Private Student Loans | FinAid

Private Student Loans

Private student loan volume grows when federal student loan limits remain stagnant.

Private student loan volume grew much more rapidly than federal student loan volume through mid-2008, in part because aggregate loan limits on the Stafford loan remained unchanged from 1992 to 2008. (The introduction of the Grad PLUS loan on July 1, 2006 and the increases in the annual but not aggregate limits had only a modest impact on the growth of private student loan volume. The subprime mortgage credit crisis of 2007-2010, however, limited lender access to the capital needed to make new loans, reining in growth of the private student loan marketplace.) The annual increase in private student loan volume was about 25% to 35% per year, compared with 8% per year for federal loan volume.

Student Loan Comparison Sites

This page provides a basic comparison chart that highlights the key characteristics of the major private education loans. FinAid also provides a separate list of private consolidation loans. In addition to the private student loan programs, there are several websites like Credible and other student loan comparison sites that provide tools for comparing private student loans which help identify the loans that match your criteria.

Then the Ensuring Continued Access to Student Loans Act of 2008 increased the annual and aggregate loan limits on the federal Stafford loan starting July 1, 2008. This shifted significant loan volume from private student loan programs to federal. Private student loan volume dropped in half in 2008-09, according to the College Board's Trends in Student Aid 2009.

Private student loan volume is expected to return to the 25% annual growth rate unless there is another increase in federal loan limits or an expansion of the availability of federal student loans. For example, the proposal for expanding Perkins loan funding from $1 billion a year to $8.5 billion a year will cause a significant decline in private student loan volume. But so long as federal loan limits do not increase every year, private student loan volume will continue to grow at double-digit rates.

If current trends continue, annual private education loan volume will surpass federal student loan volume by around 2030. Accordingly, it is important that students have tools they can use to compare different private student loans.

Advertisement

Best Private Student Loans

As a general rule, students should only consider obtaining a private education loan if they have maxed out the Federal Stafford Loan. They should also file the Free Application for Federal Student Aid (FAFSA), which may qualify them for grants, work-study and other forms of student aid. Undergraduate students should also compare costs with the Federal PLUS Loan, as the PLUS loan is usually much less expensive and has better repayment terms.

The fees charged by some lenders can significantly increase the cost of the loan. A loan with a relatively low interest rate but high fees can ultimately cost more than a loan with a somewhat higher interest rate and no fees. (The lenders that do not charge fees often roll the difference into the interest rate.) A good rule of thumb is that 3% to 4% in fees is about the same as a 1% higher interest rate.

Be wary of comparing loans with different repayment terms according to APR, as a longer loan term reduces the APR despite increasing the total amount of interest paid. FinAid's Loan Analyzer Calculator may be used to generate an apples-to-apples comparison of different loan programs.

The best private student loans will have interest rates of LIBOR + 2.0% or PRIME - 0.50% with no fees. Such loans will be competitive with the Federal PLUS Loan. Unfortunately, these rates often will be available only to borrowers with great credit who also have a creditworthy cosigner. It is unclear how many borrowers qualify for the best rates, although the top credit tier typically encompasses about 20% of borrowers.

Generally, borrowers should prefer loans that are pegged to the LIBOR index over loans that are pegged to the Prime Lending Rate, all else being equal, as the spread between the Prime Lending Rate and LIBOR has been increasing over time. Over the long term a loan with interest rates based on LIBOR will be less expensive than a loan based on the Prime Lending Rate. About half of lenders peg their private student loans to the LIBOR index and about 2/5 to the Prime lending rate.

Some lenders use the LIBOR rate because it reflects their cost of capital. Other lenders use the Prime Lending Rate because PRIME + 0.0% sounds better to consumers than LIBOR + 2.80% even when the rates are the same.

It is not uncommon for lenders to advertise a lower rate for the in-school and grace period, with a higher rate in effect when the loan enters repayment.

Federal student loans are not available for expenses incurred by law, medical and dental students after they graduate, such as expenses associated with study for the bar or finding a residency. There are two types of private student loans for these expenses:

A Bar Study Loan helps finance bar exam costs such as bar review course fees, bar exam fees, as well as living expenses while you are studying for the bar.
A Residency and Relocation Loan helps medical and dental students with the expenses associated with finding a residency, including interview travel expenses and relocation costs, as well as board exam expenses.

Comparing Private Student Loans

Key information to understand student loans includes being aware of the annual and cumulative loan limits, interest rates, fees, and loan term for the most popular private student loan programs. Often the interest rates, fees and loan limits depend on the credit history of the borrower and co-signer, if any, and on loan options chosen by the borrower such as in-school deferment and repayment schedule. Loan term often depends on the total amount of debt.

Most lenders that require school certification (approval) will cap the annual loan amount at cost of education less aid received (COA-Aid). They may also have an annual dollar limit as well.

Lenders rarely give complete details of the terms of the private student loan until after the student submits an application, in part because this helps prevent comparisons based on cost. For example, many lenders will only advertise the lowest interest rate they charge (for good credit borrowers). Borrowers with bad credit can expect interest rates that are as much as 6% higher, loan fees that are as much as 9% higher, and loan limits that are two- thirds lower than the advertised figures.

The APRs for variable rate loans, if listed, are only the current APRs and are likely to change over the term of the loan. Borrowers should be careful about comparing loans based on the APR, as the APR may be calculated under different assumptions, such as a different number of years in repayment. All else being equal, a longer repayment term will have a lower APR even though the borrower will pay more in interest.

The information presented below is based on lender provided information. Actual rates and fees may differ.

Featured Student Loan Providers

Name	Loan	Limits	Rates (Min/Avg/Max)	Fees	Term
Citizens Bank Citizens Bank offers loan options for undergrad, grad students and parents with competitive rates, flexible terms and interest rate discounts. As the only lender to offer multi-year approval on the Citizens Bank Student Loan,® qualified borrowers can secure funding for multiple years in school, without completing a full application each year and impacting their credit score.	Choose between our student or parent loan options with competitive interest rates and flexible payment terms.	Loans from $1,000 to $295,000 depending on education level	Variable rates as low as 4.07% APR* and fixed rates as low as 5.25% APR* including all available discounts	No application fees or origination fees	5, 10, or 15 year options available Rate and Repayment Examples
Credible Credible offers borrowers a "kayak-style" experience while shopping for student loans. Similar to the "Common App," users (and co-signers) complete a single, brief form and receive personalized offers from multiple lenders. The process is free and does not impact a user's credit score to compare offers. Credible's marketplace includes Citizens Bank Cognition Financial CollegeAve Connext Discover Student Loans iHelp RISLA Sallie Mae	Choose between fixed and variable rate loans, as well as deferred and interest-only repayment options for your school loans.	COA-Aid (annual limit) Borrow up to $170,000 through Credible's marketplace	Fixed rates as low as 3.99% APR and variable rates as low as 2.20% APR with auto pay. Access special discounts from some lenders.	No fees	5, 8, 10, 12, 15 and 20 year terms available

Student Loan Providers

Name	Loan	Limits	Rates (Min/Avg/Max)	Fees	Term
Ascent Student Loans Ascent is built around one guiding principle: Student loans should expand your possibilities, not limit them. The Ascent Tuition cosigned loan is designed with you in mind: AFFORDABLE fixed or variable rates CUSTOMIZE your loan with flexible repayment options 1% CASH BACK Graduation Reward* 0.25% INTEREST RATE REDUCTION for enrolling in automatic payments* RELEASE YOUR COSIGNER after 24 consecutive on-time payments* 100% US-Based Customer Service FREE financial Tools APPLY NOW *See Ascent Tuition Terms and Conditions	The Ascent Tuition Loanis for undergraduate and graduate students with a cosigner. Customize your loan payments to fit your budget with our flexible Ascent Tuition repayment options: In-School Interest-Only Repayment Minimum Payment Deferred Repayment APPLY NOW	Cover up to 100% college tuition and living expenses with a minimum loan amount of $2,000 and up to $200,000 (or total cost of attendance less aid received).	Choose from affordable fixed or variable rates. Fixed: 5.56% - 12.11% Variable: 3.83% - 10.58% (Rates are effective as of 07/01/2018 and include a 0.25% discount applied when a borrower in repayment elects automatic debit payments via their personal checking account.) **Click here for the Ascent Tuition cosigned loan current rates and repayment examples.	AVOID FEES - No application, origination or disbursement fees. NO PENALTY FEE if you pay off your loan early.	Flexible 5-year, 10-year or 15-year repayment terms.
Citizens One Citizens One, the national lending division of Citizens Bank, offers loan options for undergrad, grad students and parents with competitive rates, flexible terms and interest rate discounts. As the only lender to offer multi-year approval on the Citizens Bank Student Loan,® qualified borrowers can secure funding for multiple years in school, without completing a full application each year and impacting their credit score.²	Choose between our student or parent loan options with competitive interest rates and flexible payment terms.	Loans from $1,000 to $295,000 depending on education level	Variable rates as low as 4.07% APR* and fixed rates as low as 5.25% APR* including all available discounts	No application fees or origination fees	5, 10, or 15 year options available Rate and Repayment Examples
College Ave Student Loans College Ave Student Loans offers loan options for undergrads, grad students and parents. Our loans are designed to give you great rates plus the most repayment options so you can create a loan that fits your monthly budget while paying as little interest as possible. Our simple application process takes just 3 minutes to complete and get an instant credit decision. Not sure which repayment plan is right for you? Our student loan calculator and free credit pre-qualification tool can help. For footnotes, please refer to the links for product specifics (undergraduate, graduate or parent).	Undergraduate Student Loan Help cover tuition and other education costs for students in associates and bachelors degree programs.² You decide whether to make loan payments during school: Full Principal and interest payments Interest only payments $25 payments each month during school³ Defer payments while in school	COA-Aid ($1,000 minimum)²	Variable Rates: 3.69%-10.94% APR (with auto-pay discount)¹ Fixed Rates: 5.29%-12.07% APR (with auto-pay discount)¹	No application or origination fees and no penalties for paying early.	Choose between 5, 8, 10 or 15 year options.³
	Graduate Student Loan Cover the costs of school for students pursuing a masters, doctoral or professional degree.² Choose to repay the way that works for you: Full Principal and interest payments Interest only payments $25 payments each month during school³ Defer payments while in school	COA-Aid ($1,000 minimum)²	Variable Rates: 3.69%-8.89% APR (with auto-pay discount)¹ Fixed Rates: 5.29%-8.76% APR (with auto-pay discount)¹	No application or origination fees and no penalties for paying early.	Choose between 5, 8, 10 or 15 year options.³
	Parent Loan Help pay for your child's education with a customized loan. Choose how quickly to pay back the loan: Full Principal and interest payments Interest plus payment Interest only payments	COA-AID ($1,000 minimum)²	Variable Rates: 4.96%-9.94% APR (with auto-pay discount)¹ Fixed Rates: 6.62%-10.57% APR (with auto-pay discount)¹	No application or origination fees and no penalties for paying early.	Choose to pay back the loan in as little as 5 years or take up to 12 years (or pick something in between).³
Commerce Bank Commerce Bank has provided guidance and solutions when seeking financial aid for over 50 years to students and their families. The lender has loan options for undergrads, grads, and parents with flexible features such as multiple repayment options and competitive fixed and variable interest rates the borrower may choose. Borrowers can borrower up to 100% of their school-certified cost of attendance. There are no origination or prepayment fees.	Your Future Education Loan For Undergraduate and Graduate & Professional School Students (includes MBA, Medical & Dental, and Health Professions) attending a degree-granting institution in the United States. Students who are enrolled full time, half time, and less than half time are eligible. Interest rate reduction available for auto debit payments. Their Future Education Loan Available to parents, grandparents, and other creditworthy individuals to cover up to 100% of the school-certified cost of attendance at a degree-granting institution in the United States. Student can be an undergrad/grad and be enrolled full time, half time, or less than half time.	Minimum of $1,000 up to the school-certified Cost of Attendance at the degree-granting institution	Undergraduate: Variable Rates: 3.12% APR to 10.12 APR Fixed Rates: 5.74% APR to 11.85% APR Graduate: Lower rates available to graduate students Variable Rates: 3.12% APR to 8.09% APR Fixed Rates: 5.74% APR to 8.56% APR Parent Loan Variable Rates: 4.62% APR to 11.00% APR Fixed Rates: 5.74% APR to 12.87% APR	No application, origination or prepayment fees	5-15 Years (Your Future Education Loan) 10 years (Their Future Education Loan)
LendKey LendKey matches consumers with lenders to create the most transparent, accessible and low-cost borrowing options in online lending. LendKey works with over 280 community based and not-for-profit lending partners to get you the best possible rates and benefits for your education loans. The application process can be completed in minutes and our customer care team will be with you every step of the way if you have questions. Founded in 2009, LendKey has served over $2Billion in private student loans to tens of thousands of students across the US. Since LendKey services all loans booked on its platform, students know they're always able to speak to a real person about their loans. APPLY IN MINUTES!	LendKey Private Student Loan Private student loans at LendKey can be used for undergraduate and graduate students. Cosigners are highly recommended but not required. Some great benefits include: Better grades could earn you lower rates 30-day no-fee return policy for all borrowers $25 per month in-school payments to keep interest low 0.25% interest rate reduction for using automatic payments Interest paid on private student loans may be tax deductible 18 months of unemployment protection included (paused payments) Cosigner release available after 24 on-time monthly payments Funds can be used to pay for qualified education expenses, including: Tuition Room and Board Computer(s) And more! APPLY IN MINUTES!	Cost of Attendance - Aid (annual limit) Loans range from a minimum of $2,000 to the cost of attendance (minus any financial aid awarded).	Variable rates as low as 4.70% APR Fixed rates as low as 5.36% APR	No fees of any kind. (Including application fees, origination fees, and prepayment penalties)	10yr repayment term with up to 5 years in school.
Sallie Mae-the nation's saving, planning, and paying for college company. Funded by Sallie Mae Bank. Lender ID 900905. Special Features/Benefits: Auto Debit Savings - 0.25 percentage point interest rate reduction for automatic debit enrollment.* Free financial literacy tools and resources, including access to quarterly FICO® Credit Scores for both borrowers and cosigners.* Loan Limit - Borrow up to 100% of the school-certified cost of attendance (minimum $1,000). Application Process* - Borrower can initiate the application process at SallieMae.com. It only takes about 15 minutes to apply online and get a credit result. Sallie Mae reserves the right to modify or discontinue products, services, and benefits at any time without notice and provides compensation to FinAid for the referral of loan customers. Terms, conditions, and limitations apply. Information advertised valid as of 4/25/2018. Sallie Mae and other Sallie Mae names are service marks or registered service marks of Sallie Mae Bank or its subsidiaries. Click here for additional important information.	Smart Option Student Loan® For Undergraduate Students attending degree-granting institutions only. (School Certified) Pay now or later - choose an in-school repayment option that fits your needs or defer your payments until after school.* Make interest payments each month* Pay $25 per month* Defer payments* Exclusive Study Starter, a free loan benefit for undergraduate borrowers with up to 120 minutes of live 24/7 online tutoring that can help students make the grade. Learn More. *Click here for additional important information.	COA-Aid ($1,000 minimum)*	Variable Rates: 1-month LIBOR + 2.00% (4.00% APR) to 1-month LIBOR + 9.88% (10.86% APR)* Fixed Rates: 5.75% (5.74% APR) to 12.88% (11.85% APR)*	No origination fee and no prepayment penalty.	5-15 years based on cumulative Sallie Mae loan balance, repayment option and year in school.*
	Graduate Student Loans Graduate students aren't all the same; graduate school loans shouldn't be, either. For Graduate and Professional School Students attending degree-granting institutions only. (School-Certified). Graduate loans available for various graduate programs including MBA, Medical School, Dental School, and Health Professions. Choose from multiple repayment options. Click here for more information on Sallie Mae graduate student loans.	Visit Sallie Mae.com for details on individual graduate loans.	Visit Sallie Mae.com for details on individual graduate loans.	No origination fee and no prepayment penalty.	Visit Sallie Mae.com for details on individual graduate loans.
	Sallie Mae Parent Loan Any creditworthy individual other than the student can take out a Sallie Mae Parent Loan, including grandparents, aunts, uncles, spouses, and guardians. The Loan, which is available to pay for education expenses of both undergraduate and graduate students. Choose a repayment option that fits your needs: Interest Repayment: Borrowers make monthly interest payments while the student is enrolled in school for up to 48 months, followed by principal and interest payments# Principal and Interest Repayment: Borrowers make monthly principal and interest payments while the student is enrolled in school and through the life of the loan# #Click here for additional important information.	COA-AID ($1,000 minimum)	Variable Rates: 1-month LIBOR + 3.50% (5.49% APR) to 1-month LIBOR + 9.88% (11.87%% APR)# Fixed Rates: 5.75% (5.74% APR) to 12.88% (12.87 APR)#	No origination fee and no prepayment penalty.	10 years of principal and interest payments#

Additional Lenders listed below. Please visit lender website for updated information.

Definitions

LIBOR is the 3-month average of the London Interbank Offered Rate. LIBOR is the average interest rate paid on deposits of US dollars in the London market.

PRIME is the Prime Lending Rate as published in the Wall Street Journal. This is the rate banks charge their most creditworthy customers.

COA-Aid is the Cost of Attendance minus all other student aid received.

APR is the Annual Percentage Rate, a rate that factors in the interest rate, fees, and other terms.