Private student loans can be a valuable tool when it comes to paying for college. They typically offer low interest rates for qualified borrowers, have flexible repayment terms, and some even offer extra features like career coaching and more.
However, private student loans are the last choice when it comes to paying for college. Before you take out private loans, you should make sure you exhaust all other financial aid options, including Federal loans.
Before you sign on the dotted line, make sure you understand what you're getting into. Student loans are a collateral on your future earnings, and you need to ensure you have a positive ROI (return on investment) of your education.
To make things easier, we've put together a list of the best private student loans to help you pay for college. Our number one choice is Credible, as they make comparing your student loan options easy. In just 2 minutes, you can see what you qualify for and if it makes financial sense. Check out Credible here.
Check out our list of the best private student loan lenders below:
1. Credible
Credible is our number one choice for private students loans because they are a marketplace that makes borrowing private student loans easy! In just 2 minutes, you can enter your information and see various loans that you might qualify for.
If you're happy with the rate and term you see, you can apply online in just minutes and get the loan application started. If you require a cosigner for your student loan, you can also have your cosigner apply online in minutes.
Credible makes the entire borrowing process easy and painless. Plus, they have most of the major lenders on their platform (including others on this list), which is why they are our first choice for borrowers.
They also have no origination fee, no service fees, and no prepayment penalties if you want to pay off your loans early. Check out our full Credible review here.
2. Commonbond
Commonbond has some of the most competitive private student loan rates that we've seen, which gets them on our list of the best places to borrow private student loans.
Commonbond offers private student loans to undergraduate, graduate, and MBA students. They offer four different repayment plan options for student - including student loan deferment until college is complete. This is one of the most flexible options of the private student loan lenders we've compared.
Commonbond doesn't charge an application fee, but they do have a 2% origination fee - which is relatively high compared to other private student loan lenders. They also always require a cosigner for their private student loans, but they do have a cosigner release program.
Check out our full Commonbond review here.
3. Citizens Bank
Citizens Bank offers one of the most robust private student loan programs on this list. They let you borrow as little a $1,000, and all the way up to $295,000 depending on your degree. I personally love that they base the amount you can borrow on your degree program because it does help you focus on your ROI (return on investment).
Citizens Bank also offers both student and parent student loans, which can be a potential alternative to Parent PLUS Loans. Given that we recommend most borrowers refinance Parent PLUS Loans, you can potentially take advantage of lower interest rates and fees up front.
Citizens Bank also offers the ability for student to defer payments until after graduation or make interest-only payments while in school. Parent borrowers must make at least interest-only payments while the student is in school.
Finally, Citizens Bank also doesn't charge any origination fees, application fees, and has no prepayment penalties.
Check out our full Citizens Bank review here.
4. College Ave
College Ave is another full service lender that is very much on-par with Citizens Bank and others on this list. College Ave allows you to borrow anywhere from $1,000 to the full cost of attendance. The also allow both students and parents to borrow, which can allow for flexibility.
College Ave has various repayment plans that allow for flexibility. They allow students to defer payments until after graduation, or student borrowers can make interest-only payments, full payments, or even flat amount payments. Parents also have some repayment choices, but they cannot defer payments while the borrower is in school.
College Ave also has no origination fees, application fees, and doesn't charge a prepayment penalty if you pay the loan off early.
Read our full College Ave review here.
5. LendKey
LendKey is another great lender that makes this list because they have great rates on their student loans and have a unique business model that allows them to do it. LendKey's loans are funded by credit unions and community banks - so you're getting a great loan, but it's handled by LendKey's online service. You never even realize that you have a private loan from a small bank.
LendKey doesn't have as much flexibility for borrowers during school. The "best" option is making minimum $25 per month payments while in school (which is pretty low, but not deferment). LendKey also doesn't offer loans to parents directly.
LendKey has no origination fees, application fees, and doesn't charge a prepayment penalty if you pay the loan off early.
Read our full LendKey review here.
6. SoFi
SoFi just launched undergraduate private loans for the first time in 2019, but they have been refinancing student loans for almost a decade.
They have solid rates on their loans, and they offer four flexible repayment plan options - including deferment while in school. They are also one of the few lenders that actually advertise not needing a cosigner, but it may be more difficult to qualify without one.
SoFi has no origination fees, application fees, late fees, insufficient fund fees and doesn't charge a prepayment penalty if you pay the loan off early.
Read our full SoFi review here.
How To Compare Private Student Loans
It can be hard to know when it makes sense to borrow a private student loan, and what features you should look for. All of the lenders on the list above are great, but each person has a different financial need, so it can be hard to know which is right.
When it comes to comparing private student loans, we recommend borrowers look at the following:
- Interest Rate: Getting the lowest interest rate possible is the key to paying the least amount of interest on your loan. Remember, the higher the rate, the more you pay over the life of the loan.
- Term: This is how long you'll repay the loan for. Always keep the shortest term possible. The longer the term, the more interest you'll pay.
- Origination Fees: Look for loans that have low or no origination fees. However, if you can get a lower interest rate by paying a small origination fee, you should consider it. The origination fee is one-time, but the interest rate is ongoing.
- Application Fees: You should look for private loans with no application fees.
- Prepayment Penalties: You should look for loans that don't make you pay a penalty for paying the loan off early.
- Cosigner Release: 90% of private student loans require a cosigner. You should find a student loan that allows you to release the cosigner in the least amount of time possible. The best we usually see is 24 months of on-time payments.
- Flexible Repayment Terms: You should look for lenders that allow you flexible repayment options - such as deferment during school, and variable lengths after graduation. This will help you should you need it after graduation.
Fixed Rate vs. Variable Rate
There are two main types of interest rates on student loans - fixed rates and variable rates. Variable rates are usually "sexy" in that they are lower than fixed rates...today. However, variable rates can rise in the future if interest rates go up (they can also go down, but that's very rare). Fixed rate loans charge the same interest rate over the life of the loan.
So, should you get a fixed rate or variable rate student loan? For most private loans, you should go for a fixed rate loan. The reason is, we are in a rising interest rate environment. Rates will only rise in the future since we're at historic lows today. You can see the best student loan rates here.
Given that you're still in school, you'll have several years before you make payments - during which time your rates could rise with a variable rate loan. So, while variable rates are attractive today, you might be regretting that decision in the future.
Now, if you're refinancing an existing student loan and know the timeline of your debt repayment, getting a variable rate loan is less risky. You can see the best places to refinance a student loan here.
Understanding Cosigner Release
It is near impossible to get a private student loan without a cosigner. In fact, 90% of all private student loans have a cosigner.
The reason? Because private student loans act much more like car loans or mortgages - you need to have income, a high credit score, and more to qualify.
For most college students, they simply don't have credit (yet), a high income (because they're students), or an employment history (once again, because they're students). That's why most banks require a cosigner.
However, banks and lenders have realized that cosigners don't like to be cosigners, and they want to get off the loans as soon as possible - that's where cosigner release comes into play.
Cosigner release is a program offered by lenders where, after a specific number of on-time payments, the cosigner can be removed from the loan. Many banks offer cosigner release after 24-36 on-time payments. This basically proves that the borrower is able to handle the student loan themselves, and they no longer need the protection of having a cosigner.
When getting a private student loan, look for loans that have short cosigner release programs. This will allow your cosigner to be removed faster, which is always an added benefit.
Important Considerations For Borrowers
Given that most private student loans require a cosigner, it's important that cosigners and borrowers know and understand what they are getting into. If the borrower can't pay the loan, the cosigner is fully responsible for the debt - and failure to pay could negatively harm both the borrower's and cosigner's credit.
Also, if something were to happen to the borrower (such as death or disability), the cosigner is typically 100% responsible for the loan.
That's why recommend that borrowers get term life insurance for the duration of the student loan - payable to the cosigner. The value of the policy should be the loan value plus interest. That way, if anything were to happen to the borrower, the cosigner is protected.
Check out Haven Life to get a quick quote online in about 5 minutes. You'll see that life insurance for college students is typically very cheap - and this can be a great way to protect your family should something happen. You don't want to be responsible for your cosigners loans.
Final Thoughts
Getting a private student loan can be confusing. That's why we've listed the top 5 places to get a private student loan so that you can compare your options quickly and easily.
It can take upwards of a month or more to get the paperwork done and your loan funded. Make sure that you're giving yourself enough time to apply and get approved so that you don't miss any deadlines at your school.
