|How private student loans compare to federal loans|
|Credit check||Required||Not necessary for most loan types|
|Cosigner||9 of 10 loans for undergraduates include a cosigner, though not all lenders require applying with one||Not necessary, though an “endorser” could be needed for parent or grad PLUS loans|
|Interest rates||Fixed and variable APRs depending on your creditworthiness||One-size-fits-all fixed rates, plus origination fees|
|Annual borrowing limit||Up to 100% of cost of attendance||$5,500 to $12,500 for undergraduates|
|Repayment flexibility||Top lenders offer in-school deferment and short-term economic hardship forbearance||The Department of Education offers borrowers the ability to adjust their repayment plan at any time and for free, on top of a wide array of deferment and forbearance options that could pause payments for months or years|
|Forgiveness programs||Not available, though state and employer-run loan repayment assistance programs could be helpful||An extensive menu of federal student loan forgiveness programs as well as ways to discharge your debt|
Private student and education loan rates
Looking for ways to help cover the cost of college after exhausting all the scholarship, grant and federal student loan options out there? Private student loans can provide an additional way to help make ends meet while pursuing your degree.
Keep in mind each private student loan provider has its own set of terms, rates and eligibility requirements that vary, unlike a typical federal loan. Also know that applying with a cosigner can greatly improve your chances of qualifying. Check out this list of recommended loan providers below:
Get a customized offer based on your school with our student loan tool!
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How to Get a Private Student Loan in 4 Steps
1. Research other options
- Apply for any scholarships and grants available to you
- Consider putting savings you have toward college
- Max out your limit for federal student loans (unless you’re taking out a PLUS loan)
2. Shop for private student loans
- Browse for interest rates and terms — you can find great options online
- Some lenders will give you a rough quote without affecting your credit
- Consider having a cosigner to get a shot at better rates
- Don’t forget to weigh other features, such as unemployment protections or special discounts
3. Choose a loan and apply
- Find the loan that offers the best rate for you with the features you want
- Gather your personal and financial information and fill out the application
- Wait for approval
4. Don’t forget about next year
- Remember to start early when planning for next year’s costs
- Keep applying for “gift aid” (scholarships, etc.) to lessen your debt load
While federal loans are one-size-fits-all, private student loan rates and terms are individually set by lenders. Banks, credit unions and online companies vary their loan offers based on the strength of your application. If you have a stable credit history (or a cosigner who does), you could score the lowest rates available from the lender.
Private student loans also provide borrowers with a greater degree of choice. Instead of being assigned a fixed-rate federal loan to be repaid over a 10-year term, you might opt for a variable rate and a shorter or longer repayment period.
Private education debt comes with a higher borrowing limit, too, allowing you to cover any gaps in your school’s cost of attendance. With that said, it’s wise to only borrow what you need — and what you can afford to repay.
Check out our Student Loan Payment calculator below to see what your monthly payments could be:
Just enter the amount of your loan, interest rate and how long you have to pay it back. The Student Loan Hero calculator will reveal your monthly bill, as well as how much interest you'll pay over the life of your loan.
How do I use a student loan calculator?
To use this calculator, you'll need a few key pieces of information about your loan:
Student loan balance
When you take out a student loan, your balance is the amount you borrowed. As interest adds up, your loan balance can grow.
You might have several student loan balances, depending on how many loans you took out. Most students start with federal loans, since they're easy to access and have relatively low rates and flexible repayment terms.
However, federal student loans come with borrowing limits, meaning you can only borrow up to a maximum amount each year.
Federal student loan limits
Undergraduate students can borrow the following amounts:
- Direct subsidized loans: Up to $5,500 each year
- Direct unsubsidized loans: Up to $12,500 each year
Note that the government covers interest during your grace period or other areas of deferment for subsidized loans, which are only available to students with financial need. By contrast, unsubsidized loans are available to any student, regardless of financial need, but they start accruing interest right away.
Graduate students can borrow the following amounts:
- Direct unsubsidized loans: Up to $20,500 each year.
- Direct PLUS loans: Up to your school's cost of attendance, minus any other financial aid you already received
Parents of undergraduate students can borrow the following amount:
- Parent PLUS loans: Up to the school's reported cost of attendance, minus any other financial aid already received
Private student loan amounts
If you've hit your borrowing limit for federal student loans and need more funding for school, you could take out a private student loan. Unlike federal loans, private lenders have requirements for credit and income.
Most undergraduate students will need to apply with a cosigner (usually a parent) to qualify. Once you qualify, you can typically borrow as much as you need to pay for school.
Like with PLUS loans, private lenders will usually subtract any financial aid you already received before covering your remaining cost of attendance.
When you borrow a student loan, you agree to pay back the amount you borrowed, plus any interest that accrues. With the exception of subsidized loans, interest starts racking up from day one.
Federal loans come with fixed interest rates that are set by Congress each year. Your interest rate will remain the same over the life of your loan.
Private student loans, on the other hand, can come with fixed or variable interest rates. You can usually choose which rate type you prefer. Variable rates often start lower than fixed ones, but they run the risk of increasing over time.
When selecting a private student loan, compare offers from a few different lenders to find the lowest rate for you. By shopping around, you can find the loan that provides you with the lowest long-term costs of borrowing.
The final factor that goes into this student loan calculator is your loan term, which is the number of years it will take you to repay your loan.
Federal student loans are automatically placed on a standard 10-year term with fixed monthly payments. If you need to adjust payments, you could do so on a graduated plan, extended plan or income-driven repayment plan. These federal plans come with terms that range from 10 to 25 years.
Private loans are not eligible for federal repayment plans. Most lenders will let you choose a term of five to 20 years when you borrow.
What can a student loan calculator do?
Your loan balance, interest rate and loan term can dramatically impact the overall costs of your loan.
If you opt for a short loan term, you'll be dealing with higher monthly payments, but you'll get out of debt faster and pay less interest. A longer term, on the other hand, can lower your monthly payments. However, it means you'll be in debt longer and pay more interest overall.
Use this student loan calculator to see exactly how much you will spend or save with different loan terms. If you can afford to speed up repayment, you can make extra payments on your student loans at any time without penalty. (Just make sure those extra payments are applied correctly.)
You might also consider refinancing your student loans for new terms and lower rates. Refinancing your debt has the potential to save you money, but be cautious about refinancing federal loans, as it turns them private and makes them ineligible for federal plans and programs.
Where can I find more student loan resources?
The world of student loans can be confusing to navigate. Use these resources to learn more about your options and make informed decisions about paying for school:
Although private student loans typically include a six-month grace period, their repayment protections aren’t generally as robust as the safety net available with federal loans. Government-offered perks like income-driven repayment, deferment and forbearance, and certain loan forgiveness programs are either difficult to access or nonexistent among private lenders.
Because private student loans include fewer safeguards, they most often supplement — but rarely replace — federal loans. If borrowing one is right for you, it’s wise to check your eligibility and possible terms with at least a few of the best private lenders listed on our site.
As you shop around, go beyond interest rates to ensure you’re matched with the best overall loan for your situation. You might prioritize an online company that provides economic hardship forbearance, for example, to protect your finances in repayment. Lenders could also stand out for their discounts and perks, cosigner release policy or customer service, among other factors.
When seeking a private student loan, minimize any harm to your credit report by submitting applications within 30 days and prioritizing lenders that offer a soft credit check. This way, you can learn about your eligibility and potential interest rate while keeping your (and your cosigner’s) credit in tiptop shape.
To fully understand private student loans before opting to borrow, explore the following FAQs:
When should I consider applying for private student loans?
Before resorting to student debt, apply for scholarships and grants, tap college savings and increase your income, perhaps with a side hustle. Completing the Free Application for Federal Student Aid (FAFSA) is essential, as it’s the gateway to government grants, work-study programs and loans aid, as well as private scholarships and grants from your state.
If these strategies aren’t enough to fund your education, then you should turn to student loans. But it’s generally advisable to rely on federal student loans first before taking private loans. Funded by the Department of Education, federal loans include greater repayment protections. On the other hand, a private student loan could help you bridge any gaps in your cost of attendance once you’ve maxed out your federal loan allotment.
What can private student loans be used for?
Like federal loans, private student loans can be applied toward education-related expenses, including (but not limited to) tuition and school fees. You might also use private loan money to help cover secondary but significant expenses.
|Tuition and fees||Travel|
|Room and board||Clothes|
|A computer||Down payment on a home|
|Supplies and equipment necessary for study||Business expenses|
|Transportation to and from school|
|Child care expenses|
Related: Dos and don’ts of student loan money
What are the advantages and disadvantages of private student loans?
Private student loans can benefit borrowers with strong credit histories or with cosigners who are especially creditworthy. If you fall into this category, you might net a lower interest rate from a bank than you could from the federal government. You might also prefer private student loans for their exclusive options, such as variable rates.
On the other hand, private loans are riskier propositions for borrowers, regardless of their credit strength. For instance, you might see your initial low variable rate rise with market conditions, then find that private loans provide a fraction of the repayment protections included with federal loans. Income-driven repayment, for example, is seldom available from private lenders.
What are the different types of private student loans?
There are loans for every borrowing situation, including:
- Undergraduate, graduate and parent loans
- International student loans for non-U.S. residents
- Student loans for a associate, bachelor’s or postgraduate degree or a certificate
- Loans for attending school part time or full time
- Options for students or families with thin or poor credit files
Check with reputable lenders about whether they serve your needs or, better yet, specialize in them.
Best private student loans by ...
How do I choose a private student loan?
Before taking out a private student loan, compare offers from a few different lenders. Many will let you check your rates online without any effect on your credit score. By shopping around, you can find a loan with the lowest rate for you, reducing your long-term costs of borrowing.
Besides searching for the lowest interest rate, you can also consider a few other factors, such as origination or prepayment fees, repayment options, interest rate discounts and cosigner release policy. You should also find out if your lender has any borrower protections, such as economic hardship forbearance.
Will I need a cosigner for private student loans?
About 9 out of 10 private student loans are borrowed with cosigners — a creditworthy individual who agrees to repay the debt if you, as the primary borrower, fall behind. That’s because teens and 20-somethings often don’t have the thick credit file required to meet the underwriting standards of banks, credit unions and online-only lenders.
Even if you’re a rare case of a student who could qualify on your own, attaching a cosigner to your application could score you a lower interest rate. Just ensure you and your cosigner understand the legal obligations of repayment before deciding to team up.
How do private and federal loans differ?
Private student loans are issued by private institutions, such as banks, credit unions or online lenders. Interest rates can differ from one lender to another, and you usually have a choice between a fixed or variable rate. Before approving you for a private student loan, private lenders look at your financial credentials, including your credit. If you can’t qualify on your own, you might have to apply with a cosigner.
Federal student loans, on the other hand, are issued by the Department of Education. They come with a fixed interest rate that is set by Congress each year, and you won’t need to pass a credit check to qualify for most federal student loans. Federal loans are also eligible for a variety of repayment plans, such as income-driven repayment. They may also be eligible for federal loan forgiveness programs.
- What’s the difference between federal student loans and private student loans?
- How to choose your best repayment plan for student loans
How do I qualify for a private student loan?
To qualify for a private student loan, you’ll need to attend an eligible school, as well as meet any age, education or citizenship requirements. You’ll also need to meet a lender’s criteria for credit and income, or apply with a cosigner who does.
Many lenders let you check your rates with an online prequalification that won’t impact your credit (as opposed to a more in-depth credit check). Compare offers from a few different lenders before choosing one, so you can find the lowest rate for your private student loan.
- 5 common requirements for getting private student loans
- 6 questions about private student loans for graduate students
Can I get a private student loan with bad credit?
Most private lenders require a minimum credit score before approving you for a private student loan. If you have bad credit, you can boost your chances of qualifying by applying with a cosigner. Even if you can qualify on your own, adding a creditworthy cosigner to your application could help you get better rates.
Note that your cosigner will be equally responsible for the loan, and their credit will be impacted if your loan falls into delinquency or default. Some lenders may allow you to release your cosigner from your loan after a certain period of on-time payments.
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