Repayment Options

The Best Private Student Loans

The best type of funding for your college education is the kind that you don’t have to pay back! Scholarships and grants, for example, are easily the goal when paying for your education. But if you don’t get a scholarship or grant, or they don’t cover everything you need, loans that can possibly be forgiven – like federal student loans – are a good alternative. For most future college students, these are ideal ways to cover the growing cost of tuition and related expenses. It means less of a financial burden after graduation.

But the cost of college is always on the rise. After taking careful stock of your finances, you may realize that there’s a gap between what you’ve been awarded, what you have saved, and the actual cost of going to school. If this is the case, don’t panic. There is still another possible solution to pursue: private student loans.

This guide outlines the best private student loan options available in 2018. Find out how private student loans work, how to apply for one, and what makes a private student loan different from a federal loan.

The Three Best Private Student Loans (Overall) of 2018

According to recommendations from the U.S. Department of Education and Federal Trade Commission, there are several key areas you should focus on when comparing private student loan lenders: product offerings, eligibility, cost, and additional features.

First and foremost look for a loan that offers a product that matches your needs. There’s no point in considering a loan that you won’t be eligible for. Check qualification requirements right away. The interest rate, deferment options, and fees all play a part in total cost. Consider the whole package carefully. Finally, seek out loans with that have additional features such a money back for good grades, multiple repayment term options, or early release of a co-signer. The best private student loan is the one that will meet all your needs and cost you the least amount of money!

1. SunTrust Bank Custom Choice Loan

  • Variable APR range: 4.00-13.00 percent APR
  • Fixed APR range: 5.35-14.05 percent APR
  • Repayment terms: Seven, 10 or 15 years
  • Maximum deferment: You can fully defer your payments while you’re at school and during a six-month grace period after graduating.
  • Aggregate loan limit: $150,000

Of all the possible private loan options available for students in 2018, the SunTrust Custom Choice Loan offers the lowest APR on variable and fixed interest loans. One unique perk of this private student loan is that it celebrates your success. Upon earning a bachelor’s degree or higher, you can apply for a 1 percent principal reduction from your loan! It pays to complete your education.

SunTrust offers a variety of payment terms, more than most private student loan service providers. Repay your loan at your speed. The SunTrust Custom Choice Loan also allows for the release of a co-signer (parents all breathe a sigh of relief!). After 36 to 48 consecutive full payments, the co-signer may be released from the loan and the responsibility then lies fully on the student borrower.

Finally, the SunTrust Custom Choice Loan provides borrowers with the attractive option of taking a grace period of 6 months after graduation before payments will come due. This may serve you well as you job hunt for the perfect position.

2. Discover’s Undergraduate Student Loan

  • Variable APR range: 3.99-12.99* percent APR
  • Fixed APR range: 5.99-13.99 percent APR
  • Maximum deferment: You can fully defer your payments while at school and during a six-month grace period after graduating.
  • Aggregate loan limit: the School-certified cost of attendance

Coming in at number two for the best private student loans of 2018, Discover’s Undergraduate Student Loan offers highly competitive interest rates, both variable and fixed. Discover offers a lower interest rate incentive for auto-pay repayment options. They also don’t cap the loan at an arbitrary dollar amount. You may take what you need, as long as it matches the school-certified cost of attending.

Discover’s Undergraduate Student Loan also rewards borrowers for academic success. If you have at least a 3.0 GPA during the school terms that your loan covers, you can request a one-time reward of 1 percent of your loan amount and Discover will send you a check for the amount. What a unique bonus! Borrowers need to take advantage of this special offer within six months of the end of the academic term to qualify.

The drawbacks of this loan are that it only offers one repayment term (15 years) and it has no option for co-signer release. Most graduates take 10 to 15 years (if not longer), to pay off their loans. However better interest rates can be had for shorter loan repayment terms. Finally, this private student loan is specifically for undergraduate students and cannot be applied to graduate or professional school.

3. College Ave Student Loan

  • Variable APR range: 3.69-8.89 percent APR
  • Fixed APR range: 5.29-8.76 percent APR
  • Repayment terms: Eight, 10, 12 or 15 years
  • Maximum deferment: You can fully defer your payments while at school and during a six-month grace period after graduating.
  • Aggregate loan limit: the School-certified cost of attendance

Some private student loan providers have been established brick-and-mortar institutions for many years. This is not the case with College Ave, they are relatively new to the scene. This online loan servicer focuses solely on student loans and ranks high on our list of best private student loans first and foremost due to its simple process. The easy online application, lack of origination fees, and low-interest fees make the College Ave Student Loan a rising star in the realm of private student loans.

The College Ave Student Loan has multiple repayment terms, as well as deferment options during school and a grace period after graduation. After 24 consecutive full payments on the College Ave Student Loan, you will have the option to release a co-signer – another big plus. There is no special “bonus” with the College Ave Student Loan, but the easy to understand terms, online platform, low interest, and uncapped aggregate loan limit make this private student loan pretty special.

How to Select a Private Student Loan

Private Student Loan Basics

The definition of a private student loan is a non-federal loan used for education-related expenses. It is typically only recommended once individuals have already used all other available forms of free and federal financial aid. Private loans usually require proof of income that can be verified, a record of employment history, and a strong credit history. For this reason, many young people taking out private student loans need a co-signer.

What can I use a private student loan for? A private student loan can be used for school tuition, college fees, class textbooks, school supplies, housing expenses, transportation, computers and technology, and other school-related expenses.

The best private student loans share these characteristics:

  • Require no application, origination or late fees
  • Will cover all education-related expenses, like technology, books, even room and board
  • Offer interest rates that are competitively low
  • Compliment your other sources of financial aid to meet the entire cost of your education
  • Offer multiple repayment options that are flexible
  • Can help pay for all levels and types of education, including undergraduate, graduate school, professional degrees, and career training
  • Help you build good credit — especially if your cosigner has excellent credit

Narrow Your Private Loan Search By Answering These Questions

How much do I need?

The first rule of taking out a private loan is to only take what you need. Start by reviewing all your possible options to pay for your college costs. Sources such as personal savings (including 529 plans), scheduled tuition payment plans, grants and scholarships, work-study programs, and income from employment should all be considered in the equation. After factoring in the aforementioned sources, simply subtract to see how much tuition is still uncovered.

This is the amount you will need in private loans. The key here is to determine what you truly need. You may want a Mac Book Pro, but you really only need a reliable budget laptop. You may want to live in on-campus housing, but renting off campus may be cheaper. Only take out private loans for what is absolutely necessary, as interest will be accruing during your years in school.

Will I be able to make payments on the loan while I am in school?

Narrowing in on a private student loan is tough. The size of the loan and interest rate plays a large part in guiding your decision. It’s important to consider whether or not you will be able to make payments on the private loan during your college years. Paying your loan while you’re attending school will significantly reduce the amount of interest you will repay over the life of your loan. If you can, making interest-only payments can help you avoid interest capitalization when you enter repayment (the process where any outstanding interest is added to your principal balance once you enter repayment).

You can also make fixed payments in small amounts to cover your interest and some of your principal balance. If you can confidently say, ‘yes, I can do this’, you may be able to comfortably take on a larger loan. I know you’ll be unable to make payments while you are in school, therefore, you may want to steer away from certain private loans (like ones with variable interest rates). You will have the option to defer repayment on your loan until you are out of school if you cannot make payments during your college years.

But this option will cost the most money in the long run, because the accrued interest that is not paid before the end of your grace period will be added — to your outstanding principal balance prior to the start of repayment. Ultimately, this means your loan balance will be even higher than what you originally borrowed by the time you graduate and it’s time to repay.

Will I need a Co-signer?

Every loan servicer is different, but private student loans are known for requiring excellent credit and verifiable income. Many young people beginning their college career simply don’t have the employment history or credit score required to qualify for the best private student loan options available. In fact, a MeasureOne study found that less than 10% of undergrads who applied for private loans in 2015-2016 were approved without a co-signer.

Find out what your credit score is, and take stock of your employment history. Find out if you can meet the requirements for the loan on your own. If you don’t you will need a co-signer- a family member with excellent credit who can take joint responsibility for the loan. Whether or not you need a co-signer and whether or not you have one available may narrow down your loan options considerably.

What is the best available interest rate?

Loan interest rate, terms, conditions, and fees should all play a major role in your decision-making. Obviously, the private loans with the lowest interest rates are the most ideal (especially if you will be deferring payment while you attend school).

The Best Private Student Loan for Borrowers Requiring a Co-signer

1. Sallie Mae Smart Option Student Loan

  • Variable APR range: 4.00-9.04 percent APR
  • Fixed APR range: 6.25-9.16 percent APR
  • Repayment term: Five to 15 years
  • Maximum deferment: You can fully defer your payments while at school and during a six-month grace period after graduating.
  • Aggregate loan limit: the School-certified cost of attendance

The Sallie Mae name probably rings a bell. One of the most well-known private loan servicers, Sallie Mae was founded in 1973 as federal government loan agency that has since evolved into a private entity. Sallie Mae now stands out in one particular area- borrowers working with co-signers.

The Sallie Mae Smart Option Student Loan requires the lowest number of consecutive full payments to release a co-signer – only 12! After that, if you meet the credit requirements to take on the loan by yourself, your co-signer will be released. This is an excellent option for student borrowers who are eager to be independent and co-signers who want to be released of that financial responsibility ASAP.

The Best Private Student Loans for Borrow without Co-signer

Getting a private student loan on your own can be tough, but not impossible. Here are your best bets:

Ascent Private Student Loan

If you have little credit or income history, qualifying for a private student loan without a co-signer can be difficult, and your options are limited. One of the few lenders that offers student loans specifically for those without a co-signer and little credit history is Ascent.

Offered to junior and senior undergraduate students only, Ascent is an independent student loan. It is available exclusively for upper-class students because they are closer to graduation, and have more information available on their financial futures. Ascent takes a different approach than most lenders. Rather than inspecting credit history, Ascent focuses on predicting the student’s financial future. They scrutinize factors such as school attendance and earning potential based on their major.

Ascent is a good deal for borrowers who are in a pinch and without a co-signer. But be aware that the loan has a significantly higher APRs than other lenders. The student must have at least a 2.5 GPA to qualify for the Ascent private student loan.


Discover has a good option for students stuck without a co-signer. The most attractive thing about it is its generous repayment assistance options. Discover tries to help borrowers avoid forbearance with early repayment assistance, payment extensions and reduced payments for borrowers behind on their bills. There is also a bonus option available – a 1% cash reward for a student with at least a 3.0 GPA!

Sound too good to be true? The catch is Discover’s rates are definitely higher compared to other lenders. They don’t name a specific credit score requirement for qualification but have a specific the average application had a credit score of upwards of 700. Finally, your school must have an established relationship with Discover, which you can easily check by contacting the lender.

The Best Private Student Loans for Parents

Are you taking out a private student loan on your child’s behalf? We applaud you for your commitment to supporting your child’s higher education and future. Here are excellent options for financing their tuition:

Citizens Bank Student Loan for Parents

  • Fixed rates on Citizens Bank student loans for parents
  • Rate discount of up to 0.50%
  • No origination fees or prepayment penalties
  • Parent-student loan terms of five or 10 years
  • Loan amounts up to $295,000 or certified cost of attendance
  • In-school interest-only or immediate repayment options

Get your child’s college journey up and going easily with the Citizens Bank Student Loan for Parents. What we love: the fixed interest rate and lack of fees. If you aren’t quite prepared to make full payments, that’s ok. This loan offers a convenient in-school interest-only repayment option. The one drawback is that the repayment term is short- five or ten years.

College Ave Parent Loan

  • Fixed and variable rates on College Ave student loans for parents
  • Rate discount of 0.25% after autopay enrollment
  • No origination fees or prepayment penalties
  • Student loan terms of five to 12 years
  • Loan amounts from $2,000 up to the certified cost of attendance
  • Option to disburse up to $2,500 directly to the parent for out-of-pocket expenses

We have already established College Ave as the new leader in the private student loan arena. They made our top three overall private student loan list. But this loan is specifically designed for parents who are taking out the private student loan on their child’s behalf.

This loan stands out due to its option for fixed interest rate, autopay discount, and option to disburse money directly back into the parents pocket. The repayment terms are also slightly more flexible, ranging from five to 12 years.

Who Can Qualify for a Private Student Loan?

To begin, you will need to prove that you are enrolled at an eligible school to qualify for a private student loan. U.S. citizenship or permanent residence is also required. You must be of legal age as defined by your state of residence.

Common private student loan eligibility requirements:

  • Student borrower and cosigner must be U.S. citizens or permanent residents
  • Student borrower and cosigner must have valid Social Security Numbers
  • Student borrower and cosigner must pass a credit check
  • The student must be enrolled at least half-time in classes
  • The borrower must have good credit. Most private student loan lenders look for people with a credit score of 660 or higher.
  • The borrower needs to have a steady income. Most lenders will require that you earn a minimum of $25,000 annually to qualify for a private student loan.

How to Apply for a Private Student Loan

Great news! You can apply online from the comfort of your own home. Banks and other private lenders typically make applying for student loans simple. You may not even need to meet with a financial adviser to complete the process, although most lenders have an adviser that can walk you through it step-by-step if it makes you more comfortable.

Carefully consider all aspects of the loan that is being offered before signing an agreement. Don’t rush into the first loan you are offered. You can quickly and easily compare private student loan options online before ever beginning an application. You want to know you’re getting the best deal.

When you are finally ready to apply, you’ll need certain documentation. Lenders require information about your school tuition and other fees, as well your expected financial aid that you are already approved to receive. It may seem like a lot, but all of these pieces of information are required in order for a bank or loan provider to lend you funds for your education.

In addition to that documentation, lenders will evaluate your level of income and verify your employment, as well as check your credit score. If your income is low, or you won’t be working during school, be prepared to apply for a private student loan a co-signer. Although there are ways to obtain a private student loan without a co-signer, there are actually benefits to having one. Talk to parents, guardians, or relatives in advance about the possibility of co-signing on your private loan.

Private Student Loans vs. Federal Student Loans

Comparing federal and private student loans may seem like comparing apples to apples. In the end, whether you get your loans privately or from the federal government, you’re responsible for paying them back after college. But private loans and federal student loans are more different than you think.

Federal Student Loans

Only the Department of Education issues and guarantees federal student loans. Instead of being dependent upon the borrower’s credit rating or income, interest rates for federal student loans are the same for every borrower. This is because the loans are issued by the government, not a private institution.

Filling out the Free Application for Federal Student Aid (FAFSA) is the simple process for applying for all federal loans. It determines your eligibility for every federal loan – no need to compare loans or complete multiple applications. Federal loans offer the lowest fixed interest rates and borrower protections. You’ll have the ability to postpone repayment six to nine months after graduation and income-based repayment plans are available.

Some students incorrectly assume that they won’t be eligible for federal aid because of a low grade-point average or family income. The truth is, everyone can get some types of federal aid, no matter what their income or grades are like!

Private Student Loans

Unlike federal loans, private student loans are distributed by banks and private lending institutions. Each has their own requirements for application, approval. In this scenario interest rates, loan limits, processing fees, and repayment conditions fluctuate depending on the individual. Private student loans may offer fixed or variable rates. In the case of a variable-interest loan, your rate can fluctuate, changing your monthly repayment amount and increasing the amount you pay in interest over the life of the loan. Federal student loan interest is almost always fixed, meaning the rate remains the same throughout the entire lifetime of the loan and repayment period.

Repayment options and flexibility can become very important after graduation. What if you can’t find employment right away? Or what if you have a lapse in employment for some reason years down the road? Private lenders typically do not offer the same array of repayment options as federal loans. With a federal loan, you can limit the amount of your monthly payment based upon your income, and even qualify for loan cancellation after 20-25 years. Private loan repayment is normally a fixed monthly amount that may or may not be eligible for refinancing.

This may sound morbid, but federal loans are discharged upon the borrower’s death (or permanent disability in some cases). There is no such elimination of private loans after the borrower’s death. In which case, the burden falls to your next of kin, or your co-signer will become responsible for your student debt after your death.

Deciding Between Fixed and Variable APR

In the case of a variable-interest loan, your rate can fluctuate, changing your monthly repayment amount and increasing the amount you pay in interest over the life of the loan. Fixed interest rates are constant, reliable, and remain unchanging throughout the life of your loan.

Unfortunately, most private student loans come with a variable APR. This can potentially take you on a bit of a while ride during your repayment term. No one likes uncertainty or surprises when it comes to their finances! If you have the opportunity to lock in a competitive fixed rate take it! Even if it is slightly higher than the variable rate you are offered, remember that you are choosing a rate that you are confident that you can pay back, and it will never change. Low variable rates look attractive at signing, but they will definitely increase at some point.

The Three Best Private Student Loans of 2018 Summary

SunTrust, College Ave, and Discover are all offering excellent and competitive private student loans during 2018. The key is to determine what features of the loan are most important to you and your unique needs for higher education.

Product offerings, eligibility, cost, and additional features should be your top concerns as you evaluate your loan options. SunTrust may offer a product that matches your needs, but are you eligible? Discover has a great bonus for students with high GPA, but does it feature the lowest interest rates you are looking for? The total cost of the loan is critically important. Check out all the details – interest rate, deferment options, fees, and all.

Don’t forget to exhaust all forms of scholarships, grants, gifts, and federal student loan aid before you go shopping for a private student loan. The guiding principle is to only borrow what is absolutely necessary.

The best private student loan is the one that will meet all your needs and cost you the least amount of money!

Frequently Asked Questions and Answers

Q: What is the purpose of a co-signer?

A: A co-signer lowers a lender’s risk that a private student loan won’t be paid back. A co-signer can also add other benefits, such as helping your loan get approved more quickly and obtaining a better interest rate than you might be offered without a co-signer.

Q: When do I have to start paying my student loan back?

A: The date of required repayment varies by lender. The terms of the grace period on a private student loan depend on your loan contract. Some private student loans have a short grace period, allowing you to defer payments until after you finish school. Other student loans require repayment immediately after the funds have been disbursed. Check your loan agreement. It will define all the specifics about when payment is expected to begin.

Q: What happens if you can’t pay back the loan?

A: First, consider the important positive aspects of on-time student loan repayment: You will build good credit. But if you are going through a transition or financial hardship, contact your lender. When making payments seems impossible, you might learn there are options that make repayment more manageable.

However, you should not ignore your payment requirements. Late payments seriously hurt your financial record. They will be reported to all consumer credit reporting agencies. This eventually hurts your credit score. After 120 days of no payments, your loan is considered in default. At this point, your lender can forget the repayment terms and demand immediate payment of the full balance of the loan! More urgent, the lender may seek repayment from your co-signer. They can also refer your account to a collection agency, and charge additional fees.

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