Whether your college plans involve heading to campus or logging online, one thing is certain: You will need a way to pay. Although federal student loans are often the most affordable way to borrow, they may not be enough to cover all of your college costs. Private student loans can fill funding gaps, but you will need to shop around to choose the right lender.
|
LENDER |
LEARN MORE |
FIXED APR |
MAX. LOAN AMOUNT |
MIN. CREDIT SCORE |
|---|---|---|---|---|
 View Disclosure Sallie Mae 4.6 |
4.50% to 14.83% with autopay | Cost of attendance, minus aid | Mid 600s | |
 View Disclosure College Ave 4.6 |
4.74% to 15.32% with autopay | Cost of attendance, minus aid | Mid 600s | |
 View Disclosure Earnest 4.8 |
4.45% to 13.70% with autopay | No maximum | 650 | |
 View Disclosure SoFi 4.5 |
4.49% to 13.98% with autopay | Cost of attendance, minus aid | Not disclosed | |
 View Disclosure PNC 4.3 |
As low as 4.49% with autopay* | $50,000 | Not disclosed | |
 View Disclosure Education Loan Finance 4.7 |
3.98% to 11.99% | Cost of attendance, minus aid | Not disclosed | |
 View Disclosure Ascent Funding 4.4 |
4.62% to 14.99% with autopay | $200,000 | Not disclosed | |
 View Disclosure Citizens 4.1 |
4.99% to 14.25% with auto and loyalty discount* | Up to $350,000 | Not disclosed | |
 View Disclosure Credible 4.7 |
3.22% to 14.75% with autopay | Not disclosed | Not disclosed | |
 View Disclosure LendKey 4.3 |
4.89% to 10.39% with autopay | Cost of attendance, minus aid | Not disclosed |
Find the Best Student Loans for You
Advertiser Disclosure
Sallie Mae is a publicly traded consumer bank that offers private student loans to pay for undergraduate, graduate and professional degrees, among other educational needs. Congress started Sallie Mae in 1972 as a government-sponsored entity that serviced student loans. The lender went private in 2004 and today provides a range of student loan products. Additionally, Sallie Mae Bank offers savings products and other tools to help families plan and pay for college, including a credit card that earns bonus cash back to help you pay off any student loan.
College Ave exclusively offers student loans. Founded in 2014 and based in Wilmington, Delaware, College Ave offers undergraduate, graduate and parent loans for students enrolled at schools affiliated with College Ave in all 50 states and the District of Columbia. College Ave’s advantage is speed, with applications that take a few minutes to complete and instant decisions.
Earnest is an online lender offering private student loans to college and graduate students, as well as student loan refinancing. The company was founded in 2013. Borrowers can choose their own loan terms to fund up to the full cost of their education.
SoFi is an online lender founded by Stanford business school students in 2011. SoFi offered student loan refinancing as of May 2012, and the San Francisco-based company added private student loans in 2019. Choose from undergraduate, graduate, law, MBA, health profession or parent loans with no fees.
PNC offers student loans in all 50 states for students at all stages of postsecondary education, including professional training loans and refinancing. The bank is also engaged in a number of community efforts, including financial literacy programs and PNC Grow Up Great, which supports early childhood education. For eligible undergraduate students, PNC offers opportunities to win $2,000 scholarships toward education expenses.
Education Loan Finance, also known as ELFI, is a student loan program offered by Tennessee-based SouthEast Bank since 2015. The company provides private student loans and refinancing options for private and federal student loans.
Ascent Funding is an online lender offering undergraduate and graduate student loans for those with or without a co-signer at more than 2,200 eligible schools nationwide. Students who are not U.S. citizens or permanent residents or those with Deferred Action for Childhood Arrivals status – aka “Dreamers” – may apply for an Ascent loan. Ascent Funding was founded in 2015 and is based in San Diego.
Citizens Bank was founded in the late 1800s in Rhode Island. Today, it’s one of the largest commercial banks in the U.S. Branches are concentrated in the New England, mid-Atlantic and Midwest regions.
Credible is a loan comparison marketplace that allows would-be borrowers to shop around for student loans and student loan refinancing that meet their needs. The company was founded in 2012 in San Francisco as a tool to empower borrowers to shop rates and products.
LendKey’s digital platform connects borrowers who need private student loans or refinancing loans with nonprofit credit unions and banks. Since 2009, LendKey has helped more than 135,000 people by funding $5 billion in loans. The company offers fixed- and variable-rate loans for undergraduate and graduate students.
Student loan interest rates increased last month, according to a U.S. News analysis of minimum and maximum APRs reported by private lenders. Student loan rates have trended higher during the past year, with variable rates climbing by a higher margin than fixed rates.
Here are the in-school student loan rates offered during the month of Feb. 2023:
- Average fixed APR range: 4.29% – 13.63% (Compared to 4.29% – 13.62% the previous month).
- Average variable APR range: 4.21% – 13.54% (Compared to 4.13% – 13.37% the previous month).
The APRs on the lower end of the range are generally reserved for applicants with a high credit score and low debt-to-income ratio, while those with poor credit or limited income will see higher rates.
If you don’t have the credit history needed to qualify for a competitive student loan rate, consider enlisting the help of a cosigner. Additionally, shop around with multiple student loan lenders to ensure you’re getting the lowest possible rate for your financial situation.
Before you consider private student loans, make the most of federal and free financial aid, including private scholarships. You may be eligible for federal Direct Unsubsidized Loans, but there are limits on how much you can borrow each academic year and overall. Annual borrowing limits range from $5,500 to $20,500.
“Your first step in financing your education is to submit a Free Application for Federal Student Aid, commonly called a FAFSA,” says Jay S. Fleischman, a lawyer who advises student loan borrowers on effective repayment strategies.
Even if you don’t think you’ll need financial assistance or think you won’t qualify, submit a FAFSA, which is the key to most financial aid. It’s a requirement for the student financial assistance programs authorized under Title IV of the Higher Education Act, including federal loans, grants and work-study programs. These do not have income or GPA cutoffs, which are common myths.
Unlike federal student loans, private student loans do not offer standard repayment plans and interest rates. Your credit, and that of a co-signer if you have one, will affect the types of loans you qualify for and the student loan interest rate you’ll receive.
Loan Types
Private lenders may offer different types of loans depending on the degree you’re pursuing. The loan type can affect your loan amount, interest rate and repayment terms.
- Community college or technical training. Some lenders provide loans to students who are pursuing two-year degrees, attending nontraditional schools or going to career-training programs.
- Undergraduate school loans. You can take out undergraduate loans to pay for expenses while you pursue a bachelor’s degree. Undergraduate loans may have lower interest rates and higher loan limits than community college loans.
- Graduate or professional school loans. Graduate school loans tend to have higher maximum loan amounts than undergraduate loans, reflecting the higher cost of attending school for a master’s degree or doctorate. Some lenders have special loan programs for business, law or medical school.
- Parent loans. Lenders offer these to parents of students. Some families have an informal agreement that the child will make loan payments after graduating, but the legal responsibility to repay the loan falls on the parents.
Loan Terms
The loan term is the length of the loan’s repayment period, which could range from five to 20 years for private student loans. Typically, shorter loans have higher monthly payments than longer loans but lower interest rates and lower total costs.
Loan Limits
Loan minimums: Most lenders have minimum amounts you can borrow, which may vary based on your state. Because the minimum could be as low as $1,000, a private student loan may not be the best option if you only need a few hundred dollars for textbooks or another small expense.
Loan maximums: Lenders may set a maximum annual amount you can borrow or establish a combined private and federal amount you must fall under to qualify for a loan. You may also be limited to borrowing up to your school’s certified cost of attendance, which is outlined in your financial aid award letter.
Interest Rate Types
Lenders offer student loans with either fixed or adjustable interest rates. Carefully consider your options because you may not be able to switch your interest rate type after taking out a loan, without refinancing.
When you’re comparing student loans from different lenders, look at the annual percentage rate, or APR, rather than the interest rate. The APR is your total cost of borrowing each year and includes interest and fees.
Several factors determine a private student loan interest rate, including the loan amount and repayment length, as well as the borrower’s credit history and debt-to-income ratio. If you have a low credit score or no established credit history, you may be offered a higher interest rate than someone with good credit or require a co-signer. Whether you’re pursuing career training or a bachelor’s or master’s degree and whether you’re choosing a fixed- or variable-rate loan also factor into your interest rate.
- Interest rate discounts. Many lenders offer an interest rate discount if you sign up for autopay. The discount is often 0.25 or 0.5 percentage point, but it may not take effect until you start making full principal and interest payments. Some lenders provide a discount if you have another product with them, such as a loan or bank account.
- Potentially lower rates. For well-qualified applicants, private student loans may offer more competitive interest rates than other gap funding options, like Direct PLUS Loans.
- Ability to compare rates. Private student loan lenders let you prequalify before applying, which lets you check your estimated interest rate and loan terms. This gives you the ability to compare costs and shop around for the lowest possible student loan rate for your financial situation.
- Early repayment options. Making interest-only payments, full payments or fixed monthly payments will help lower your loan balance before you graduate.
- Deferment options. You might be able to defer payments while you’re in school. Lenders may offer a grace period after you graduate or if you drop below half time, and you won’t need to make full payments until the grace period ends.
- Financial hardship deferment. You may be able to defer your student loan payments if you go back to school, join the military or can’t afford payments for another covered reason, such as a job loss.
- Discharge due to death or permanent disability. Find out whether your loan balance passes on to your estate or co-signer if you die before it’s repaid. Also, make sure you know what happens if you become permanently disabled and can’t afford to repay the debt.
- Co-signer release. A lender may release a co-signer from a loan after the student makes a series of on-time payments and if the student qualifies to take on the loan.
- Credit-based eligibility. Private student loan terms will depend on the applicant’s credit. Without a creditworthy co-signer, many students may not be able to get approved or may only qualify for a high interest rate.
- Risk for co-signers. Co-signers take on debt and risk when they add their names to private student loans, since they will be equally responsible for repaying the debt. If the student can’t make payments, this can hurt the co-signer’s credit.
- Potentially higher interest rates. Private student loans do not always offer lower interest rates than federal student loans.
- Interest accrual. With subsidized federal loans, the government will pay the interest while you’re in school and when the loans are in deferment. But with private student loans and unsubsidized federal loans, you will accrue interest as soon as you take out the loan.
- No guaranteed hardship options. Private student loans aren’t eligible for federally mandated deferment options, forbearance programs and income-driven repayment plans. Some private student loan lenders offer deferment or forbearance options, but they might not be as flexible as your options with federal student loans.
- No federal forgiveness programs. Several federal student loan forgiveness and cancellation programs aren’t available with private student loans, such as Public Service Loan Forgiveness and borrower defense to repayment.
- Shorter default period and little recourse. Private student loans can default after one missed payment, although you may be able to repay the late balance and bring the amount current before the lender charges it off. If you default on a private student loan, the entire loan balance becomes due immediately. Federal student loans default after 270 days of nonpayment, and when they do, you may have several options for getting your loans out of default.
Focus on four keys areas when comparing private student lenders, according to the Federal Trade Commission, the Consumer Financial Protection Bureau, the Department of Education and countless consumer reviews.
- Costs: The cost of your private student loan will depend on a variety of factors, including the interest rate and the type of interest. Look closely at fees to calculate how they’ll affect your total cost of borrowing. Lenders often have application or origination fees and late fees. Always read the loan terms closely to identify potential fees.
- Products: Determine the type of student loan you’ll need, how much you want to borrow, and check that the lenders’ offerings match your requirements. Compare loan terms and limits to narrow your list.
- Eligibility requirements: Research lender eligibility criteria, such as citizenship, enrollment status, age, and income and credit history.
- Additional features: The fine print of private student loans can vary from one lender to another. Some features or benefits could make repayment easier, lower your interest rate or help you choose the right lender for your needs.
When you apply for a student loan, you’ll need to meet eligibility requirements, provide documentation, and go through processing before approval and disbursement.
- Eligibility: The lender will check basic eligibility for the loan and verify further documentation, such as income, credit history and other factors. Additionally, you’ll need to fill out a Private Education Loan Applicant Self-Certification form through your school’s financial aid office.
- Required documentation: You’ll need to verify personal and financial information, such as a Social Security card and recent pay stubs.
- Processing: Many private student loan lenders let you apply online and receive a decision quickly.
- Approval and disbursement: Once you’re approved for a private student loan, you can then choose the interest rate type, the repayment plan and the other loan terms, and then sign the loan agreement. The lender will contact your school to verify that you’re eligible for the loan amount you requested. Private student loans will be sent directly to the school. If your loan amount exceeds what you owe the school for that semester, you may receive a refund for the difference, which will typically be subtracted from the loan amount.
- Apply for grants and scholarships. Need-based grants are awarded at the federal, state or college level. As for scholarships, students should start their search locally, and national scholarships are listed on database search websites, including the U.S. News Scholarship Finder.
- Exhaust all federal loan possibilities. Federal student loans tend to have low fixed interest rates. They also offer better deferment and forbearance options, among other advantages.
- Consider a cheaper college. Studying for two years at a community college before transferring to a four-year college can translate to significant savings. The average cost of annual tuition and fees at schools ranked by U.S. News for the 2022-2023 school year was $39,723 at private colleges and $10,423 for state residents at public colleges. In contrast, community colleges charge about $3,860 on average per year for full-time in-district students, according to the 2022 Trends in College Pricing and Student Aid report released by the College Board.
- Ask about a payment plan. Some colleges let you spread out certain costs over monthly payments. These plans usually cover only direct costs, such as tuition and sometimes campus housing and food, and charge an enrollment fee but no interest.
- Live at home. Room and board cost an average of $12,310 per year at public colleges and $14,030 at private colleges for 2022-2023, according to the College Board. Determine the cost of your commute to see whether living at home could cut this expense.
- Get a part-time job. A part-time job can pay for personal expenses, supplement federal financial aid and help you gain valuable work experience. Some employers may help pay for college, with benefits such as tuition assistance or paid internships.
- Ask family or friends for support. If someone can help pay for tuition or supplies, then accept graciously.
- Take a year off. Weigh the total cost of a private student loan against the cost of delaying your education a year and working to save for college, and then decide what suits you best.
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. The scoring factors for private student loan providers are customer service ratings, fixed APR, variable APR, loan product availability, minimum and maximum loan terms, minimum and maximum loan amounts, minimum FICO score, and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
Source: https://money.usnews.com/loans/student-loans/best-private-student-loans
