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Students can choose either federal or private student loans to help pay for school. It's usually best to start with federal student loans, which currently have an interest rate of 2.75 percent for undergraduate students for the 2020-21 school year. However, while private student loans have fewer borrower protections, they can fill in any funding gaps and typically have a wider range of repayment terms.
Student loans can help borrowers cover the costs of tuition, room and board, books, supplies and more. To apply, you'll need to start with the following steps:
Determine how much you need to borrow.
Compare lenders' interest rates and terms.
Fill out the FAFSA.
Apply with private lenders as needed.
Submit required documentation.
Methodology
To find the best student loans, Bankrate first looked at lenders that have a national reputation and serve borrowers across the U.S. We then narrowed down the field based on APR ranges, loan options and loan amounts to ensure that the lenders offered competitive loans for a variety of borrowers. Lenders that offered loans for undergraduates, MBA students, medical students and more, for example, scored higher than those offering just one type of loan.
To determine the final rankings, we then evaluated eligibility requirements and any standout features that make a loan uniquely suited to a variety of needs — for instance, the ability to apply for multiple years of school or receive cash rewards upon graduation.
Reviewed by Mark Hamrick, Bankrate senior economic analyst
As of Monday, June 21, 2021
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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 May 28, 2021. 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, read our methodology section.
When you apply for a student loan, you'll be offered an interest rate. This interest rate is an extra percentage of your loan amount that you'll have to pay each month.
With federal loans, this rate is the same for all borrowers and is determined by the federal government each year. With private loans, this rate is determined by your credit score, income and more. The most affordable private student loans go to students in good financial health with high credit scores.
Prospective borrowers can usually choose between a fixed and a variable interest rate. Fixed interest rates remain the same over the life of the loan, while variable rates change based on market trends. Federal student loans are always fixed, while private student loans can be either fixed or variable.
Private student loans differ from federal student loans because they’re originated by private institutions such as banks, credit unions and online lenders rather than the federal government. Private student loan interest rates are based on you or your co-signer's credit score and financial health and can be either fixed or variable. Borrowers with a good credit score could qualify for a low interest rate and competitive fees with a private loan, but those with a less-than-stellar credit score will be offered a higher rate.
Federal student loans come from the U.S. Department of Education and have fixed interest rates that are set yearly. It's recommended that you max out your federal loan potential before applying for private loans, as they come with more flexible repayment options, including customized payment plans based on your income and potential loan forgiveness. Federal loans also come with protections that private loans don't, like deferment and hardship options.
Student loan news updates
The student loan landscape has been changing in recent months, driven by the coronavirus pandemic and forgiveness policies implemented by the Biden administration. Some current student loans trends to be aware of include:
Federal student loans are in administrative forbearance: President Biden extended the forbearance period for federal loans until Sept. 30, 2021. Federal student loan payments are not required, and interest charges and collections activities are paused.
Student loan forgiveness is now tax-free: The $1.9 trillion stimulus package passed in early March — also known as the American Rescue Plan — made student loan forgiveness tax-free through 2025.
Borrowers with total and permanent disabilities see loan forgiveness: The Department of Education recently revised documentation requirements for total and permanent disability discharge, which makes it easier for borrowers who qualify to see their student loan debt forgiven.
White House budget for 2022 focuses on revising existing policies: Biden's annual budget proposal does not include widespread student loan forgiveness, but it does seek to increase the maximum Pell Grant award and fund other higher education proposals laid out in the American Families Plan.
How student loans could change under a Biden presidency
President Biden's proposed student loan policies could spell big changes for student loans moving forward. His proposed policies include:
Revising current income-driven repayment plans to no more than 5 percent of the borrower's discretionary income.
Doubling the value of Pell Grants.
Providing four years of free tuition at public universities for borrowers with household incomes below $125,000.
Providing two years of free community college.
Forgiving $10,000 of student loan debt for each year borrowers participate in national or community service, up to five years.
He has also expressed support for pandemic relief legislation that would immediately wipe out $10,000 in student loan debt for federal borrowers. In early March 2021, Biden requested that U.S. Secretary of Education Miguel Cardona oversee a legal review of his authority to do so.
Types of student loans
Loan type
Eligible students
Borrowing limit
Interest rates
Repayment term
Direct Unsubsidized Loans
Undergraduate, graduate
$5,500-$20,500 per year, depending on degree
2.75% for undergraduate, 4.3% for graduate
Standard term is 10 years
Direct Subsidized Loans
Undergraduate
$3,500-$5,500 per year
2.75%
Standard term is 10 years
Direct PLUS Loans
Graduate, parents
Total cost of attendance
5.3%
Standard term is 10 years
Private loans
Undergraduate, graduate, parents
Total cost of attendance
1.04%–14.5%
5–20 years
Perkins Loans, when offered, had an interest rate of 5 percent. The last interest rates available for FFELP Loans ranged from 5.6 percent to 8.5 percent, depending on the type of loan. Perkins Loans and FFELP Loans are no longer offered.
Overview: Ascent offers undergraduate and graduate private student loans in all 50 states. Borrowers without a co-signer have their own loan option, which is a rarity in the private student loan space. If you don’t have a co-signer, you may be able to qualify for a loan based on your school, graduation date, major and cost of attendance. The lender also offers a longer-than-average period of forbearance, which is a hardship program that allows you to temporarily stop making payments. Check your personalized rates from Ascent today.
Perks:
Loan option based on future income instead of credit score.
Forbearance of up to 24 months over the life of the loan.
1 percent cash back reward at graduation and up to $525 for each referred friend.
What to watch out for:
High rate caps.
Borrowers without a co-signer must have a GPA of at least 2.9.
Best student loan for multiyear approval: Citizens Bank
Overview: Citizens Bank offers private student loans to undergraduate students, graduate students and parents. Borrowers can get approved for multiple years of student loans; Citizens Bank will run a hard credit inquiry when you apply and will let you know if you qualify for the multiyear loan program. Once approved, you can request funds in subsequent years without supplying additional income documentation, so the process is faster, and Citizens will run only soft credit checks.
Perks:
Multiyear loan option.
0.25 percent APR discount for eligible Citizens Bank accounts.
Funds may be used to pay for child care.
What to watch out for:
Not available in all 50 states.
Not available to students attending two-year colleges or career-training programs.
Best student loan for quick application process: College Ave
Overview: College Ave is an online lender that offers private student loans to undergraduate students, graduate students, parents and students attending community college and career programs. The lender specializes in a simple application process with an instant decision, claiming that the application process takes three minutes. Borrowers can check their potential loan terms and whether they prequalify for a loan without impacting their credit.
Perks:
Three-minute application process.
Loans available for community college and career programs.
$150 reward upon graduation.
What to watch out for:
Loan cap of $150,000 for most graduate school loans.
$1,000 to 100% total cost of attendance (maximum $150,000 for some degrees)
Loan terms
5 to 20 years
Min. credit score
Not specified
Fees
Late fee
Best student loan for personalized mentoring: CommonBond
Overview: CommonBond is an online lender that offers undergraduate and graduate private student loans. Borrowers can access generous hardship options and individualized money advice through the "money mentor" program, which helps you navigate personal finances before, during and after college.
Perks:
Money mentor program.
Hardship forbearance for up to 24 months.
Co-signer release after 24 consecutive, on-time payments.
What to watch out for:
Co-signer required for undergraduate student loans.
Loans not available to customers in Mississippi or Nevada.
$2,000 to 100% total cost of attendance ($500,000 lifetime maximum)
Loan terms
5 to 15 years
Min. credit score
Not specified
Fees
Late fee: 5% or $10; Returned check fee: $5; Origination fee: 2% for some degrees
Best student loan for flexible repayment terms: Earnest
Overview: Earnest is an online lender that funds private student loans to undergraduate and graduate students and offers unique repayment options. Borrowers who choose a deferred payment plan get a nine-month grace period on payments after graduation, which is three months longer than what most lenders offer. Borrowers are also allowed to skip one payment every 12 months.
Perks:
Skip a payment once every 12 months.
Nine-month grace period.
Extremely low starting rates.
What to watch out for:
No student loans available in Nevada.
No co-signer release.
Credit score of 650 required.
Lender
Earnest
APR
Fixed: Starting at 3.34% (with autopay)
Variable: Starting at 1.04% (with autopay)
Loan amounts
$1,000 to 100% total cost of attendance
Loan terms
Not specified
Min. credit score
650
Fees
Returned payment fee: Up to $8; Florida stamp tax: 0.35%
Overview: Discover offers private student loans to undergraduate students, graduate students and parents, and loans can cover up to 100 percent of school-certified undergraduate and graduate school costs. Discover stands out for its rewards; students who earn at least a 3.0 GPA in college or graduate school could qualify for a one-time cash reward of 1 percent on each new loan they take out. High school students who graduate with at least a 3.0 GPA could also qualify for an additional reward on their first college loan.
Perks:
Rewards for students who earn good grades.
Qualify for multiple years of student loans.
No application, origination or late fees.
What to watch out for:
No prequalification option.
No co-signer release.
Only one repayment term available for each loan type.
Lender
Discover
APR
See rates at DiscoverStudentLoans.com/Rates
Loan amounts
$1,000 to 100% total cost of attendance. Aggregate limits may apply.
Loan terms
15 or 20 years
Min. credit score
Not specified
Fees
None
Best student loan for part-time students: Sallie Mae
Overview: Sallie Mae offers private student loans to undergraduate students, graduate students, parents and students enrolled in career-training programs. This is one of the only private student loan lenders that doesn’t require borrowers to attend school full- or half time, which makes it a standout option if you’re studying abroad, taking just one or two classes at a time or taking a professional certification course.
Perks:
Four months of free access to Chegg Study.
Loans for part-time students, students attending online or summer classes and students studying abroad.
Wide range of loan amounts.
What to watch out for:
$50 charge per loan for forbearance, with a maximum of $150.
Overview: SoFi is an online lender that offers private student loans for undergraduate students, graduate students and parents. Among its perks, SoFi says that it doesn’t charge any fees, which cuts down on the overall cost of borrowing.
Every lender has different eligibility requirements for student loans, but generally you’ll generally need to:
Be enrolled in an eligible school.
Meet age, education and citizenship requirements.
Use the loan for qualifying education expenses.
Have a good credit score and consistent income (or have a co-signer who does).
Maintain good grades while in school.
How do I apply for a student loan?
You can apply for a student loan through banks, online lenders, credit unions and the federal government. To apply for a federal student loan, you'll fill out the Free Application for Federal Student Aid (FAFSA), which opens up on Oct. 1 each year. Once you fill it out, you will be notified about your eligibility for federal student loans and other financial aid.
To apply for a private student loan, first compare a few lenders to determine which offers the best rates and terms for your needs. You can prequalify with most lenders, which lets you see your loan offer before submitting a formal application. When you've selected a lender, you can apply online, over the phone or in person, if the lender has physical locations.
Can you get a student loan with bad credit?
You can take out new student loans or refinance your existing loans with bad credit. Most federal student loans don't even check your credit, which makes them a great option for borrowers with little to no credit history. If you are applying for private loans, some lenders cater to borrowers with less-than-stellar credit, although interest rates may be higher and loan amounts smaller.
Before applying for any student loan, check for credit score requirements at each lender and get prequalified if possible.
What are the pros and cons of private student loans?
Private student loans appeal to many borrowers because of their high borrowing limits and low interest rates for good-credit borrowers. They also give you the option of fixed or variable rates, so you can choose the best plan for your budget. However, private student loans have fewer deferment and forbearance options than federal student loans, and borrowers with bad credit could see interest rates in the double digits.
Will I need a co-signer for private student loans?
Whether or not you need a co-signer for private student loans depends on your financial health. If you have poor credit or little income, a creditworthy co-signer could help you get approved or receive a better interest rate.
When is refinancing student loans a good option?
Refinancing your student loans may be a good option if you'd like to consolidate multiple loans into a single loan or if interest rates have fallen significantly since you first took out your fixed-rate loan. However, refinancing can only be done through private lenders, so you'll lose options like income-driven repayment and COVID-19 relief programs if you refinance your federal loans.
How do I refinance my student loans?
To refinance your student loans, shop around and compare a few lenders to see which one offers the best rate and repayment terms for your situation, getting prequalified where possible. When you're ready to apply, you can typically apply online, over the phone or in person. Once you're approved and have submitted the necessary documentation, the lender will pay off your existing loans, and you'll begin making your new payments.
