10 Best Student Loans of 2018
Need a student loan but don't know where to start? Our editors have compiled the most up-to-date information on the subject and reviewed the industry's top private student lenders.
Student loans are used to finance a student's post-secondary education, which usually includes tuition costs, room and board, books and other materials, and additional living expenses. In the United States, students who attend qualifying post-secondary schools can request loans sponsored by the federal government through the Department of Education or they can apply for private student loans through a bank or lender.
Students who take out federal student loans are not required to make payments while they are in school at least half-time because the loan payments are automatically deferred. Once the student graduates or drops below half-time, payments are due after a six-month grace period. Federal student loans may be subsidized, which means the government pays the interest accrued while the borrower is still an active student, or unsubsidized, which means the student is responsible for paying the interest. Subsidized loans are only available for undergraduate students. The student's credit history and score do not factor into the federal student loan approval decision. Parents may also request federal loans for their children's academic expenses through the Direct PLUS Loan program.
One reason federal student loans are so popular is the repayment assistance programs that are available to students who have trouble making payments after graduation, such as payment deferment, income-based repayment plans, and loan forgiveness. Students can apply for federal student loans through the Free Application for Federal Student Aid, better known as FAFSA.
Since federal student loan offerings are uniform across lenders, we will be focusing on private student loan servicers in this vertical. Private student loans are issued by private lenders who do take students' credit, as well as income, employment history, and other factors, into consideration when deciding whether or not to approve a loan. Many, but not all, private student loans work similarly to unsubsidized federal student loans in that students are not required to make payments while studying but interest begins to accrue immediately, and any unpaid interest is capitalized or added to the principal loan amount.
Unlike federal student loans, however, interest rates for private student loans tend to be higher and many, if not all, of the repayment assistance programs that students have access to with federal loans are not available for private student loans. However, there is a maximum dollar limit students can borrow with federal student loans, and students who reach this limit, and who have no other sources of financial aid available to them, may turn to private student loans to finance their education. Parents or other eligible individuals with better credit histories can cosign the student's loan application to help them access lower interest rates. Parents can also apply for private parent loans for their child's school-related expenses. The parent's credit is considered for approval, and they are the ones responsible for payments, not the student.
When comparing private student loan lenders, it is important to shop around and compare repayment plans, interest rates, and benefits. Most private lenders will offer several repayment plans, such as the traditional deferment plan, where the student is not required to pay the loan while studying, or the student can pay all or some of the accrued interest while in school to keep the cost of the loan down. Private lenders offer fixed annual percentage rates (APRs), as well as variable APRs, which adjust every so often according to market fluctuations and other factors. Variable APRs may be lower at the outset but can increase suddenly later, leading to much higher payments in the future. Private student loans also give students the choice of many loan terms, from as short as five years to as long as 30 years, as opposed to the standard 10-year term of federal student loans. Longer repayment terms may mean lower monthly payments, but they can also increase the loan APR, which means the student will be paying more in total for the loan.
As for additional services, many private lenders have forbearance programs, which postpone payments while the student undergoes a financial hardship. Though interest rates continue accruing during the forbearance period, which means a higher amount will be due at the end of it, this is preferable to defaulting on the loan, which can seriously damage the student's credit history. Other lenders have programs where the interest rate is lowered if good grades are maintained or if payments are made during the pre-graduation deferral period. These services should factor into the decision of which lender to borrow from.
Before taking out a student loan—whether it is federal or private—it is important only to borrow as much as is needed. Finding a good job after graduation is every student's wish, but this may not be the reality. According to Forbes, the total student loan debt in the United States in 2016 was $1.31 trillion owed by 44.2 million people. That's an average of $29,412 per person, but some students owe much more. To avoid unnecessary debt, students should exhaust all other aid options before turning to student loans and borrow modestly. It is also important to understand all the terms of the loan. When is the first payment due? Are there any fees associated with the loan? How long is the loan term? Is there a flexible repayment plan available? Being informed about all the assistance programs available if repayment becomes difficult is also key. Is deferment or forbearance available during a hardship? Are there ways to lower the interest rate? Borrowing from a reliable lender should also be a top priority. This can be verified through customer reviews and a check for any relevant government regulatory actions.
Top 10 Companies
- Multiple in-school repayment options
- Check application status online
- Loan e-signing
- Free scholarship registration
- BBB A+ rating
- Online marketplace for student and parent loans
- Flexible repayment options, loan terms and fixed or variable interest rates
- Comprehensive website with a free pre-qualification credit check
- 24/7 Customer Support
- Fast approval turnaround times
- Considers eligibility criteria other than credit score and income
- Two private student loan products with multiple repayment options
- Affordable fixed and variable rates
- Discounts for automatic payments
- No application fees or prepayment penalties
- Mobile app
- Rates include ACH discount
- 1% cash back reward on loan principal upon graduation
- Undergraduate, graduate, and MBA loans with fixed or variable APR rates
- Easy and fast online application process
- Focus on customer service
- Forbearance in times of hardship
- Social Promise program funds children in need
- One of the largest and oldest banking institutions in the US
- Student loans for undergraduate, graduate, medical professionals, and post-law studies
- 0.50% interest rate reduction with auto payments
- Variable APR as low as 4.58%
- Defer payments up to 6 months
- Get quick quotes with minimal information
- Will not damage credit
- Compare the best rates from multiple lenders
- Excellent customer service
- A+ with the BBB, 9.5 on Trustpilot
- Prequalify for multiple student loan offers from top lenders
- Variable APRs as low as 3.78% (with discounts applied)
- Live chat support available
- No origination or service fees
- Accredited and rated A+ by the BBB
- One of the largest banking institutions in the United States
- Customizable loan choices for undergraduate and graduate students
- Multiple repayment options
- No fees or prepayment penalty
- Fast online application process
- APRs for as low as 4.53% (variable) and 5.36% (fixed) with AutoPay
- Reduce your rate by 0.25% when you sign up for AutoPay
- No application or origination fees
- Get a private student loan in just 3 minutes
- A+ BBB Accredited
How We Compare Student Loans
When comparing student loan providers, it's crucial to consider factors such as the interest rate as well as the repayment terms and conditions, especially when looking at private lenders. Federal student loans are typically offered to students that demonstrate financial need and the maximum loan amount will depend on what their institution determines they are eligible to receive based on their tuition expenses and any financial aid they are currently receiving. Private student loans, on the other hand, are available to all students regardless of financial need and can be obtained for larger amounts, yet we don't recommend asking for much more than is needed to cover tuition, fees, room, and board. The loan term or duration of the loan, meaning the time allotted to pay off the principal loan amount and accrued interest, is generally 10 years for either type of loan, yet shorter or longer terms may be available.
Interest rates, which are the proportion of a loan charged by a lender to a borrower for the use of its funds, vary by lender and loan product. Federal student loans typically offer slightly better rates and flexible repayment terms, as the government doesn't take into account the applicant's creditworthiness or ability to repay what is owed. These types of loans also feature fixed rates, meaning rates remain the same for the life of the loan. In contrast, private student loan rates can be either fixed or variable, meaning subject to market fluctuations, and are based on the borrower's or cosigner's debt-to-income ratio and credit history. Keep in mind, though, that shorter loan terms mean fewer monthly repayments and larger repayment amounts, yet less overall interests, while longer loan terms translate to more monthly repayments, smaller monthly repayment amounts, and more overall interests.
Undergraduate Loans: These types of loans are designed for undergraduate students undergoing studies in a degree-granting higher education institution.
Graduate Student Loans: These loans are intended to cover tuition expenses for medical, dental, MBA, and masters or doctorate students.
Career Training Loans: These loans cover education expenses for those undergoing professional training or working towards a technical certificate at a non-degree-granting institution.
Parent Loans: As the name suggests, these loans are for parents of students working towards a bachelor's, associate's, or graduate degree or certificate at a degree-granting institution.
K-12 Loans: These loans are for the parents of children enrolled in a private school and can cover from kindergarten to high-school.
Minimum Loan Amount
The minimum loan amount refers to the smallest amount a lending institution would be willing to lend a borrower.
Maximum Loan Amount
The maximum loan amount refers to the largest amount a lending institution would be willing to lend a borrower.
The loan term refers to the time the borrower commits to the rate, terms, and conditions of a loan or the period before the borrower must pay the loan in full.
Fixed Rates: The interest rate refers to the total amount a borrower will pay for borrowing from a lender, which is expressed as a percentage of the principal loan amount. Fixed rates will remain the same for the life or the loan unless the borrower opts to refinance.
Variable Rates: Variable rates are interest rates that change over the life of a loan unless the borrower opts to refinance. That typically means the borrower may have to pay more or less, depending on market fluctuations, for the borrowed funds.
Fixed APR Range
The APR refers to the Annual Percentage Rate, which is the total yearly cost of the borrowed funds to be paid over the term of the loan. That also includes fees and additional costs associated with borrowing. Fixed APRs remain level for the life of the loan.
Variable APR Range
The APR refers to the Annual Percentage Rate or total yearly cost of borrowing from a lender. Variable APRs can fluctuate with market changes over the life of the loan.
Loan Application Fees: An upfront fee associated with processing a loan application.
Loan Origination Fees: An upfront fee associated with the processing of a new loan application. These are based on a percentage of the total loan amount.
Late Payment Fees: As the name suggests, these fees apply when a borrower fails to make a timely loan repayment.
Collection Fees: Collection fees are due upon defaulting or failing to meet several loan repayments.
The grace period refers to a period of approximately six months between the borrowing student's graduation date and the date of the first scheduled repayment.
Deferment or Forbearance
With deferment or forbearance qualifying borrowers have the option of temporarily suspending loan repayments or reducing loan repayment amounts for a specified period. This option is more widely available for the recipients of federal student loans, yet some private lenders may also offer it.
A cosigner is someone who endorses, guarantees or backs up a loan for a borrower who doesn't have sufficient income or credit history or whose credit is affected. In the event the borrower defaults or fails to pay back the loan, the cosigner—who can be a parent, guardian, or friend with good to excellent credit and the financial means to repay the loan—is responsible for doing so. When a lender offers a cosigner release, the cosigner is eligible to be removed from the loan agreement, so only the borrower is responsible for making repayments.
Deferment: A repayment option most often offered to those who have taken out federal loans and are having a difficult time meeting monthly repayments. It allows the borrower to temporarily suspend payments or decrease the monthly repayment amount until the individual has the means to continue regular payments. Some private lenders also offer this option.
Fixed repayments: Fixed monthly payments of as little as $25 that must be made while the borrower is still in school. After graduation, the borrower is then required to make full monthly repayments that go toward the interest and principal loan amount.
Immediate repayment: Student loan repayments are due the moment the funds are disbursed.
Interest-only payments: Payments that go toward the accrued interest while the borrower is in school. The student is only required to make payments toward the principal amount after graduation or dropping below half-time status.
To qualify for a federal student loan, the applicant must fill out a Free Application for Federal Student Aid (FAFSA) and fill out a loan application form. To qualify, the student must meet the following requirements:
- Be a citizen or eligible non-citizen
- Have a valid Social Security Number
- Have a high-school diploma or GED certificate
- Be enrolled in an eligible program at a degree-granting institution
- Maintain academic progress
- Not owe refunds on federal student grants
- Not have a default status on a federal student loan
- Register with the Selective Service Program (males only)
- Not have a conviction for the possession or sale of illegal drugs
As for private student loans, only the loan application form will be required along with any additional income verification documents. Private lenders will typically look at the applicant's remaining income after accounting for their monthly financial responsibilities or debt payments, as well as their credit history. If the student doesn't have sufficient income or credit history, they may apply with a cosigner who will be responsible for paying off the loan in the event they default.
Full-time: Some lenders require borrowers to be full-time students enrolled in at least 12 credits.
Half-time: While full-time students may have more funding options, there are still lenders willing to extend loans to part-time students.
Another relevant factor to consider when shopping for private student loans is the provider's customer service standards. Competitive lenders will seek to provide features and benefits that will make its products more attractive to prospective borrowers. For that reason, private student loan lenders may offer discounts for those who sign up for direct debit or additional services like 24/7 support.
Private lenders often provide online quotes that detail the interest rate and loan amount a student borrower would be able to qualify for based on their qualifications and requested loan amount.
Student Loan Calculator
Student loan calculators allow prospective borrowers to calculate details such as monthly repayment amounts and interest on their loans based on their principal loan amount, the term of the loan, and the estimated annual percentage rate (APR).
Some lenders offer student loan discounts for borrowers who sign up for direct debit or make timely payments. Some may even waive origination fees to be more competitive. Discounts vary from one lender to another, and some may not offer them at all.
Student loan providers may offer additional services such as 24/7 customer support and career support, which aims to help students obtain employment after graduation.
When comparing loan products, it's important to look at the lender's reputability within the industry. Although this is a subjective area of evaluation that will depend on many variables, reputable companies will be transparent with regard to its products and services, and one should be able to find some online information on the company and its founders. Other sources with which we typically ascertain a lender's reputation are the Better Business Bureau and Trustpilot.com, online customer review platforms where consumers can provide feedback on the products and services of numerous companies across different business sectors.
The Better Business Bureau or BBB has been helping consumers make informed decisions for over a hundred years. The bureau helps set the standards for marketplace trust based on two main factors: integrity and consistent performance. It not only provides customer reviews but also accredit companies that meet the bureau's high ethical business standards and promptly reply to consumer feedback.
Trust Pilot Rating
Trustpilot.com is an online review community where customers can share their experiences with companies offering a broad range of products and services. Companies with high ratings on Trustpilot have met high customer service standards and are generally deemed trustworthy.
What's important to know about Student Loans?
- Why a choose a private student loan?
- Can I get a student loan for community college?
- How is a parent loan different from a cosigner loan?
- Why opt for a credit union versus a traditional bank?
- What is the difference between a fixed and variable rate?
- Do you pay student loans after graduation?
- How do I pay off my loan faster?
- Is there a penalty for paying a student loan early?
- What happens if I don't pay off my student loans?
Why a choose a private student loan?
Private student loans are offered by banks, credit unions, and other lending institutions as alternatives or supplements to federal student loans. You can apply for a private student loan anytime during the school year and they have higher borrow limits to help you cover not just school-related costs but also other living expenses. Applying for a private student loan is easy, since you can do it online or over the phone, and the disbursement of funds is usually fast. However, private lenders do require a credit check, whereas most federal student loans do not.
Can I get a student loan for community college?
In most cases, you can get a federal or private student loan to attend community college. This was not always the case and, unfortunately, many people still believe this to be true. The recent shift in lending is attributed to more students choosing community college over traditional four-year colleges. If you are interested in getting a federal student loan to attend a community college, be aware not all community colleges offer federal loans to students. Check with your school’s financial aid office to see if it does. One alternative is going with a private lender for a student loan that may offer you higher borrowing limits and more repayment options.
How is a parent loan different from a cosigner loan?
The primary differences between the loans is who qualifies for it and who is legally responsible for making the loan payments. With a parent loan, the borrower is your parent (just as the name implies) and is the person responsible for making the loan payments. With a cosigner loan, you as the student are the primary borrower with the cosigner as the secondary signer who has agreed to be responsible for the loan if you can no longer make payments. Both federal and private lenders offer parent loans, whereas only private lenders offer a cosigner loan. Having a cosigner with an excellent credit score and history will definitely help you in securing a private student loan with a good interest rate. Some private lenders offer a cosigner release with which you can remove your cosigner from the loan after meeting specific qualifications, such as maintaining a good repayment record over a 24-month period. Keep in mind that, if you get behind on payments and default on your cosigner loan, both you and your cosigner will take major credit hits, which is something you want to avoid.
Why opt for a credit union versus a traditional bank?
Credit unions might be a good option depending on what you are looking for in your lender. Credit unions are nonprofit and are only responsible to direct members, whereas traditional banking institutions are for-profit and owned by outside investors. Credit unions are local and focus more on a personal customer service approach (i.e., building relationships), which a larger bank can't offer, mostly because of its size. As far as loan specifics, credit unions may offer better deals on rates and repayment options because it is not accountable to outside investors that want to maximize and increase profits, possibly passing that cost onto you as a customer.
What is the difference between a fixed and variable rate?
A fixed interest rate remains the same for the life of your loan unless you choose to refinance it. A variable interest rate can change several times during the life of your loan, which means you could pay more or less on the loan due to fluctuations in the market. There are pros and cons with each rate option. Consult with your lender to understand which one will work best for you.
Do you pay student loans after graduation?
Most students will have loan payments after graduation, and the amount and duration of payments depend upon your loan's term, grace period, and repayment option. The term of your loan is the length of time in which you have to pay off your loan: for example, 5, 10 or 20 years. If your loan has a grace period, it generally starts on the day after you graduate, leave school, or drop below half-time enrollment, and it typically ends six months later. You may not be required to make payments during the grace period; however, interest will continue to accrue. The repayment option defines how and when you start to repay the loan. Check your contract for the specifics of your loan.
How do I pay off my loan faster?
Besides paying off your loan in full, which usually is not a viable option for most students, there are other ways to pay down your loan before the end of its term. If you can, make additional monthly, principal-only payments, starting with the loans with the highest interest rates. Consolidating multiple loans or refinancing your loan into a new loan with a lower interest rate is another option. If you have a federal student loan, you may qualify for the Student Loan Forgiveness, Cancellation and Discharge program, under which some or all of your debt can be forgiven if you work in a public service job, or if you meet other requirements. This option, unfortunately, is not available through private student loan lenders.
Is there a penalty for paying a student loan early?
With federal and most private student loans, there are no pre-payment penalties. However, if you have discounts on an existing private student loan that you want to pay off ahead of term, be sure to check your contract. There may be a fee that revokes any earlier discounts you received. If you choose to make an additional monthly payment amount, contact your lender and make sure that amount will be applied to your principal balance only and not applied as an early payment on your next month’s bill.
What happens if I don't pay off my student loans?
We highly recommend you keep your student loans in good standing by making your loan payments on time and in full. With that said, most federal student loans go into “delinquent” status after 90 days with no payment made and “default” status after 270 days. If your federal student loan becomes delinquent, do not ignore it. Take action right away by contacting your federal student loan servicer to discuss the many repayment assistance programs available to you. If you go into default on a federal student loan, the government can garnish your wages (up to 15%), take your tax refund, or deny you government benefits. Private lenders, on the other hand, have varying definitions of “delinquent” and “default” status so you will want to check your contract. For example, your loan could go into default status after missing only one payment. Many private lenders do offer forbearance programs, which suspend loan payments for a temporary period of time due to financial hardship. Interest continues to accrue during this period, which will add to your overall loan amount. If your loan does default, your credit score will take a hit and the defaulted loan could remain on your credit history for up to seven years. If you have a cosigner on your private loan and default, that person may also suffer similar consequences. Additionally, you could pay higher interest rates on any existing credit cards and pay more for car or home insurance. If your loan goes to collection, you could incur as much as a 25% penalty, depending on your state. Do not ignore your loan status. Talk to your lender right away about payment options to avoid going in or getting out of delinquent or default loan status. Read more here about what to do if you can't pay off your student loans