Private student loans fill the gap when federal student loans don't cover education costs. While lacking federal protections, private loans can offer competitive rates for creditworthy borrowers.

When to Consider Private Student Loans

Private loans should be your last resort after:

  1. Completing the FAFSA
  2. Accepting all eligible grants and scholarships
  3. Borrowing maximum federal student loans
  4. Considering work-study options

Only then should you explore private loans for remaining costs.

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Best Private Student Loan Lenders

SoFi Student Loans

Best for borrowers wanting member benefits:

  • No fees (origination, late, or prepayment)
  • Unemployment protection
  • Career coaching and financial planning
  • Competitive rates for excellent credit
  • Parent loans available

Earnest Student Loans

Best for flexible repayment:

  • Customizable repayment terms
  • Skip one payment per year
  • No fees
  • Precision pricing (choose exact monthly payment)
  • Merit-based approval beyond credit score

College Ave Student Loans

Best for customization:

  • Multiple repayment options during school
  • 9-month grace period option
  • Quick application and approval
  • $1,000 to cost of attendance borrowing

Sallie Mae Student Loans

Best for undergraduate options:

  • Multiple loan products for different needs
  • Rewards for good grades
  • Cover up to 100% of school-certified costs
  • Parent and graduate options available

Discover Student Loans

Best for cash rewards:

  • 1% cash back reward for good grades
  • No fees
  • Multiple repayment options
  • U.S.-based customer service

Fixed vs. Variable Rates

Fixed Rate Loans

  • Rate stays same throughout loan life
  • Predictable monthly payments
  • Better for long repayment terms
  • Protection against rate increases

Variable Rate Loans

  • Rate fluctuates with market conditions
  • Often starts lower than fixed
  • Payments can increase significantly
  • Better for short repayment terms or ability to pay quickly

How Private Loan Approval Works

Unlike federal loans, private lenders evaluate:

  • Credit score: 670+ typically needed, higher scores get better rates
  • Income: Current or expected post-graduation
  • Debt-to-income ratio: Existing obligations vs. income
  • School attended: Some lenders consider graduation/employment rates
  • Major: Expected earning potential

The Cosigner Question

Most students need a cosigner—typically a parent or relative with good credit:

  • Cosigner is equally responsible for the loan
  • Cosigner's credit affected by loan performance
  • Some loans offer cosigner release after on-time payments
  • Cosigner death or bankruptcy may trigger loan issues

Before cosigning, understand the commitment. It's not just helping—it's taking on the debt.

Comparing Private Loan Offers

When evaluating lenders, compare:

  • Interest rate (APR includes fees)
  • Repayment term options
  • Payment flexibility during school
  • Fees (origination, late, prepayment)
  • Cosigner release options
  • Forbearance/deferment options
  • Customer service reputation

Private Loan Limitations

Private loans lack federal benefits:

  • No income-driven repayment
  • No loan forgiveness programs
  • Limited deferment/forbearance
  • No subsidized interest
  • Variable rates can increase

Consider refinancing federal loans to private only if you don't need federal protections.