Best Private Student Loans of 2021

After exploring scholarships, grants, and federal student loans, a key way to pay for college can be finding the best student loans through private loans from banks and other lenders.
Private student loans can be easier to qualify for than federal student loans, which are provided by the federal government and some of which are based on financial need.
Federal loans often have more flexible repayment plans, though private student loans also offer different repayment terms, including making interest-only or fixed payments while in school. Private loans offer the choice of a fixed or variable interest rate
Either way, you have to pay back the money you borrow, plus interest, whether you graduate or not. Knowing which student loans are best can save you money, which can help students and their parents.
Note that the interest rates quoted are as of Dec. 2, 2020, and may change at any time. Go to each company’s website for the latest information.

Overview of the best private student loans

ProviderBest For
Sallie Mae0.25% autopay discount
AscentFuture income-based option
CommonbondEarly cosigner release
EarnestHaving fair credit
SoFiOnline services
Citizens BankMultiyear approval
College AveInstant decisions
DiscoverMinimal fees
LendKeyMultiple lender options
PNC0.50% autopay discount

Best private student loans

Sallie Mae

You’ve probably heard of Sallie Mae. It started in 1973 as a government entity servicing federal student loans. In 2004 it went private as a publicly traded bank offering private student loans.
The lowest, variable interest rate that Sallie Mae offers, 1.25%, only comes after a 0.25% rate reduction when a student or cosigner enrolls in automatic debit payments for the monthly payments. Its fixed interest rate loans start at 4.25% APR. The APRs assume a $10,000 loan to a freshman with no other Sallie Mae loans.
As with other types of school loans, students have a better chance of being approved for a loan if they have a cosigner. Sallie Mae says the approval rate is 95% for students with a cosigner. This person is usually a parent with good credit, and they’re responsible for repaying the loan if the student doesn’t.
The rates listed above are for the most credit-worthy customers and include autopay discounts. Students getting a loan on their own, however, are more likely to have worse credit scores or no credit scores, and could see their interest rates as high as 11.10% for a variable rate and up to 12.35% for a fixed rate through Sallie Mae.

Ascent

Ascent is an online lender that makes it easy to apply, qualify, and repay its private student loans.
The interest rates offered by Ascent vary by how you decide to repay a loan. Interest-only payments can be made or a $25 minimum payment can be made while you’re in school. For the lowest rate, payments can be deferred until six months after graduation.
It also has a creative solution for students who don’t want a traditional co-signed loan or a credit-based non-co-signed loan that they qualify for on their own. Both of those are available, but college juniors and seniors who don’t have credit, income, or a co-signer can borrow money for college based on their future income.
Eligibility requirements include having a 2.9 GPA or higher. Students must also be enrolled full-time as a junior or senior, or expect to graduate within nine months. They get a 2% discount for automatic debit payments. Variable-rate loans can be repaid in 10 or 15 years, and fixed-rate loans must be repaid within 10 years.
A minimum credit score isn’t required for Ascent’s future income-based loan. Instead, it evaluates loan applications based on factors like the student’s school, major, future earning potential, academic progress, and credit history.

Commonbond

Commonbond is one of the few student loan providers that require undergraduates and graduate students to have a cosigner to borrow from. MBA borrowers may be able to qualify based on their credit score. Having a cosigner means the loan is more likely to be repaid.
To make up for the requirement of having a cosigner, Commonbond allows cosigners to be released from a loan earlier than other lenders. It allows cosigners to be released after 24 months of on-time payments. This can put your parents at ease and give you the full responsibility of paying off your student loan debt.
Another interesting option at Commonbond is its hybrid loan rate. The interest rate is fixed for 5 years, then changes to the variable. This gives you a set monthly loan repayment for the first half of the loan when interest payments on loans are higher. Later you’ll get the benefits of a variable interest rate, which is usually lower than a fixed rate.

Earnest

If you have a fair credit score, meaning at least a 650 FICO credit score, then the online lender Earnest may be best for you.
Getting a private student loan on your own may be best if you don’t have a friend or family member with a good credit score, or who isn’t willing to be a cosigner.
A 650 FICO score is very close to the “good” credit score range of 670-739, according to Experian. It reports that 67% of Americans have a good score or better, and 17% have a fair score. That’s nothing to be ashamed of, especially if you’re a student with little or no credit history.
Along with a 650 credit score, Earnest requires at least a three-year credit history, enough savings to cover two months of expenses and other student loans, and can’t carry a large amount of debt. You must be a full-time student.
Earnest allows a payment to be skipped once a year, though it must be repaid later. Borrowers can pay monthly or every two weeks, with a 0.25% discount for autopay. A nine-month grace period is given for repayment to begin after graduation, which is longer than the six months most lenders offer.

SoFi

Most online lenders have applications that are easy to fill out online. If they don’t, what’s the point of going there? SoFi does that and much more with its excellent online services for school loans.
Its lending process is completely online. Like many lenders, it offers a 0.25% autopay discount, and borrowers may qualify for a 0.125% discount on additional loans.
SoFi doesn’t disclose a minimum credit score requirement, but it requires borrowers to be employed or have enough income from other sources, including a cosigner, to repay loans. Borrowers must also have satisfactory academic progress, including good grades and completed credit hours toward completing a degree.
SoFi members get free access to Edmit Plus, a tool to estimate financial aid, compare costs of attendance, and learn about other forms of financial aid. SoFi also offers $400 off SAT and ACT prep courses.
It also offers free career coaching, free advice from a financial planner, and exclusive member events. Its website offers all kinds of resources, including student loan refinance calculators and advice on choosing a fixed or variable interest rate.

Citizens Bank

Most student loan lenders require borrowers to reapply each school year if they need to borrow more money for the coming school year. Citizens Bank allows multi-year approval, meaning once they’re initially approved, students can secure loans for subsequent years without getting a credit check every year.
To enjoy this benefit, however, borrowers must go through a hard credit inquiry that could drop their credit score a little bit. There is no preapproval or instant application.
Once approved, a soft credit inquiry is done for additional academic years. Future student loans won’t impact a credit score, the bank says. If your plans change, you can borrow only the amount of money you need.
Interest rates drop by 0.25% when enrolled in autopay, and another 0.25% for Citizens Bank customers. Citizens Bank has branches in about 40 states, with most in New England, and the Mid-Atlantic and Midwest regions.

College Ave Student Loans

With loans available in all 50 states, College Ave Student Loans specializes in simple loan applications with quick decisions. It also has some of the lowest variable interest rate student loans we can find.
Like a few other lenders, borrowers at College Ave can make full payments while in school, pay interest only, a flat fee, or defer payments. Terms range from five to 15 years.
Part-time undergraduate students can get loans from College Ave, as can graduate students who are enrolled for less than half time.
The company’s website has an excellent loan calculator to figure out the cost of a loan and what your best loan options are. Slide the scales to make small monthly payments while in school and you can see how the post-school payments drop and lower the total cost of a loan.

Discover

Discover Bank is known for not having fees on its credit cards, and it continues that with its student loans. It has no application, origination, or late fees.
It also offers discounts for having good grades and for certain payment options. Students earn a one-time award equal to 1% of each new Discover student loan when they have at least a 3.0 GPA.
Interest rates are reduced by 0.25% for having automatic payments, and an additional 0.35% discount is given for selecting the interest-only repayment option and making interest-only payments during the in-school and grace periods.
Discover doesn’t disclose qualifying criteria, and prequalification isn’t available. A hard credit pull is made for applicants, which could hurt your credit score for a while.

LendKey

LendKey works with credit unions and community banks to give online borrowers a chance to find many types of loans that meet their needs. A single application allows students to review and consider multiple lenders, saving them time from doing it one by one on their own.
LendKey has no origination or application fees, though other fees vary by lender. A 0.25% discount is given for autopay.
You must complete the application process and apply for a loan to find out what loan terms you can get and if you’re approved. No online pre-approvals are available. A credit history of at least 36 months is required, and cosigners are accepted.

PNC

Most student loan lenders offer a 0.25% interest rate reduction for having autopay. PNC doubles that to 0.50% for choosing automatic withdrawal, also called ACH, from a checking or savings account.
The minimum student loan amount is $1,000, and it’s $10,000 for refinancing. To refinance, you must be graduated or no longer enrolled in school.
The maximum loan amount is $50,000 for an undergraduate degree, $65,000 for graduate school, and $75,000 if refinancing. Multi-year approval is not offered.
PNC also has loans tailored toward health and medical professionals, health professions residency, and law students studying for the bar exam.

Summary of the best private student loans

Note that some of these interest rates may include a discount for having autopay and/or a cosigner.
ProviderVariable rates startFixed rates startMinimum loanOrigination fee
Sallie Mae1.25%4.25%$1,000No
Ascent2.46%3.39%$1,000No
Commonbond6.59%6.98%$5,000No
Earnest1.05%3.49%$5,000No
SoFi2.25%2.99%$5,000No
Citizens Bank1.21%4.25%$1,000No
College Ave1.09%3.49%$1,000No
Discover1.24%4.24%$1,000No
LendKey1.49%3.99%$2,000No
PNC2.92%4.49%$1,000No

FAQs

When is a private student loan a good idea?

Private student loans are often used to refinance federal student loans to get a better interest rate.
Federal Direct PLUS loans for graduate students or parents who want to pay for school can be the most expensive option among federal loans. If you have good credit or a steady income, a private student loan might be better.
But long before you get to that decision, you should fill out the Free Application for Federal Student Aid, or FAFSA, to see if you’re eligible for financial aid beyond federal student loans. These include grants, scholarships, and gift aid. If federal loans and free money options are exhausted, then a private student loan may be exactly what you need.
A private student loan can fill a funding gap if other financial aid doesn’t cover your costs. Some federal student loans have limits and don’t cover the entire cost of attendance. Student loans can also be used to pay for summer school, which can help you graduate earlier.
If your expenses suddenly change and you need money, a private student loan can help. Maybe you need to move, or your laptop dies. Instead of a cash advance from a credit card, a low-interest student loan may be a better choice.

What is forbearance?

You may come upon the term “forbearance” when researching student loan providers. We did.
It simply means that the lender allows you to temporarily put off paying the loan. Deferment is another term that’s used.
These options may be needed by students or recent grads who are having difficulty making loan payments. Many lenders allow loans to be deferred for six months after graduation. Borrowers also often have the option to not make any payments while they’re in school, though they can make at least a minimum payment to lower the loan costs.
Some lenders, such as Discover, forgive student loans for borrowers and co-signers if the primary borrower dies or is permanently disabled.

What should I look for in the fine print?

There are many details of a student loan to be certain of before you agree to the loan terms. Here are a few to look for:
  • Loan limits: How much you can borrow is important. Loans start at $1,000, but some lenders require borrowing at least $5,000, which may be more than you need for a few expenses. At the higher end, some loans only go so high, though most should be for up to the cost of attending school for a year. Citizens Bank allows multi-year loan approval.
  • Prepayment penalties: Most lenders don’t charge fees for paying off student loans early.
  • Repayment options: Most lenders have around four repayment plan options to repay a student loan. These include in-school payments such as full principal and interest, interest-only payments, and a flat $25 each month. It’s common not to pay anything while in school, and to put off payments until six months after graduating.
  • Origination fee: None of the lenders we reviewed charge this fee, which is sometimes charged on loans.
  • Automatic payments: If you set up autopay from your checking account, you’ll often get a 0.25% interest rate deduction.

Why you should use a private student loan

If you don’t qualify for student aid in grants, scholarships, gifts, or other forms, then you may want to apply for a student loan.
Federal student loans, which are different from private student loans that we’ve reviewed here, are usually cheaper because the interest rate is fixed and often lower.
However, in today’s environment where interest rates are at all-time lows, variable rates on student loans have dropped considerably, making a variable rate private student loan cheaper than a federal loan at a fixed rate.
If you have a federal student loan at a high, fixed interest rate, then shopping for a private student loan and comparing costs can be worthwhile.

Why shouldn’t you use a private student loan?

If you qualify for a federal student loan, and it’s at a good interest rate, it can be a good way to pay for college for several reasons.
Federal student loans are subsidized, meaning the government pays the interest while you’re in school at least on a half-time basis. Private student loans are often not subsidized. Payments can be deferred until after you graduate, but the interest charges will continue compounding while you’re in college.
If you have poor credit or don’t know someone with good credit who will cosign a loan for you, then a student loan can be hard to get. At least a “fair” credit score is needed to qualify for a private student loan. Most federal student loans, except for PLUS loans, don't require a credit check.
A private student loan may also not be right for you if you plan to work in a public service field. Teachers, doctors, and others can have federal student loans forgiven by working in public service. Private lenders don’t offer such loan forgiveness.

The bottom line

After a mortgage, student loans will likely be the largest amount of debt you’ll ever have. The average borrower owes $37,172 in student loan debt, according to one financial website.
But don’t despair. A college education usually pays off. On an annual basis, someone with a bachelor’s degree earns about $32,000 more than those with a high school diploma, according to one report.
Still, no one wants to take on debt if they don’t have to. Trying to get as much free financial aid as you can is a good idea, as is borrowing money if you have to.
To find the best student loan, start by shopping for the best interest rate you can find. Select a loan term with monthly payment amounts you expect you can afford when you graduate.
If you don’t qualify on your own, look for a cosigner with good credit for help. It probably won’t be the last thing you ever ask your parents for, but it can lead to a lifetime of higher earnings.

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