By Kim Porter
As of Monday, July 06, 2020
Private student loans can be used to pay for the costs of higher education, but they originate with private entities — such as banks, credit unions and online lenders — rather than the federal government. Private student loans typically come with a fixed monthly payment and a fixed or variable interest rate, and you may be able to delay repayment until after you graduate from school.
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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.
| Lender |
Current APR Range
|
Loan Term
|
Min. Loan Amount
|
Max. Loan Amount
|
|---|---|---|---|---|
| Ascent |
Fixed: 4.13%–15.00%
Variable: 3.41%–14.18% |
5 – 15 years
|
$1,000
|
$200,000 (or the cost of attendance, whichever is less)
|
| Citizens Bank |
Fixed: 4.72%–12.04%
Variable: 2.02%–10.13% |
5 – 15 years
|
$1,000
|
$350,000
|
| College Ave |
Fixed: 3.99%–11.98%
Variable: 1.24%–10.97% |
5 – 15 years
|
$1,000
|
The total cost of attendance
|
| CommonBond |
Fixed: 5.33%–9.74%
Variable: 3.21%–9.29% |
Not specified
|
$2,000
|
The total cost of attendance, with a $500,000 lifetime maximum
|
| Earnest |
Fixed: Starting at 4.39%
Variable: Starting at 2.74% |
Not specified
|
$1,000
|
The total cost of attendance
|
| Sallie Mae |
Fixed: 4.74%–11.85%
Variable: 2.00%–10.09% |
5 – 20 years
|
$1,000
|
The total cost of attendance
|
| SoFi |
Fixed: 4.41%–11.76%
Variable: 1.73%–11.00% |
5 – 15 years
|
$5,000
|
The total cost of attendance
|
| Wells Fargo |
Fixed: As low as 4.53%
Variable: As low as 1.96% |
Not specified
|
$1,000
|
The total cost of attendance, with a $180,000 maximum
|
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. Here are some of the pros and cons of each type of loan.
Although federal student loans generally come with more flexible repayment options and borrower protections, private student loans can be a good option in some cases.
Because federal student loans have low borrowing limits, private student loans can help fill the gaps if you still need to borrow money after applying for grants, scholarships and federal financial aid. Annual percentage rates (APRs) on private loans also usually start lower than federal loan interest rates. However, if you have a variable-rate loan, your APR (and monthly costs) can increase over the life of the loan.
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. The lender also offers a longer-than-average period of forbearance, which is a hardship program that allows you to temporarily stop making payments.
Perks: 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. You can also apply for forbearance between one and four months, for a maximum 24 months over the life of the loan. Borrowers are eligible to apply for Ascent scholarships and can even earn various types of rewards. These include a 1 percent cash-back reward at graduation, based on the original principal balance, and up to $525 for each referred friend who signs up for and receives a student loan.
What to watch out for: Among lenders on this list, Ascent advertises the highest APRs — which can significantly add to your overall cost of borrowing. Additionally, independent borrowers will need to meet eligibility requirements: To apply without a co-signer, you must be a full-time junior, senior or graduate student with a GPA of at least 2.5.
| Lender | Ascent |
|---|---|
| APR | Fixed: 4.13%–15.00% Variable: 3.41%–14.18% |
| Loan amounts | $1,000–$200,000 based on cost of attendance and whether you have a co-signer |
| Loan terms | 5 to 15 years |
| Fees | None |
Overview: Citizens Bank offers private student loans to undergraduate students, graduate students and parents. Borrowers can get approved for multiple years of student loans.
Perks: 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 soft credit checks. In addition to the 0.25 percent autopay discount, you can take an additional 0.25 percent APR discount on a private student loan if you have an eligible Citizens Bank account. Borrowers can use loan funds to pay for school costs and child care, which is a rarity among lenders.
What to watch out for: Citizens Bank isn't available in all 50 states, and people attending two-year colleges or career training programs aren't eligible. And beyond the 12-month forbearance period, the company doesn't offer generous hardship programs.
| Lender | Citizens Bank |
|---|---|
| APR | Fixed: 4.72%–12.04% Variable: 2.02%–10.13% |
| Loan amounts | $1,000–$350,000 depending on program |
| Loan terms | 5 to 15 years |
| Fees | None |
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.
Perks: Altogether, College Ave says 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. Aside from its loans geared toward four-year degrees, College Ave also offers private loans for students attending community colleges and career programs. Borrowers earn $150 upon graduation, awarded as a statement credit to the loan balance.
What to watch out for: Although College Ave says that it will work with borrowers experiencing financial hardship, it doesn't have a defined forbearance program. Instead, each situation is handled on a case-by-case basis. This may cause problems if you need to postpone payments due to financial difficulties later on.
| Lender | College Ave |
|---|---|
| APR | Fixed: 3.99%–11.98% Variable: 1.24%–10.97% |
| Loan amounts | $1,000 up to total cost of attendance |
| Loan terms | 5 to 15 years |
| Fees | None |
Overview: CommonBond is an online lender that offers undergraduate and graduate private student loans. Borrowers can access individualized money advice and generous hardship programs.
Perks: CommonBond loans come with a free “money mentor,” a person who helps you navigate personal finances before, during and after college. CommonBond also offers forbearance to students who encounter economic hardship after graduation. The limit is 24 months over the life of the loan, though CommonBond may extend those limits during declared national emergencies.
What to watch out for: You’ll need a co-signer to apply for a private student loan, but you can request to have them released after making 24 on-time payments.
| Lender | CommonBond |
|---|---|
| APR | Fixed: 5.33%–9.74% Variable: 3.21%–9.29% |
| Loan amounts | $2,000 up to total cost of attendance, with a $500,000 lifetime maximum |
| Loan terms | Not specified |
| Fees | Late fee: 5% or $10 |
Overview: Earnest is an online lender that funds private student loans to undergraduate and graduate students and offers unique repayment options.
Perks: Borrowers who choose a deferred payment plan get a nine-month grace period on payments after graduation, which is three months longer than most lenders. Borrowers are also allowed to skip one payment every 12 months.
What to watch out for: The “skip payment” feature comes with some restrictions; for example, the payment counts toward normal lifetime forbearance limits. Also, Earnest doesn’t offer private student loans in Alaska, Connecticut, Hawaii, Illinois, New Hampshire, Nevada and Texas.
| Lender | Earnest |
|---|---|
| APR | Fixed: Starting at 4.39% Variable: Starting at 2.74% |
| Loan amounts | $1,000 up to total cost of attendance |
| Loan terms | Not specified |
| Fees | Returned Payment Fee: $8 |
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: Borrowers get four months of free access to Chegg Study, which provides study and homework support for any subject. And if you choose to make interest-only payments or a fixed $25 payment while in school, you can get a discount up to 1 percent off your APR.
What to watch out for: While borrowers can apply 12 months of forbearance over the life of the loan, in three-month increments, you'll have to pay $50 per loan, with a maximum of $150 per account, to get forbearance.
| Lender | Sallie Mae |
|---|---|
| APR | Fixed: 4.74%–11.85% Variable: 2.00%–10.09% |
| Loan amounts | $1,000 up to total cost of attendance |
| Loan terms | 5 to 20 years |
| Fees | Late fee: 5% or $25. Returned Check Fee: Up to $20 |
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.
Perks: In addition to the routine 0.25 percent autopay discount, SoFi customers with an eligible account may qualify for a member rate discount of 0.125 percent. Borrowers get access to free career coaching, and if you lose your job through no fault of your own, you’re eligible to postpone loan payments in three-month increments (up to 12 months total) and receive job placement assistance.
What to watch out for: SoFi doesn’t offer a co-signer release, and the minimum loan size is higher than that of most lenders.
| Lender | SoFi |
|---|---|
| APR | Fixed: 4.41%–11.76% Variable: 1.73%–11.00% |
| Loan amounts | $5,000 up to total cost of attendance |
| Loan terms | 5 to 15 years |
| Fees | None |
Overview: Wells Fargo is a bank that offers private student loans for undergraduate students, graduate students, parents and those attending career-training programs. The low rates, range of options and flexible hardship options make this lender a solid choice — whether you’re pursuing a four-year degree or nontraditional schooling.
Perks: There’s a handful of hardship options for struggling borrowers: short-term payment relief for up to two months, forbearance up to 12 months, payment options if you’re already past-due on the account and a loan modification program. In addition to the 0.25 percent autopay discount, borrowers may also qualify for a discount up to 0.50 percent when they have a qualified Wells Fargo investment or checking account. Plus, borrowers get a dedicated student loan advisor.
What to watch out for: Although Wells Fargo offers hardship programs, not all of its private student loans are eligible for forbearance.
| Lender | Wells Fargo |
|---|---|
| APR | Fixed: As low as 4.53% Variable: As low as 1.96% |
| Loan amounts | $1,000 up to total cost of attendance, with a $180,000 maximum depending on program of study |
| Loan terms | Not specified |
| Fees | None |
Here’s the general process you can expect when applying for a private student loan:
When choosing a student loan lender, look for low interest rates, limited or no fees, and flexible repayment terms. You also want to make sure the lender offers hardship options in case you have financial difficulties during repayment.
Starting your repayment while in school can help reduce the overall cost of your loan. Most private lenders offer these types of repayment plans:
Every lender has different eligibility requirements for student loans, but generally you’ll need to:
Yes; once you start repaying your student loans, you can deduct the interest each year. At the beginning of the tax season, look for Form 1098-E in the mail or in your online loan account. The form will tell you how much interest you’ve paid on your student loans during the tax year.
Eligible borrowers can deduct up to $2,500 of the interest paid in the past year on a qualified student loan. A deduction lowers the amount of your income that’s taxable. So if you earn $30,000 a year and you can deduct the full amount, then only $27,500 of your income will be taxed.
For tax year 2019, the deduction is available to filers who earn up to $85,000 (or $170,000 if you file a joint return), but it's gradually phased out if your modified adjusted gross income is between $70,000 and $85,000 (between $140,000 and $170,000 for joint filers).
Yes, some private lenders are willing to work with borrowers with less-than-stellar credit, although interest rates may be higher and loan amounts may be smaller.
Ascent, for example, says that it can base its lending decision on alternative factors. These may include your school, graduation date, major and cost of attendance. Check for credit score requirements at each lender. Some allow you to do a prequalification, which allows you to see if you qualify and the potential rates you’ll receive without hurting your credit.