Federal student loans offer the best rates and terms for students, but if you've exhausted all your federal options, there are several private lenders worth considering. After searching through rates, repayment options, assistance programs and discounts from the top private student lenders, our team created a list of the most ideal options for various types of borrowers.
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Best Student Loans: Federal Student Aid
Federal student loans are the best option for most borrowers, especially those with little or poor credit. They have the lowest fixed interest rates, no credit score requirements and great repayment options. If you've filled out the FAFSA, the best student loan you can receive for the 2018–2019 school year is a Direct Subsidized Loan, as the government pays the interest while you are in school. However, many borrowers won't qualify without enough financial need, so your next best bet is a Direct Unsubsidized Loan.
Many borrowers are granted a mix of loans based on their need and the federal loan limits. Oftentimes, due to loan limits and the volume of borrowers, federal loans won't cover the total tuition cost. In these cases, students must turn to private lenders or their parents to take out loans. To help those students who need additional student financial aid, our team sorted through the private student loan lenders available to borrowers and found the best options.
Best Student Loan for Low Rates: CommonBond
CommonBond ranked as our best private lender pick for the lowest student loan interest rates available. The lender provides both fixed and variable rates between 3.62% and 9.82%, with a 0.25% auto-pay discount, while most lenders have rates that reach 12%. If you qualify for CommonBond's lowest rates, your loan's APR could nearly match a federal loan (after accounting for the federal origination fee).
Unfortunately, in order to qualify for a student loan from CommonBond, you'll need a co-signer, as most students don't have enough credit history to be approved on their own. But, unlike some other lenders, you can release your co-signer after making on-time payments for two years. Before committing to CommonBond, you should still check your rates with other lenders to make sure you are getting the best value on your student loans, especially if you are taking out a significant amount.
Best Student Loan for Graduate Students: College Ave
College Ave has some of the best options for graduate borrowers who want low rates but flexibility in paying off their loans. The lender provides four repayment options: an interest-only payment, a flat payment of $25 each month, full repayment and deferred repayment. On top of this, the lender gives borrowers the choice of paying back their loans in five, eight, 10 or 15 years. Other lenders, like CommonBond, offer these four options as well but lack loan-term flexibility, giving College Ave the edge over its competition.
Waiting to pay off your student loan until after graduate school can leave you with accumulated interest that will make your monthly payments higher following graduation—especially if you still have student loans from undergrad. If you can't afford full payments, College Ave gives you the option to pay off some of that interest with manageable payments each month. There aren't many drawbacks to using College Ave, as it has competitive rates and helpful repayment plans. But like with every lender, it is good to check all your options for the best rates.
Best Student Loan for Parents: Citizens Bank
Citizens Bank stands out for parent borrowers, thanks to its interest-only repayment option, as most lenders require parents make full payments after the loan is disbursed, and competitive rates, which range between 5.05% and 8.56%. Citizens Bank's lowest rates are even less than federal PLUS parent loans, which have a fixed rate of 7.6% and a loan fee of 4.25%. In many cases, it may be more economical to get a private student loan with this lender over a federal PLUS loan.
On the other hand, we still recommend submitting the FAFSA, especially if you don't have a high credit score, as you can qualify as long as you don't have adverse credit history. But even so, Citizens Bank may be a better option because it allows you to defer full payments until after your child graduates. Federal PLUS loan repayment begins 60 days after the loan is disbursed, which can be a large financial commitment for parents.
Best Student Loan for Borrowers Without a Co-Signer: Ascent
If you don't have anyone to co-sign your student loan, Ascent offers independent student loans, available to junior and senior undergraduate students without a co-signer and little credit history. Many lenders allow students to borrow without a co-signer but require sufficient credit history to qualify, which most students lack. Instead of focusing solely on credit history, Ascent looks at a student's financial potential including school attendance, major and savings. However, the loans have significantly higher APRs, which will increase the amount of interest you'll pay.
Although Ascent is a good option for borrowers without a co-signer and little credit history, you are better off using a co-signer or building your credit, if possible, to apply for a student loan with more manageable rates. Ascent also offers borrowers co-signed loans with better rates, but the rates are still not as competitive as CommonBond or College Ave. However, Ascent has more lenient credit score and income requirements for co-signers, so you may have a better chance of getting approved.
Summary of Our Top Picks
For a quick comparison, we summarized our top student lenders according to their strengths for student loan borrowers. We evaluated each lender on certain criteria, which we explain in the section below on how to find the best student loan for you and how we found our top options.
|Best for...||Lender||APRs*||Loan terms|
|Low rates||CommonBond||5, 10 or 15 years|
|Graduate Students||College Ave||5, 8, 10 or 15 years|
|Parents||Citizens Bank||5 or 10 years|
|No co-signer||Ascent||10 or 15 years|
*Rates include 0.25% rate discount with auto-pay
How to Find the Best Private Student Loan for You
After maxing out your federal loan options, borrowers with high credit scores (generally, a FICO score of 680+) should look for the lowest possible rates they can qualify for from private lenders. The lowest APRs we saw were between 3% and 4%. If you don't have a high credit score, the best option would be to use a co-signer with more financial history to qualify for a low interest rate. You'll want to focus on minimizing the amount of interest you pay on top of your loan principal amount, since you want as little debt as possible.
If you can afford to start paying off your student loans while in school, which is recommended to lower the amount of interest you will have to pay after graduating, you should look at lenders like College Ave and CommonBond. These lenders offer interest-only and fixed repayment plans, which let you repay small amounts of your loan without being a financial burden. However, if you are unable to make any payments while in school, you'll still have options, as almost all lenders allow you to defer repayment until after leaving school.
And the last significant factor to look into is your lender's loan servicer. This is arguably more important than your actual lender, as most of the work gets passed on to a servicer. If you want a lender that services its student loans, then Sallie Mae and Discover are the lenders for you. To get an idea of how reliable your servicer is, check reviews online, talk to your lender, and ask upperclassmen, mentors or financial aid representative at your college to see what types of experiences they've had with the servicer you're considering. Some of the largest student loan servicers include Navient, Nelnet and MOHELA.
How We Arrived at Our Top Student Loan Picks
Our team combed through dozens of lender websites and borrower reviews to find the top student loan lenders for various types of borrowers and how they differentiate themselves among their competitors. We evaluated the lenders based on different borrower profiles, as many students have certain qualities they are seeking from a lender. Most commonly, borrowers are looking for low APRs and multiple repayment options, since those components affect your finances the most.
We looked at lenders with some of the most competitive rates and evaluated them based on the choices they offer borrowers with the goal of saving them the most money. Ultimately, the repayment process will be the most significant part of your student loan experience. If your lender allows you to pay off some of the loan while in school, then you could save on interest costs. And if your lender offers hardship programs, you'll have a safety net in case you can't make payments in the future.
ValuePenguin's Selection Criteria
APR: The APR on your student loan is one of the most important factors when picking a private student lender due to the extra cost it adds to your loan amount. The interest accumulates over time, and if you choose to defer repayment, as many students do, you will be left with much higher monthly payments than if you chose a lower interest rate. Therefore, we gave preference to lenders that had starting interest rates below 4%.
Fees: While the interest rate is a significant factor, your fees can add up as well. Most of the top lenders don't charge application fees, but some lenders, like CommonBond, add an origination fee to your APR. And almost all lenders have a late fee, which can negate any savings you made on interest costs.
Repayment terms: We favored student lenders with multiple repayment options available to borrowers, as it is the main process of taking out a student loan and generally lasts between five and 20 years. Almost all lenders allow you to defer or make full payment while in school, so we searched for lenders that allowed you to choose from multiple loan terms with more options to put some funds toward paying off your loans while in school.
Servicer reputation: We considered lenders that service their own loans or have generally good servicer reviews. Your lender's servicer is arguably more important than your actual lender, as most of the work gets passed on to a servicer. Anything from loan payments, issues with your loan and working out repayment options is handled by your servicer.
Repayment assistance programs: Many students have trouble finding jobs or don't make enough income after leaving school, which can lead to student loan default. As a result, we put emphasis on finding lenders with options for borrowers who need financial assistance, whether they need to defer payments or apply for forbearance in order to avoid default.
Discounts: Lastly, we took discounts into account when evaluating lenders, as they can lower your interest rate significantly. Most lenders offer at minimum a 0.25% discount on your interest rate if you sign up for automatic payments. And for lenders like CommonBond, you can receive $200 for referring someone to take out a student loan or refinance.