Best private student loans in May 2022

The Bankrate guide to choosing the best private student loans

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When shopping for a student loan, look for a competitive interest rate, flexible repayment terms that meet your needs, generous hardship options and minimal fees. Loan details presented here are current as of Jan. 28, 2022. Check the lenders’ websites for more current information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability. To learn more about how we chose lenders, read our methodology above.

Compare private student loan interest rates in May 2022

What is a private student loan and how does it work?

A private student loan is a loan used to cover qualifying educational expenses. You can take out private student loans through banks, online lenders and credit unions, and sometimes through colleges and state agencies. These usually have higher borrowing limits than federal student loans and may offer lower interest rates for borrowers with good credit, but they come with fewer borrower protections.

To qualify, you’ll need to meet the lender’s eligibility requirements and go through a credit check. Applicants with good or excellent credit tend to get the lowest interest rates. But because undergraduates usually don’t have extensive credit histories, they typically need a co-signer to take out a private student loan.

What can private student loans be used for?

While the restrictions vary by lender, generally you can use private student loans for:

• Tuition.
• Fees.
• Room and board.
• Books and supplies.
• Transportation.
• Child care.

Typically you cannot use student loans for:

• Clothes.
• Vacations.
• Restaurant dining.
• Business expenses.
• Car or home purchases.

How to get a private student loan

While every lender has its own application process, there are a few general steps you'll need to take to get a private student loan:

1. 1. Check your credit score. Some lenders will list credit score requirements on their websites, but even if they don't, it's safe to assume that you'll need a credit score in the mid-600s to qualify for a student loan.
   2. Enlist a co-signer if needed. If you don't have much credit history or if your credit score is poor, you may need to get a co-signer. This person — usually a parent or family member — signs onto your loan with you in order to help you get approved.
   3. Get prequalified. The rates that lenders advertise aren't necessarily the rates you'll receive. By getting prequalified with a few lenders, you can compare true offers to see which loan is best for your needs.
   4. Send in an application. Once you've chosen a lender, you'll send in your full application, which will ask for details like your Social Security number, financial history and school information. You'll also go through a hard credit check at this stage.
   5. Wait for verification. The lender will process your application and confirm your cost of attendance with your school. After a few weeks, the lender will typically disburse the funds directly to your school.

How does a private student loan differ from a federal student loan?

While private and federal student loans are both viable ways to pay for college, there are some differences to keep in mind:

How do student loan interest rates work?

Most private student loans offer two types of interest rates: variable and fixed. With a fixed interest rate, the rate doesn’t change throughout the life of the loan. This is a good option for borrowers who prefer predictable payments, although the rates usually start a little higher. Variable rates, on the other hand, are tied to changes to an index, such as the Libor. These rates may go up or down over the course of repayment, although lenders usually limit how high the rate can go.

Every month, your payments will be comprised of both the principal — the base loan amount you borrowed — and interest charges. While your monthly payment will be the same if you have a fixed interest rate, more and more of each payment will go toward the principal and less toward interest with each successive month. You can use a student loan calculator to determine how different interest rates will affect your monthly payment over time.

Types of private student loans

Just about any type of student can apply for a private student loan, from undergraduates to students seeking medical, business, dental and law degrees. Some lenders also offer private student loans for international students or people who are in a residency program, studying abroad, attending community college, enrolled in a career-training school or studying for the bar exam. There are even student loans for borrowers with poor credit, although these student loans for bad credit might be more expensive.

Pros and cons of private student loans

Before applying for a private student loan, consider the benefits and drawbacks of this type of financing.

The most valuable college majors

When deciding whether investing in college is worth it, you may want to evaluate the cost versus reward of your chosen degree. A Bankrate study of the most valuable college majors ranked degrees from the most financially rewarding to the least, with STEM majors like architectural engineering and construction services topping the list.

Arts majors fell to the bottom of the rankings, but that’s not to say you should write them off; the value of your degree ultimately depends not only on the financial input and output, but also the personal value you take away from your classes and future career.

In terms of median income, unemployment rate and advanced degree requirements, here are the top five college majors in our rankings:

FAQs about private student loans