Paying for college is already challenging enough, but then you have to think about finding the best student loans and student loan rates, and it can just be daunting. How do you find a lender? What should you think about? How do you know you’re getting a good deal? It can all be overwhelming.
When I was in college, there weren’t a lot of options. If you got Federal loans, you filled out your FAFSA and waited for your email from the financial aid office. If you were looking for private loans, you went to a major bank.
That’s all changed today. There are lots of options, and comparing them all could be a challenge.
Let’s take a look at how to find the best student loans and rates and what you should consider before borrowing. If you're just "ready to go", jump to Credible and compare the best private student loan options right now in 2 minutes or less.
Federal vs. Private Student Loans
The first thing to understand is that you don’t get a choice in your student loan rates with Federal loans. Federal student loan rates are set by the government and change periodically.
However, for most people borrowing Federal student loans, that doesn’t matter because they are trying to take advantage of the special student loan repayment programs or loan forgiveness plans that come with Federal student loans.
Federal student loan interest rates vary, from as low as 4.53% to as high as 7.6%. They actually decreased by roughly 10% this year. Check out this chart to see where you student loan interest rate may fall:
2021 - 2022 Student Loan Interest Rates
These rates are for loans taken after July 1, 2021 but before July 1, 2022:
Loan Type | Borrower Type | Interest Rate |
|---|---|---|
Direct Subsidized Loan | Undergraduate | 3.734% |
Direct Unsubsidized Loan | Undergraduate | 3.734% |
Direct Unsubsidized Loan | Graduate or Professional | 5.284% |
Direct PLUS Loan | Parents, Graduates, and Professional | 6.284% |
Perkins Loan | Undergraduate | 5% |
These rates are slightly higher than the previous year, but still near historic lows.
For many borrowers, Federal loans with be the best student loans. However, if you have great credit (or a cosigner with great credit), a private loan could potentially save you a lot of money.
Finding The Best Student Loans
If you go the private student loan route, there are a lot of lenders with different programs and it’s important to compare.
We’ve reviewed most of the major student loan lenders and have a comparison tool here: Comparing Private Student Loan Lenders.
We also recommend really researching the different loan programs out there. There are a lot of lenders that offer different programs and incentives that can be helpful depending on the type of degree and what you believe your employment will look like after graduation.
If you already have student loans and are looking to refinance, it’s also essential to compare.
Some of the key features that you should look for to find the best student loans include:
- Interest Rate (the lower, the better)
- Loan Term (anywhere from 3 years to 25 years)
- Origination Fees (you want none)
- Repayment Plan Options
- Forbearance Options
- Bonus Offers
- No Prepayment Penalties
- Cosigner Release (since it's almost impossible to get a student loan without a cosigner)
Comparing The Best Student Loan Rates
The best private student loan rates range from 2.99% APR to over 14.99% APR, depending on various factors - including your credit score, household income, cosigner, and more.
We recommend using a service like Credible to compare the best student loan rates. With Credible, you can compare multiple lenders in about 2 minutes. It’s quick and easy, and will give you a snapshot of what you might see for student loan rates.
Check it out here and see for yourself: Credible Private Student Loan Comparison.
Credible doesn't have every lender available, and it's important to shop around. When shopping for a student loan, remember that most banks and credit unions will do a "soft pull" of your credit on the initial application. That's okay. If you do all your loan shopping within a 2 week period of time, it shouldn't hurt your score overall.
When you do a formal application, the lender will do a hard pull. You should only move to this part once you're ready to go.
Finally, remember it can take about 30 days to complete the application from start to finish. If you're looking to start college in August, you should probably have your loans all ready to go no later than July. Start shopping now! You can find the best private loans here.
Our Picks For The Best Student Loans
If you're ready to shop around, here are our picks for the best private student loans. We recommend comparing all of them - it honestly only takes a few minutes. You can take a look at our full list of the best private student loan lenders.
Considering everything else you've done to apply for college at this point in time, spending an hour to compare the best student loans is a no brainer!
Note: The student loan offers that appear on this site are from companies from which The College Investor receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). The College Investor does not include all student loan companies or all student loan offers available in the marketplace. As always, shop and compare!
1. Credible
Credible is our #1 pick for the best private student loans because they are a comparison tool that shops all the major private loan providers to give you the best rates and terms possible. Instead of manually doing the work, Credible shops:
- Citizens Bank
- College Ave
- Connext
- Discover Student Loans
- IHelp
- EDVestIn
- Raise Private Student Loans
- Sallie Mae
These are pretty much all the major private student loan lenders available. The cool thing with Credible is that it takes about 2 minutes, and you can get a good sense of your loan options. Read our full Credible review.
2. Earnest
Earnest is another lender that offers strong student loan options - with good rates and loan terms. They also don't charge any fees for origination, disbursement, prepayment, or late payment.
In repayment, they also allow you to have a 9 month grace period after graduation (most lenders are 6 months), and they allow you to skip a payment once a year.
Read our full Earnest review.
3. Ascent
Ascent Student Loans offers competitive in-school loans and has two products - cosigner student loans and non-cosigner student loans. Ascent is one of the few companies that makes their criteria on getting a private student loan without a cosigner very clear.
Ascent doesn't charge any application fees, and they have solid repayment options - including deferment while in school. They also offer very competitive interest rates on their loans.
Read our full Ascent review.
4. LendKey
LendKey is another of our favorite places to shop for a student loan because they take care of comparing "all the rest" of your options. Instead of major banks and lenders, LendKey is a comparison tool that focuses on community banks and credit unions. However, don't think that you're dealing with some random bank in the middle of nowhere. LendKey actually manages everything for your loan, the money simply comes from one of these community banks.
LendKey doesn't charge any application fees, it has one of the shortest periods of cosigner release (24 months), and it has several payment options to help you manage your student loans. Read our full LendKey review.
5. CommonBond
CommonBond is our final favorite place to get a private student loan. They are the one of the few direct lenders we have on this list, simply because they aren't on any of the comparison sites. But there is a reason for this - by avoiding the middleman, you get the savings passed on to you.
CommonBond has some of the lowest private student loan interest rates available on the market right now, but they do require a cosigner for their loans. However, they also have a 2 year cosigner release, which is one of the shortest terms we've seen.
CommonBond also is one of the few private lenders that offers a forbearance to borrowers who suffer economic hardship after graduation and during repayment. Read our full CommonBond review.
Are Private Student Loans Right For You?
It can be hard to know if private student loans are right for you. Honestly... there is no right answer. Some people swear off private student loans. Other people have found them to be a helpful way to pay for college while saving money in interest.
It's important to remember that Federal student loans come with a lot of options, and they usually have a very good interest rate. With Federal student loans, you get access to income-driven repayment plans, student loan forgiveness options, and more. You don't get many benefits with private student loans.
However, private student loans typically give you the best student loan rates possible.
You might also consider an income-sharing agreement as an alternative to a private loan. Income-sharing agreements are where you get money for school in exchange for paying back a portion of your income after graduation. These plans are typically structured in a way that means you only pay back if you see a positive return on your education. Check out our guide to income-sharing agreements here.
As with everything related to paying for college, we recommend you follow the Proper Order Of Operations To Pay For College. Make sure you've exhausted your other aid, Federal student loans, and working before diving into private student loans. If you're at that point already, then make sure you're shopping around for the best student loan rates and terms.
Common Student Loan FAQs
Here are some of the most common questions we get when it comes to finding the best student loans and borrowing to pay for college.
Which is better - federal or private student loans?
You should always borrow the maximum amount of federal student loans before moving to private student loans. Federal student loans offer more benefits, such as loan forgiveness and flexible repayment plans, compared to private student loans.
What type of student loan is best?
Federal student loans, specifically subsidized student loans, are the best to pay for college. Then you have unsubsidized loans. Many borrowers will also be offered parent PLUS loans, which we don't recommend. Then you have private student loan options.
How can you find the lowest student loan rate?
Interest on federal student loans is fixed for all borrowers based on your school year. These rates are typically some of the lowest in the marketplace. If you're looking at private student loans, you need to shop around and get multiple quotes on your student loan rate.
What are the drawbacks of student loans?
Student loans have drawbacks just like any other form of debt. You're going to need to repay the debt, and your ability to repay is going to be based on your income after graduation. However, unlike other loan types, student loans have very few options for discharge - meaning you can't easily get rid of them in bankruptcy. And the government and private lenders have a lot of collection options available to them.
Final Thoughts
No matter what path you take in paying for school, it's essential that you educate yourself on your options. Whether your looking for the best student loans, or other financial aid options, you're going to have to spend a little time doing homework.
If you haven't already checked out financial aid options, look at this guide: Student Loan And Financial Aid Options By State. Many states maintain their own special financial aid and student loan programs that could save you even more money or help pay for college!
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
