Male student with glasses on sitting and filling out application for a private student loan

College Success

12 Best Private Student Loans & How To Apply

06.15.2022 • 14 min read

Nick Griffin

Subject Matter Expert

Learn what private student loans are and how they work. Included is a list of the best private loans there are and how to apply.

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In This Article

  1. What Is a Private Student Loan?

  2. 12 Best Private Student Loans

  3. How To Apply for a Private Student Loan

  4. Private Student Loan FAQs

When thinking about the cost of college, do you know how you’ll pay for it?

There are so many financial options to look into, like grants and scholarships, federal student loans, and private student loans.

While most prospective students know to fill out a FAFSA (Free Application for Federal Student Aid) to access federal student loans and grants that help cover the costs, much less is known about private student loans. Private student loans can be an ideal tool to help pay for school in certain situations.

Whether you are beginning your college career right out of high school or going back to school in your 30s, have no fear, there is likely money available to help pay for your education.

The first step is learning what your options are.

What Is a Private Student Loan?

Private student loans are loans issued by a bank or credit union to help pay for undergraduate or graduate school expenses.

Private student loans differ from federal student loans in several ways:

FEDERAL STUDENT LOANSPRIVATE STUDENT LOANS
Fixed interest rateChoice of variable or fixed interest rate
Interest set by federal governmentInterest rate set by financial institution
No credit check or cosignerNeed a credit check and maybe cosigner
Annual limits on loan amount set by governmentMax loan amount based on the cost of individual’s college expenses

Typically, students will access private student loans after they have exhausted their federal loans due to the higher interest rates of private loans. For many students, federal loans will not cover all their college costs, so they access private loans to pay for the remainder of their expenses.

The first step in your student loan journey should be to fill out your FAFSA. The FAFSA allows you to take out low-interest federal student loans, apply for federal grants, and determine your eligibility for work-study. These opportunities should be utilized before you take out private student loans to reduce the amount of interest you will pay back later.

Once you take out all federal loans, the remainder of your college costs can be paid for using private lenders.

Private loans can cover college costs, such as:

  • Tuition and school fees

  • Room and board during college

  • Books and school supplies

  • Transportation

  • Resources such as a computer

Accessing private student loans is often a necessity for students who can’t cover all of their college expenses from grants, scholarships, and federal student loans alone.

Since eligibility, interest rates, loan limits, and repayment options vary with private loans based on the lending institution, it is important to know all the details upfront.

Taking the time to learn about different private student loans can save thousands of dollars and headaches in the future.

12 Best Private Student Loans

Since private student loans differ based on each unique student and their needs, this list of student loan lenders is a useful starting point. We recommend that you do your own research and explore each option to see what the right fit is for your financial needs.

This list, from the US News & World Report, compares student loan lenders by affordability, eligibility criteria, and customer service.

1. Credible

Credible does not provide student loans directly, rather it is a marketplace to search out the best student loans available.

You can put in your specific desired criteria and compare several different student loan options that you are prequalified for. The best part about Credible is that it gives you your options without a hard credit pull.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
No hard credit check2.94% - 13.09%Full cost of education

2. Earnest

Without any application fees, students can fund their college costs or refinance their student loans through Earnest. Earnest will fund all of a student’s college costs including resources needed for college.

Students using Earnest as their lender are able to choose their monthly payment plan and their loan term length.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
6502.99% - 12.78%Full cost of education

3. College Ave

It takes just a few minutes for students to complete the College Ave loan application and have a decision sent to them.

College Ave exclusively deals with student loan programs and offers graduation incentives to students who graduate and land a career. No matter what state or career you intend to pursue, College Ave has loans to fit your needs.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
Mid 600s3.24% - 12.99%Attendance minus aid

4. Sparrow

Sparrow is an online marketplace that allows a student to see their loan options side by side, allowing you to find the best rates out there.

Without a minimum credit score needed, Sparrow provides students with actual loan offers from lenders and not just estimates.

International students can also see the loan options available to them through Sparrow’s free service.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
No Minimum2.99% - 14.98%Attendance minus aid

5. Sallie Mae

Sallie Mae has been in the student loan business since 1972. The company started as a student loan servicer for the federal government and then went private in 2004.

Outside of offering student loans, Sallie Mae prides itself on its additional student services. The company provides financial education to students and parents to help manage college costs.

The college credit card allows you to earn cash back that you can apply toward you

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
Mid 600s3.50% - 12.60%Attendance minus aid

6. Education Loan Finance

Beyond offering private student loans, Education Loan Finance also offers student refinancing on student loans including federal loans.

The Tennessee-based company offers student loans and refinancing in all 50 states and Puerto Rico. Every student loan is eligible for refinancing and there are no origination or application fees.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
6803.20% - 11.99%Attendance minus aid

7. Citizens

As one of the largest commercial banks in the US, Citizens offers several products to college students. In fact, students who have an account with Citizens receive a deduction in their student loan interest rate.

With Citizens, students can streamline ‌applying for student loans each year they are in college by not having an additional application process or credit check to go through.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
Not disclosed3.48% - 11.34%Up to $350,000

8. Purefy

Purefy serves a dual purpose—you can compare student loan options on the website as well as refinance student loans through its partner, Pentagon Federal Credit Union.

Student loans between spouses can be consolidated through Purefy, giving married couples the option of a single monthly payment at a reduced interest rate.

When cosigning through Purefy, they release the cosigner from their loan obligations after 12 months of on-time payments.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
Not disclosed3.26% - 14.50%Not disclosed

9. SoFi

Started by college students, SoFi promises that you will never have to pay origination fees on their loans or even late fees. SoFi gives its student loan borrowers options on repayment plans and offers unemployment protection on loans.

Students can check their eligible rates on SoFi’s website prior to submitting a full application and running a credit check.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
6403.47% - 11.16%Attendance minus aid

10. Ascent Funding

Ascent Funding offers borrowing students a 1% cashback graduation reward once they finish school. As a nationwide company, Ascent Funding provides private student loans in all 50 states to US citizens and those with Deferred Action for Childhood Arrival (DACA) status.

Students can view and select their rates based on if they would like to use a cosigner or not. Those without cosigners can deduct a percentage point off of their interests with regular automatic payments.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
5404.36% - 12.33%Up to $200,000

11. Discover

As the longest-running lender on this list, Discover has made a name for itself as a national bank for more than 100 years. Students have access to several of Discover’s programs and services when choosing to borrow from them.

Discover student loans can cover any and all education expenses with both fixed and variable rates. Students can borrow as little as $1,000 or up to the full cost of their education with no late fees. There are also approval deferment and forbearance options for students deciding to take a year away from school.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
Not disclosed1.29% - 11.99%No maximum

12. U-fi

U-fi offers borrowers flexible repayment options and can have up to 15 years to pay off their student loans.

By choosing to borrow from U-fi, you also get the choice to make full payments, interest payments or defer payments until after you graduate from college. No matter which option you choose, by enrolling in automatic payments you will receive a discount on your interests with U-fi.

MINIMUM CREDIT SCOREFIXED INTEREST RATELOAN AMOUNT
680 (640 with cosigner)3.34% - 10.50%Up to $500,000

How To Apply for a Private Student Loan

1. Figure Out How Much You Need To Borrow

After filling out the FAFSA and applying for grants and scholarships, you should have a rough estimate of how much more money you need for school each year.

Remember that federal student aid typically offers the lowest interest rates and should be utilized first by taking subsidized loans, then unsubsidized, and finally PLUS loans to get the best rates.

Subsidized loans have their interest rates paid by the U.S. Department of Education while in school. Unsubsidized means you have to pay the interest in school, and a PLUS loan (also called a parent loan) has higher interest rates but is typically lower than private loans.

If there are grants or scholarships available to you, apply for them. This is free money that you do not have to pay back.

Once you know your total costs, you can then begin to look for loans to help pay for school. Keep in mind that you could work full time while going to school, or even part-time to help reduce the amount of money you need to pay back down the road.

2. Get a List of Lenders That Work With Your School

Not all schools work with all lenders. It is important to talk to the school you plan on attending to see what your options are.

Most likely, your school’s financial aid office has a list of lenders they work with. This list will guide you in your search for the right financial institution to borrow money from.

Each lender will need your estimated cost of attendance as well. This is an overall estimate put together by your school that includes all college-related costs you will incur and can be acquired through the financial aid office.

3. Compare Several Lenders

While the list above gives you a rough idea of the services that are offered by each lender, this is just the beginning. Take the time to explore several options, looking at interest rates, terms, promotions, and additional services.

You may find that several companies offer a free application without a credit check or any obligation—take advantage of these. Marketplace sites like Credible give you the flexibility to compare several different lenders at once. This is a great starting point.

4. Choose Your Interest Rate Type and Repayment Terms

After choosing which lender you’d like to use, it’s time to apply. Be sure to fill out all the information carefully. A mistake could cost you a higher interest rate for years to come.

Most lenders will give you a choice as to whether you would like to use a cosigner or not if you are creditworthy. They will then show you the interest rates of each option. Take the time to think this through and speak with your potential cosigner about the possibility of having cosigned credit.

Another important decision you need to make is if you would like to use a fixed or variable APR (interest rate). Often a variable rate will start much lower than a fixed rate but can change quickly. Variable rates are a gamble that depends on the state of the economy. The nice part about fixed loans is they’re predictable.

Your payment option is another key component to figure out with a private student loan. While longer terms have lower rates, you will probably end up paying more over time.

Since you don’t know when you could pay off the loan, it may be better to go with a longer-term loan; but try to pay it off more aggressively after you graduate if you can.

5. Track Your Expenses and Reapply Each Year

Since you will need to apply for financial aid and student loans each year, it is best to know what you are spending. By having a college budget, you can adjust the amount you apply for in student loans.

Try keeping a simple spreadsheet of your disbursements, where you make purchases, and for how much. This way you can add up the expenses and adjust either your spending habits or the amount of money you take out in loans each academic year.

There are also loan forgiveness programs out there for eligible students that should be looked into. Depending on if you are going into a certain profession or working at a participating business post-graduation, you may be eligible for loan forgiveness.

Private Student Loan FAQs

Can I Get a Private Student Loan With Bad Credit?

While it is best to keep your credit score high for lower interest rates, things happen. Even with bad credit, you can still find lenders that will work with you.

At first, the interest rates may be higher than those offered to students with better credit. Consider utilizing a cosigner. This way you can reduce your interest rates and the long-term costs of college.

Another great avenue is to look for lenders who offer rewards like lowering your interest rate after 12 months of regular payments before the grace period.

Who Can Get a Private Loan?

While filling out a FAFSA and getting federal student loans first is a much better option, private student loans are available to most graduate or undergraduate students with good credit. If you do not have substantial credit, you may have to have a cosigner to obtain a private student loan.

The major criteria for accessing a private student loan are being a U.S. citizen or an eligible noncitizen, enrollment in an eligible degree or certificate program, and continuing to make satisfactory progress in your program.

Do I Have To Have a Cosigner for a Private Student Loan?

When accessing federal student loans, a cosigner is not required. With private loans, you must have a substantial credit history for loan eligibility.

Several lenders have programs with a cosigner release that allow cosigners to remove themselves from the loan after 12 months of on-time payment.

Should I have a fixed or variable interest rate on a private student loan?

Fixed interest rates are predictable and you can budget for them. Even though a variable interest rate can appear lower at first, students should approach it with caution.

A variable interest rate student loan can change rates on a monthly or quarterly basis. This means you have no control over how much money you will owe in the future.

How Can I Reduce the Number of Loans I Need?

Learning clever ways to save money is a great approach to financing your education over using any loan products.

A wise student would look into several grant and scholarship opportunities. Both grants and scholarships offer you free money to go to school. Since grants are needs-based and scholarships are merit-based, you should apply for both before taking out graduate student loans or undergraduate loans.

Talk to your college’s financial aid office to find grant and scholarship money you could be eligible for.

Another great way to save money on future loan payments is to enroll in online or community college programs. By earning transferable credit through a program such as Outlier’s College Foundation, you could save yourself thousands of dollars in student loan payments in the future.

How Long Will You Pay Off a Private Student Loan?

Most lenders give students an option of student loan terms. Typically, students take out loans for a term of 10 years.

Of course, you want to give yourself enough time to pay off the loan, but if you can afford it, pay more. The faster your student loans get paid off, the closer you will be to financial freedom.

While student loans are a great tool that should be utilized, it is not wise to make minimum payments for years on end. Take advantage of private student loans and then pay them back when you can.

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