Written by
Hanneh Bareham
Hanneh Bareham, a Certified Financial Education Instructor℠, has been a personal finance writer with Bankrate since 2020.
Edited by
Rhys Subitch
Rhys Subitch is a Bankrate editor who leads an editorial team dedicated to developing educational content about personal loans products for every part of life.
Edited by
Rhys Subitch
Rhys Subitch is a Bankrate editor who leads an editorial team dedicated to developing educational content about personal loans products for every part of life.
Updated Sep 04, 2024What to know first: Federal student loans are almost always a better first choice than private student loans, but they have borrowing limits and qualification requirements. When federal loans aren't enough, private student loans can cover tuition, room and board, fees and other costs of higher education once you've reached your federal limit. Read more
Private student loans can be useful for:
Bankrate's ranking of the best private student loans weighs interest rates, loan types, terms, fees and unique features to give you a starting point in your search for college funding. The resources below can also help you decide whether a private loan is right for you and find the best interest rate for your situation.
Table of contents
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Definition of terms Filter & Sort| LENDER | BEST FOR | MIN. CREDIT SCORE | APR | MIN. LOAN AMOUNT | MAX LOAN AMOUNT |
|---|---|---|---|---|---|
| College Ave | International students | Not Specified | 5.59%-17.99% variable; 3.74%-17.99% fixed | $1,000 | 100% total cost of attendance |
| Sallie Mae | Part-time students | Not Specified | 5.37%-15.70% variable; 3.69%-15.49% fixed | $1,000 | $1,000 to 100% cost of attendance |
| Ascent | Borrower incentives | Not Specified | 5.99%-15.95% variable; 3.69%-15.21% fixed | $2,001 | $400,000 |
| Education Loan Finance | Customer service | Not Specified | 6.00%-14.22% variable; 3.69%-14.22% fixed | $1,000 | 100% total cost of attendance |
| Citizens Bank | Existing Citizens Bank customers | Not Specified | 5.99%-16.59% variable; 3.99%-15.59% fixed | $1,000 | $225,000 |
| Earnest | Applying without a co-signer | 650 | 5.62%-18.51% variable; 3.74%-16.74% fixed | $1,000 | $1,000 to 100% cost of attendance |
| SoFi | Online borrower resources | 640 | 5.74%-15.86% variable; 3.74%-14.83% fixed | $1,000 | 100% total cost of attendance |
| Custom Choice | Graduation rewards | Not Specified | 5.46%-14.92% variable; 4.24%-14.02% fixed | $1,000 | $99,999 annually; $180,000 aggregate |
| INvestEd | Indiana residents | 670 | 7.99%-12.45% variable; 5.04%-9.19% fixed | $1,001 | 100% total cost of attendance |
| MEFA | Low maximum APR | 670 | 5.75%-8.95% fixed | $1,500 | 100% total cost of attendance |
Loan details presented in the table above are current as of June 15, 2024. Check the lenders’ websites for more current information. The student loan lenders listed here are selected based on factors such as APR, loan amounts, fees, credit requirements and more.
Use each lender's deep-dive to help you better understand the loan product, who it's best for and how to qualify.
Overview: College Ave offers private loans for students seeking undergraduate, graduate, dental, law, medical and business degrees. Parents can also take out loans on behalf of their college-bound kids, and students interested in attending community college or receiving career training may also apply.
Loan amount $1,000– $500,000Students who need flexibility with their loan requirements, international students who have a qualifying co-signer and those needing a loan for a training or certification program.
Overview: Sallie Mae is among the most well-known student loan lenders on our list and was originally founded in 1973. Unlike other lenders, Sallie Mae doesn't require its applicants to be full-time students, regardless of the degree program or loan type.
Loan amount $1,000-$500,000Undergraduate and graduate students, MBA and law school candidates, those starting a career training program and individuals preparing for a residency can all benefit from a Sallie Mae loan.
Overview: Ascent offers the most comprehensive incentive programs out of the lenders we reviewed. Borrowers who qualify can take advantage of the automatic payment discount, a one percent cash back graduation benefit, a reward of up to $525 per referral and one-on-one coaching through its student success program.
Loan amountStudents enrolled in a degree-granting institution or a bootcamp program who plan on taking advantage of the lender's wide array of benefits.
Overview: Education Loan Finance, Inc. is a nonprofit organization that values a personal relationship with its borrowers, having provided over $20 million in scholarships. The company is known for its financial literacy high school program and recently awarded a customer $50,000 to help a customer and his family pay off their loans.
Loan amountELFI's loans are best for borrowers with good credit who need repayment flexibility and a larger loan.
Overview: While most of the lenders we review only have an online presence, Citizens Bank has nearly 2,000 locations across the country. As the oldest institution on our list, Citizens Bank has garnered a solid reputation over the years as a reliable and staright-forward lending option.
Loan amountIndividuals with a strong credit score who want the convenience of an online application with the option of in-person assistance.
Overview: Earnest is a well-known online lender that offers a variety of repayment terms and programs, which isn't a given with every student loan lender. Among its options are an extended term program, a deferment or forbearance option, loan forgiveness and discharge and a hardship rate reduction program.
Loan amount $1,000 - 100% total cost of attendance
Overview: SoFi is one of the most recognizable online lenders in the student loans space, and for a good reason. It's best known for its member benefits and perks, including exclusive access to the SoFi stadium, a personalized reward and redemption program and a SoFi PLUS membership.
Loan amountOverview: While most lenders offer interest rate reductions, Custom Choice's Grad Reward takes 2 percent off your principal balance after you graduate. Plus, it's one of the only companies that doesn't require applicants to meet the SAP requirements set by their school.
Loan amount $1,000 to $99,999Individuals in good financial standing and those who have a creditworthy co-signer are most likely to benefit from the lender's no fees, low rates and competitive features.
Overview: Functioning as a financial resource, INvestEd is an online lender that offers residents of Indiana — and those attending an in-state school — a competitive student loan option. It's also one of the most engaged lenders out of the ones we've reviewed. It has an events calendar and attends over 700 events annually across the state.
Loan amountBorrowers in good credit health with a FICO score of at least 670 and those who have a creditworthy co-signer are most likely to benefit from an INvestEd student loan.
Overview: While MEFA's fixed-rate APR rnaximum is technically the second lowest on our list, it is lowest for a lender that caters to borrowers across the country. Unlike some, MEFA doesn't have any state restrictions on its loans — borrowers just need to attend an eligible U.S. nonprofit college or university.
Loan amountStudents who need to borrow for summer semesters, cover a past due balance from a previous semester and current degree-earning students can all benefit from a MEFA loan.
A private student loan is a loan used to cover qualifying academic-related expenses. You can take out private student loans through banks, online lenders, credit unions and sometimes through colleges and state agencies. These usually have higher borrowing limits than federal student loans and may offer lower interest rates for borrowers with good credit, but they come with fewer borrower protections.
To qualify, you’ll need to meet the lender’s eligibility requirements and go through a credit check. Applicants with good or excellent credit tend to get the lowest interest rates. Because undergraduates usually don’t have extensive credit histories, they typically need a co-signer to take out a private student loan.
Some lenders specialize in student loans without a co-signer for undergraduates. To determine your eligibility and rate, they may evaluate your performance in school, earning potential, work history and more.
Unlike other types of loans, you likely won't receive the funds. Instead, they'll be sent to your school or college. From there, you can use the money for academic-related expenses, like technology, room and board and tuition.
Just about any type of student can apply for a private student loan, from undergraduates to graduate students seeking medical, business, dental and law degrees.
Some lenders also offer private student loans for international students or people who are in a residency program, studying abroad, attending community college, enrolled in a career-training school or studying for the bar exam. There are even student loans for borrowers with thin credit or a less robust financial history, although student loans for bad credit might be more expensive.
Before applying for a private student loan, consider the benefits and drawbacks of this type of financing.
While private and federal student loans are both viable ways to pay for college, there are some differences to keep in mind:
| Federal student loans | Private student loans | |
|---|---|---|
| Where do they come from? | The U.S. Department of Education | Banks, credit unions, online lenders |
| How much can you borrow? | Up to $31,000 for dependent undergraduates, up to $57,500 for independent undergraduates, up to the full cost of attendance for graduates | Varies by lender; often up to the full cost of attendance |
| What are the interest rates? | 5.50% for undergraduates, 7.05% or 8.05% for graduates; all fixed rates | 4.49% to 16.99%; may be fixed or variable |
| What are the benefits? | Income-driven repayment plans, loan forgiveness options, extensive deferment and forbearance | Low interest rates for borrowers with good credit, potential discounts and rewards, larger loan amounts |
| What are the drawbacks? | Limited loan amounts for undergraduates, only one interest rate option | Credit check required, high interest rates for borrowers with poor credit |
Nationally recognized student financial aid expert
"Students should borrow federal first, because federal student loans are cheaper, more available and have better repayment terms. Private student loans are an option when a borrower exhausts the federal loan limits, which range from $5,500 to $7,500 for dependent students, depending on the year in school (and $9,500 to $12,500 for independent students). If a borrower reaches these loan limits, their main options are private or parent loans. But, needing to borrow more than the federal student loan limits may be a sign that you are borrowing too much money. You should aim to borrow no more than your annual starting salary for your entire education. If total student debt is less than annual income, you should be able to repay your student loans in ten years or less. If you do need to borrow parent or private loans, compare the interest rates, fees and other benefits on both types of loans. Shop around for the lowest interest rate. If you have an excellent credit score, or a cosigner with excellent credit, you may be able to qualify for a lower rate on a private student loan than a Federal Parent PLUS loan."
Writer, Personal Loans and Debt Relief
"There are very few instances in which you would want to choose a private student loan over a federal loan right off the bat. Unlike private loans, federal student loans aren't credit-based and come with hardship repayment and forgiveness options. Plus, they have the same, fixed rates for every borrower. However, they do come with maximum borrowing amounts that often don't cover the entire cost for the semester. Borrowers often turn to private loans after maximizing their federal aid to fill any financing gaps — this is the recommended route for most individuals. The only time a private loan is recommended over a federal loan is for those who have excellent credit and qualify for a lower rate with a private loan."
Currently, private student loan interest rates sit anywhere between 4 percent and can range all the way up to 18 percent. Most private student loans offer two types of interest rates: variable and fixed. With a fixed interest rate, the rate doesn’t change throughout the life of the loan. Borrowers who prefer predictable payments may prefer fixed rates, although the rates usually start a little higher.
Variable rates, on the other hand, are tied to changes to an index, such as the Libor or SOFR. These rates may go up or down during repayment, although lenders usually limit how high the rate can go.
Every month, your bill includes part of the principal — the base loan amount you borrowed — and interest charges. While your monthly payment will be the same if you have a fixed interest rate, more and more of each payment will go toward the principal and less toward interest with each successive month.
You can use a student loan calculator to determine how different interest rates will affect your monthly payment over time.
Here's what you can expect from most private student loan applications:
Here's what you can expect from most private student loan applications:
Generally, you don't need to worry about repaying your student loan until after your grace period. A standard grace period is six months after you graduate or drop below half-time enrollment, but it may be longer with some private lenders. At that point, you'll be responsible for paying back the principal and interest.
With many private companies, you have the option of selecting a payment plan while you're in school to decrease how much interest accumulates. Once your funds are disbursed, you may have the option to make interest-only payments or a small flat monthly payment. You may also have the opportunity to refinance your private student loan to help manage your payments.
Before jumping into a student loan to cover the costs associated with a degree, consider options that can help reduce the overall cost. Grants and scholarships are two of the most common alternatives, but unlike loans, they don't need to be repaid.
Federal need-based financial aid should also be explored before looking at private loans. Borrowers can apply for government-sponsored grants and programs — like work-study — through the Free Application for Federal Student Aid (FAFSA).
If you have bad credit, it’s best to start by applying for federal student loans, since these don't have credit requirements. If you still need funding from private student loans, you may need a co-signer to qualify. A co-signer agrees to foot the bill if you fall behind on payments, so make sure they understand what they’re getting into before signing up. You can also start by searching for lenders specializing in loans for borrowers with bad credit.
Some lenders do not require co-signers for private student loans. However, according to private lender Sallie Mae, students are nearly four times more likely to be approved for a private student loan with a co-signer. That’s because private student loans are largely based on creditworthiness. A co-signer can help you qualify for the loan and get better loan terms if you're young and have minimal credit history.
Loan limits vary by private student loan lender. However, many of them let you borrow up to the full cost of attendance at your school, minus other financial aid you've received.
In most cases, private student loan lenders will disburse student loan funds directly to your school, not to you. This ensures that funds go toward education costs like tuition and fees. In general, any remaining amount after tuition and fees is refunded to you to use for books, supplies and housing.
While the Supreme Court rejected President Joe Biden’s administration’s original federal loan debt forgiveness plan, the administration continues to propose student loan forgiveness options. Administrative changes to programs such as income-driven repayment and Public Service Loan Forgiveness have meant about 1 in 5 public student loan borrowers have received some amount of student loan forgiveness.
