re attending and your income and career potential to deduce whether the amount you can borrow can be paid back and at what rate.


How does repayment work?

Most private student loan borrowers are given a choice of a few repayment options. Popular options include -

  • Full payments - Make full monthly payments while still in school. This saves the most money by paying off interest.

  • Partial payments - Make a flat payment or fixed payment each month to help reduce the total cost of your loan. This does not save as much money as making full payments but saves more than full deferment where interest builds up.

  • Interest-only payments - Pay only the accrued interest each month to keep the buildup fixed. When you graduate, your loan balance will be equal to what you originally took out and principal amount to be paid will be added to your payments along with the interest already being paid.

  • Full deferment - You do not make any payments while in school. Interest will continue to accumulate the entire time which makes this the most expensive option.


Disadvantages

While most students will require loans to cover the cost of college, there are some negatives to consider - 

  • Generally higher interest rates when compared to federal loans.

  • Fewer repayment options in comparison to federal loans.

  • Cannot be discharged in bankruptcy which is important to note.

  • Credit will be damaged if payments are missed which can further hamper any future loan requests.


FAQ's

  How do private student loans and federal student loans differ?


You apply for a federal student loan through a FAFSA. Borrowing a federal loan means you’re borrowing a loan funded by the government.

You apply for a private student loan through a private bank, credit union or an online lender.

Federal student loans offer borrowers protections and alternative repayment options more than that of private loans, such as income-based repayment and forgiveness programs.

Federal student loans also have defined interest rates set by Congress, while the interest rate set on a private student loan depends on your or your cosigner's credit.

With a credit score of less than 690, you’ll likely pay a higher interest rate for a private loan than you might have to for a federal loan.

  How do I qualify for a private student loan?


Each lender will have its own eligibility criteria for taking out a loan. With most loans, credit score and income are taken into consideration. Higher scores and incomes tend to avail the best student loan rates or higher borrowing amounts.

However, since undergraduate borrowers are less likely to have established credit or an income, lenders will usually require students to be present with a co-signer. Some lenders who have loans for applicants without a co-signer will consider career and income potential.

Lenders will often require you to be attending a Title IV school, which means your school processes federal student aid. Some lenders don’t offer loans in certain parts of the country.

  Can I get a private student loan with bad credit?


You’ll have a hard time finding a private student loan from a bank, credit union or online lender if you possess a bad credit score. Federal student loans do not require borrowers to demonstrate creditworthiness, so they’ll be your best option. If you’ve already reached your limit on federal loans, you may be able to get a private student loan if you apply with a co-signer who has a good credit score, typically scores in the upwards of 600 are a good start.

  How quickly can I get a private student loan?


If the money is sent directly to the college, it usually takes 1-2 weeks before the remaining money is refunded to you. Therefore, from the date the loan is approved, it usually can take 3-10 weeks for you to receive the student loan money from a private student loan.

  How long does it take for a private student loan to be approved?


After loan approval, it can take 2 weeks to 2 months for the lender to send the loan amount to the college or to you, whichever is applicable. If the money is sent directly to the college, it typically takes 1-2 weeks before the remaining money is sent to you.

  How much can you get in student loans?


Student loans aren't limitless. The max amount you can borrow depends on factors including whether they're federal or private loans and your year in school. Undergrads can borrow up to $12,500 annually and $57,500 total in federal student loans.

  Do private student loans go directly to the school?


Most financial aid including scholarships, grants, work-study paychecks, and loans will usually go directly to the school, where it's applied to your tuition payments, college fees, on-campus housing payments, and more. That being said, some scholarship or loan options will allow the funds to go directly to you, the student.

  Do student loans ever get written off?


Graduates are only allowed to start to repay their debts when they reach a certain income threshold of about  $21,000 for students taking out a loan since 2012 and have their debts written off if they're not repaid after 30 years or after about 25 years for students who started program between 2006 and 2012.

  What happens if you don't repay student loans?


When you stop paying your student loan. Your loan technically goes into “default” after not making a payment on the loan for about 9 months or 270 days. This also happens if you do not make a full payment. Once you are delinquent on your loan payments, your lender will attempt to contact you several times.

  How can I lower my student loan debt?


6 solid ways to lower your student loan payments - 

  • To extend your repayment plan

  • Opt-in for a graduated payment plan

  • Enroll in an income-driven repayment plan

  • Consolidate your loans

  • Refinance at a lower interest rate

  • Set up an auto repayment plan

  Does paying off a loan early hurt credit?


Installment loan accounts affect your credit differently. While paying off an installment loan early would not hurt your credit, keeping it open for the full term length of the loan and making all the payments on time is actually positively affecting the scoring models and can help your credit score.

  What happens if you ignore student loans?


If you ignore your student loans, your principal + interest on that will keep growing as interest accrues, plus you'll likely owe heavy additional fees if your debt gets moved into collections. Your credit score will take a major hit, which can affect your ability to further avail a mortgage, car loan, credit card, or apartment lease.

  Can you be taken to court for student loans?


It is less common for the government to sue to collect on student loans because it has so many ways to pursue you outside of court. Even if and when you end up losing your case and the government or private lender gets a judgment against you, this does not mean that you are required to repay the debt.

  Can I get a private student loan with bad credit?


If you definitely need a student loan, but you have bad credit or no credit history, federal student loans are your best bet. A private loan from one of the few lenders that do not have credit checks or co-signer requirements, although you'll pay comparatively higher interest rates. Another way of getting a private student loan with bad credit is to apply with a co-signer who has good credit.