The Bankrate guide to choosing the best 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 the publish date. 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.
Best private student loan interest rates in April 2021
College Ave
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International students
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Not specified
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Variable: 1.04%–11.98% (with autopay); Fixed: 3.34%–12.99% (with autopay)
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$1,000
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100% total cost of attendance
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CommonBond
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Payment flexibility
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Not specified
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Variable: 3.81%-9.37% (with autopay); Fixed: 3.74%–10.74% (with autopay)
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$2,000
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$500,000
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Custom Choice
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Graduation rewards
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Not specified
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Variable: 1.02%-9.52% (with autopay); Fixed: 3.99%–10.56% (with autopay)
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$1,000
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$99,999 annually; $180,000 cumulative
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Discover
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Academic achievement bonus
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Not specified
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See rates above
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$1,000
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100% total cost of attendance
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Earnest
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Applying without a co-signer
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650
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Variable: Starting at 1.05% (with autopay); Fixed: Starting at 3.49% (with autopay)
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$1,000
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100% total cost of attendance
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Sallie Mae
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Multiple loan options
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Not specified
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Variable: 1.13%-11.64% (with autopay); Fixed: 4.25%-12.59% (with autopay)
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$1,000
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100% total cost of attendance
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SoFi
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Online borrower resources
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Not specified
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Variable: 1.77%-11.89% (with autopay); Fixed: 4.13%-11.52% (with autopay)
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$5,000
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100% total cost of attendance
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Summary: What you need to know about private student loans
What is the difference between private and federal student loans?
The main difference between private and federal student loans is where you get them. Federal student loans are funded by the federal government, while private student loans originate from private lenders, such as banks and credit unions.
Generally, you can borrow less with federal student loans, and they’re typically only available to U.S. citizens and permanent residents. The draw for borrowers is that they come packed with important borrower protections, such as income-driven repayment options, generous forbearance and deferment programs and fixed interest rates.
If you need to borrow money to pay for college, start with federal loans. Then, if federal loans won’t cover all of your school costs or you’re not eligible to take out this type of loan, private student loans can fill in the gaps.
How has the coronavirus impacted private student loans?
The coronavirus pandemic has impacted nearly every corner of the U.S. economy, and its effects on private student loans have been a mixed bag:
- Lower interest rates: Interest rates on student loans across the board have plummeted since the Federal Reserve cut rates to near-zero in 2020. Federal student loan rates set for the 2020–21 school year are at record lows, and private student loan companies have slashed their rates in response. As of early 2021, average private student loan interest rates range from around 1.5 percent to 13 percent. The rate you receive depends on the type of interest rate you choose, your creditworthiness and your degree program.
- Paused principal and interest payments: Some private student loan lenders are offering forbearance programs to borrowers who are struggling with the effects of the pandemic. These programs allow you to temporarily suspend payments for a month or more. If you need help making payments, contact your loan servicer for details.
- Closures and online classes: Some schools have closed or canceled classes, while others have moved entirely online. As a result, some schools are refunding money paid toward tuition and other school costs. Contact your school’s financial aid office for details. If you receive a refund, you could use the money to repay your loans.
Will the Biden presidency impact private student loans?
President Joe Biden’s administration says that it may be open to using an executive order to wipe out $10,000 of student loan debt per borrower. However, the order would likely be limited to federal student loans, which means that borrowers with private student loans wouldn’t benefit from this move.
With that said, President Biden has proposed other student loan policies that could benefit private student loan borrowers, including:
- Providing four years of free tuition at public universities for borrowers with household incomes below $125,000.
- Forgiving $10,000 of student loan debt for each year borrowers participate in national or community service, up to five years.
- Making it easier to discharge student loan debt in bankruptcy.
Details: Private student loan rates in 2021
College Ave: Best for international students
Overview: College Ave offers private loans for students seeking undergraduate, graduate, dental, law, medical and business degrees. Parents can also take out loans on behalf of their college-bound kids, and students interested in attending community college or receiving career training may also apply.
Perks: International students can apply for a College Ave private student loan as long as they have a valid U.S. Social Security number and a creditworthy co-signer. Borrowers also have access to a lineup of online resources, including student loan calculators, scholarships, sweepstakes, contests and plenty of educational content.
What to watch out for: College Ave doesn’t disclose its income or credit requirements, meaning you’ll have to get a quote in order to determine if you’re eligible.
College Ave |
Variable: 1.04%–11.98% (with autopay);
Fixed: 3.34%–12.99% (with autopay) |
$1,000–100% total cost of attendance |
5 to 20 years |
Late fee |
CommonBond: Best for payment flexibility
Overview: CommonBond is an online lender that offers private loans for students pursuing undergraduate, graduate, business, dental and medical degrees. CommonBond boasts four different repayment options while you're in school: full deferment, a fixed monthly payment, interest-only payments or full monthly payments.
Perks: Borrowers can take advantage of generous hardship programs, such as personal forbearance for up to 12 months and natural disaster forbearance. Loan amounts start as low as $2,000, which is great for students who don’t need to borrow much.
What to watch out for: Borrowers usually need a creditworthy co-signer to apply, though you can release your co-signer from the loan after you make at least 24 consecutive, on-time payments.
CommonBond |
Variable: 3.81%–9.37% (with autopay);
Fixed: 3.74%-10.74% (with autopay) |
$2,000–$500,000 |
5 to 20 years |
Late fee: 5% or $10; Returned check fee: $5; Origination fee: 2% on dental school, medical school and MBA loans |
Custom Choice: Best for graduation rewards
Overview: Custom Choice offers private student loans for undergraduate and graduate students. Although you don’t need a co-signer to apply, the lender says you’re four times more likely to qualify when you add a creditworthy co-signer to the loan.
Perks: Borrowers who complete their degrees receive a graduation reward of 2 percent off the principal balance. The lender also offers generous hardship options: In the event of a job loss or natural disaster, borrowers can pause payments in increments of two months, up to a maximum of 12 months total.
What to watch out for: International borrowers aren’t eligible for Custom Choice products. Loans also aren’t available in Arizona, Iowa or Wisconsin.
Custom Choice |
Variable: 1.02%–9.52% (with autopay);
Fixed: 3.99%-10.56% (with autopay) |
$1,000–$99,999 annually ($180,000 cumulative) |
7 to 15 years |
No fees |
Discover: Best for academic achievement bonus
Overview: Discover offers private student loans to students seeking undergraduate, graduate, medical, dental, business and law degrees. You can also apply for a loan if you’re in a residency program or studying for the bar exam.
Perks: In addition to its long menu of student loans, Discover’s standout feature is the academic achievement bonus. Borrowers are eligible for a 1 percent cash reward if they maintain at least a 3.0 GPA.
What to watch out for: Discover limits its loan terms to either 15 years or 20 years depending on the type of loan. There’s also no prequalification option and no co-signer release.
Discover |
See rates above |
$1,000–100% total cost of attendance |
15 or 20 years |
No fees |
Earnest: Best for applying without a co-signer
Overview: Earnest offers refinancing options and private student loans for students seeking undergraduate, graduate, business, law and medical degrees. Borrowers may qualify on their own or use a co-signer.
Perks: Borrowers can choose from four main repayment plans, access forbearance and deferment programs and even skip a payment once a year if needed. Also, borrowers aren’t required to get a co-signer on the loan (though it’s an option if you want to score a lower interest rate).
What to watch out for: If you have a co-signer, there’s no option to release them from the loan. Plus, Nevada residents can’t take out any of Earnest’s student loans.
Earnest |
Variable: Starting at 1.05% (with autopay);
Fixed: Starting at 3.49% (with autopay) |
$1,000–100% total cost of attendance |
Not specified |
Florida documentary stamp tax: $0.35 for each $100 |
Sallie Mae: Best for multiple loan options
Overview: Of all the lenders on this list, Sallie Mae offers the most extensive menu of private student loan options. There are loans for students seeking undergraduate, graduate, medical, dental and law degrees, plus career training loans, parent loans and even loans for students who pay tuition for K–12 school.
Perks: Sallie Mae supports students through free study help and college expense calculators, and borrowers can take out loans even if they’re enrolled less than half time, attending online or summer classes, studying abroad or enrolled in professional certification courses.
What to watch out for: If you need to apply for hardship programs, Sallie Mae offers fewer options and shorter forbearance periods than others on this list.
Sallie Mae |
Variable: 1.13%-11.64% (with autopay);
Fixed: 4.25%-12.59% (with autopay) |
$1,000–100% total cost of attendance |
5 to 20 years |
Late fee: 5% or $25; Returned check fee: Up to $20 |
SoFi: Best for online borrower resources
Overview: SoFi offers private student loans, law school loans, medical school loans, MBA loans and parent loans, plus other financial products such as personal loans and mortgages.
Perks: With SoFi’s unemployment protection program, a professional can help you search for jobs and provide one-on-one career training. Plus, borrowers get a $400 discount on ACT and SAT prep courses. And unlike many other student loan lenders, SoFi has an app where you can browse deals, use financial planning tools and find educational resources.
What to watch out for: SoFi’s minimum loan amounts are higher than those of any other lender on this list, which might not be a good fit for people who only need to borrow a small amount.
SoFi |
Variable: 1.77%-11.89% (with autopay);
Fixed: 4.13%-11.52% (with autopay) |
$5,000–100% total cost of attendance |
5 to 15 years |
None |
How do I apply for a private student loan?
You can apply for a private student loan through banks, online lenders or credit unions. Here's how:
- Compare multiple lenders. Look at interest rates, fees and repayment plans from a few lenders to see where you can get the best deal. To evaluate a lender’s reputation, check the Consumer Financial Protection Bureau’s Complaint Database, the Better Business Bureau and reviews from customers who have worked with the lender.
- Check application requirements. Every lender has its own qualification requirements. For example, you might need a minimum income or credit score to qualify, and you might have to be enrolled in school at least half time at an eligible program. Make sure you fit lender requirements before applying.
- Get prequalified. Many lenders let you avoid unnecessary hard credit checks by offering prequalification. If you prequalify with multiple lenders, you'll see the approximate rates and terms you qualify for, allowing you to make an apples-to-apples comparison with only a soft credit check.
- Complete the application process. After comparing offers from a few lenders, fill out the application. Be prepared to provide personal information like your income, Social Security number and citizenship information. After you submit your application, it could take a few weeks to find out if you’re approved for the student loan. The lender will usually send the funds directly to your school.
How do private student loans work?
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, 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.
Loan types
Just about any type of learner 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 loans might be more expensive.
Interest rate types
Before applying for a private student loan, you should understand the two main 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.
Is a private student loan right for me?
When looking for ways to pay for college, it's typically best to start with money you don't have to repay, like scholarships or grants. There are hundreds of scholarships available from independent sources, and you can find out if you qualify for grants by filling out the FAFSA. After exhausting those resources, you may have to turn to student loans.
Because federal student loans don’t require a credit check and offer important borrower protections, it’s a good idea to start by applying for federal student aid. If you don’t qualify for federal student loans or the loan doesn’t cover all of your qualified education and living costs, start checking out private student loans. Compare the interest rate, loan terms, fees and lender reputation. If you’re sure that you can handle payments after graduation, then a private student loan could be a good fit for you.
Frequently asked questions about private student loans
Can I get a private student loan with bad credit?
If you have bad credit, it’s best to start by applying for federal student loans. These don’t require a credit check in most cases. If you still need to apply for private student loans to fill in some of the gaps but you lack strong credit, then you may need a co-signer to qualify. A co-signer agrees to foot the bill if you fall behind on payments, so make sure they understand what they’re getting into before they sign up.
Will I need a co-signer for a private student loan?
Students are nearly four times more likely to be approved with a co-signer, according to private lender Sallie Mae. That’s because private student loans are largely based on creditworthiness, and a co-signer can help you qualify for the loan and get better loan terms if you're young and have little credit history.
How do I qualify for a private student loan?
Every lender has its own way of setting eligibility requirements and calculating loan terms, but here are three areas where they usually focus:
- Good credit score: Private student loans are based largely on credit requirements, so having a higher score increases the likelihood that you’ll qualify and get more affordable loan terms.
- Income requirements: Lenders also might check that you have the income to handle monthly payments. College students who don’t have a job or don’t earn enough to meet these requirements might need to add a co-signer to qualify.
- Enrollment requirements: Many lenders require borrowers to be enrolled in school at least half time in an eligible program to take out a private student loan. If you’re not sure that you fit requirements, contact your lender and ask.
Do private student loans allow deferment or forbearance?
Many lenders offer deferment and forbearance programs, although they vary by loan type and servicer. And keep in mind: While you’re not making payments, your student loans usually accrue interest. Here’s how the two types of relief work:
- Student loan deferment: If your loans are in deferment, you won’t have to make payments during specific windows, such as while you’re enrolled in school. You won’t pay a penalty for missing a payment during these time frames, and it won’t affect your credit.
- Student loan forbearance: If you’re financially struggling, you might be able to enroll in a forbearance program. These allow you to temporarily pause payments while you’re unemployed, ill, affected by a natural disaster or going through another type of financial hardship.
What can private student loans be used for?
While requirements vary by lender, private student loans can often be used for education expenses and sometimes for living expenses. These may include:
- Tuition.
- Room and board.
- Fees.
- Books.
- Supplies.
- Transportation.
- Computer for school.