Paying for college is becoming increasingly challenging. Despite federal financial aid, part-time jobs, and scholarships, many students find themselves still needing extra help to cover their tuition and living expenses. In such cases, private student loans can provide a crucial lifeline.
But what exactly are private student loans, and how do they differ from federal student aid? In this post, we’ll explain how private student loans work, explore what makes them unique, and review some of the best private student loan options available today.
What is a Private Student Loan?
Private student loans are loans offered by private institutions such as banks, credit unions, and online lenders. Unlike federal loans, which have standardized interest rates and terms, private loans offer more flexible rates and repayment options, which can vary based on your credit history. These loans can be used for any educational expenses, including tuition, fees, and living costs.
A major distinction between private and federal loans is that private loans usually require a credit check, and in many cases, a cosigner is needed, especially for borrowers with limited credit history. However, having a cosigner can sometimes help secure a lower interest rate. These loans often come with either a fixed or variable interest rate, depending on the lender’s terms.
How Private Student Loans Compare to Federal Loans
While federal student loans offer benefits such as income-driven repayment plans and loan forgiveness, private loans come with their own set of advantages. Private loans can often offer lower interest rates for borrowers with strong credit histories, and the repayment terms tend to be more flexible. However, private loans do not have the same borrower protections as federal loans, such as deferment or forbearance options.
Top Private Student Loan Lenders for 2021
We’ve reviewed some of the top private student loan providers for 2021, looking at their rates, loan terms, and benefits. Here are our top picks:
1. Credible: A One-Stop Comparison Shop
Credible is a fantastic tool for comparing rates from multiple private student loan lenders in just a few minutes. Users can check rates from several top lenders without impacting their credit score. Key features of Credible include:
- Compare up to 7 lenders at once
- Free rate quotes without affecting your credit score
- Option to add a cosigner
- No fees for application, origination, or prepayment
- Personal loan and refinancing options available
Credible is perfect for those who want to quickly compare the best rates and choose the lender that suits their financial situation.
2. CommonBond: Social Impact Lending
CommonBond isn’t just a private lender—it’s also focused on social impact. For every loan or refinancing they facilitate, CommonBond donates to the non-profit Pencils of Promise to help build schools in underserved communities. In addition to this, they offer private student loans for undergraduate, graduate, and professional degrees. Here’s what CommonBond offers:
- Fixed and variable rates for loans
- Loan terms from 5 to 15 years
- No prepayment penalties
- Cosigner release after 48 consecutive payments
- Forbearance and deferment options available
If you’re looking to borrow for a degree while making a positive social impact, CommonBond is an excellent option.
3. Citizens Bank: Competitive Rates for Current Customers
Citizens Bank is a strong contender in the private student loan space. They offer a variety of loan products, including a 0.25% interest rate reduction for current customers or their cosigners. Key features include:
- Fixed rates starting at 3.99% APR
- Variable rates starting at 1.22% APR
- Loan amounts ranging from $1,000 to $295,000
- 0.25% interest rate reduction for automatic payments
- Cosigner release after 36 consecutive on-time payments
Citizens Bank is a great option for existing customers looking to save on their student loan rates.
4. College Ave: Tailored Loan Options
College Ave offers highly customizable loan options for students at all education levels. Whether you need an undergraduate loan, a graduate loan, or a loan for a parent, College Ave provides flexible repayment terms that cater to different needs. They offer:
- Fixed rates starting at 3.49% APR with autopay
- Variable rates starting at 1.04% APR with autopay
- Loan amounts up to 100% of your school’s cost
- Cosigner release after 24 months of on-time payments
- No fees for application, origination, or prepayment
With a variety of repayment plans, College Ave is a great choice for those who need flexibility in their loan terms.
5. Sallie Mae: A Well-Known Lender
Sallie Mae is one of the most recognized names in the student loan industry. They offer loans for undergraduates, graduates, and professional degrees, including medical and law school loans. Features include:
- Fixed rates starting at 4.25% APR
- Variable rates starting at 1.25% APR
- Cosigner release available after 12 months of on-time payments
- Multiple repayment options, including deferred payments
- No origination or prepayment fees
Sallie Mae is a reliable option for students looking for a well-established lender with multiple loan products.
6. SoFi: Flexible and Customer-Focused
SoFi is known for its customer-centric approach and wide range of student loan products. SoFi not only offers private student loans but also refinancing options. Here’s what SoFi offers:
- Fixed rates starting at 4.23% APR
- Variable rates starting at 1.90% APR
- No fees for origination, late payments, or insufficient funds
- Flexible repayment options, including deferment
- Discounts for autopay and existing members
SoFi is a strong option for borrowers who want flexibility and customer service.
Other Notable Private Student Loan Lenders
- LendKey: LendKey partners with credit unions and community banks to offer low-cost student loans, making them a good choice for those who want to support smaller institutions.
- Discover Student Loans: Known for offering competitive rates and rewards for good grades.
- Laurel Road: Provides loans for select graduate degree programs and offers a 6-month grace period after school.
Final Thoughts: Finding the Right Private Student Loan
Private student loans can be a great way to cover any gaps in your financial aid package, especially when federal loans are no longer enough. Each lender offers its own set of benefits, such as lower interest rates for borrowers with good credit, cosigner release options, and various repayment plans.
Before selecting a private student loan, be sure to compare rates, terms, and any potential fees. Choose a lender that not only offers competitive rates but also provides the flexibility and benefits that best suit your financial situation.
No matter which lender you choose, make sure you fully understand the loan terms and only borrow what you need to minimize your debt after graduation.
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