Best Private Student Loans for 2020

Private student loans can be used to pay for college after you’ve exhausted all of your scholarship, grant, and federal student loan options.

If you already filled out the FAFSA to see what other aid you qualify for, the next step is to compare private student loans to find the lowest interest rate.

To help you do this, we researched and analyzed lenders to find the best private student loans available today. Having a good credit score or creditworthy cosigner can increase your chances of being approved and qualifying for the lowest rates.

Best Private Student Loans

With so many private student loan lenders out there, it can be difficult to decide which is the best for you. To help solve this problem, we researched and analyzed lenders to find the best options for specific situations.

The following companies are LendEDU partners who have been extensively vetted by our Editorial Team. Our partners update us of any product changes, so we can be sure to keep the information on this page accurate for our readers. Note that these lenders don’t represent all of the options available to you.

Click a lender’s name to jump down to that section:

• Best Overall: College Ave
• Best for Checking Rates Before Applying: College Ave
• Best for Flexible Repayment: Earnest
• Best Large Bank: Citizens Bank
• Best for Students Without a Cosigner: Ascent

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College Ave Student Loans

Best for: Best Overall, Best for Checking Rates Before Applying

>> CHECK RATES AT COLLEGE AVE

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Earnest

Best for: Flexible Repayment

>> CHECK RATES AT EARNEST

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Citizens Bank

Best for: Large Bank

>>CHECK RATES AT CITIZENS BANK

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Ascent

Best for: Students Without a Cosigner

>> CHECK RATES AT ASCENT

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How We Chose the Best Private Student Loan Companies

LendEDU has rated and reviewed private student loan lenders since 2014. In order to find the best student loan lenders for this article, we analyzed over 20 data points for our partner lenders.

Here are some of the most important data points we considered:

• Interest rates: The rate on your loan has the largest impact on the total cost of it over time. Typically, the lower the rate you are offered, the better the loan is.
• Term lengths: Your term length is the amount of time you have to repay your loan and affects your monthly payments. The best private lenders offer a wide range of loan terms so you can choose one that fits into your budget.
• In-school repayment options: Most lenders allow you to make partial or full payments during school or defer your payment until after graduation. Making payments while in school—even if you are just paying the interest—will help reduce the total cost of your loan.
• Discounts available: The most common discount offered is an autopay discount for making automatic payments. Some lenders offer additional discounts, as well, that can help reduce the cost of your loan.
• Loan amounts: Each lender has different limits on how much you can borrow. Some will cap the borrowing limit at a certain amount while others let you borrow up to the total cost of attendance.
• Cosigner release: If you use a cosigner on your loan, you may be able to release them from their shared responsibility after a certain number of on-time payments.
• Deferment options: If you decide to go back to school, enter the military, or are in a medical residency or fellowship, your lender may allow you to defer payments during this time so you don’t have to make payments. Just be aware that interest will likely accrue during these times which will increase the cost of your loan.
• Forbearance options: Forbearance allows you to delay making payments if you face financial hardship. Like deferment, interest will usually still accumulate during this time, but your loan won’t enter default and your credit score won’t be affected.
• Initial soft credit pull availability: Some private lenders allow you to check your eligibility and receive rate quotes with a soft credit check. This won’t affect your credit score like a hard credit check does and allows you to see if you are happy with your likely rate before going through the full loan application process.
• Customer support options: We also considered the availability of customer support from lenders, including phone, email, live chat, and in-person.
• Extra benefits and rewards: Almost every lender offers unique perks to borrowers such as rewards for graduating, flexibility in repayment, and career coaching.
• BBB rating: We checked each lender’s credibility with the Better Business Bureau to make sure they were reputable companies with no or minimum complaints.
• Trustpilot: We also read through customer reviews on Trustpilot to make sure other borrowers had a good experience.

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Private Student Loan FAQs

Here are some of the most common questions we receive when it comes to private student loans. Click a question to jump down to it or keep scrolling to read them all.

• What can a private student loan be used for?
• When should I apply for a private student loan?
• What are the eligibility requirements? Do I need a cosigner?
• How does the application process work?
• How do interest rates work?
• Is private student loan interest tax deductible?
• Do private student loans have fees?
• Do I have to make payments while in school?
• How do private student loans compare to federal student loans?

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What can a private student loan be used for?

In most cases, college students can use private student loans for any costs associated with their higher education. These often include tuition, room and board, books, computers, and even living expenses like food.

Typically, lenders will send your student loan money directly to your college. First, the money will be used for mandatory expenses like tuition. Then, your college will give you any leftover money for you to use how you see fit.

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When should I apply for a private student loan?

There is no set time in which you can apply for private student loans. If an unexpected expense comes up in the middle of a semester and you need some extra money to help pay for it, you can apply for a new loan.

It can, however, take anywhere from a week to up to two months for colleges to receive your loan funds. If you need the money for a mandatory expense like tuition, make sure that you leave enough time to get through the process.

We also recommend waiting to use private loans until you’ve exhausted all other financial aid options including scholarships, grants, and federal student loans.

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What are the eligibility requirements? Do I need a cosigner? What if I have bad credit?

Each lender has its own eligibility requirements, but most lenders will examine your credit history, debt, income, college or university, field of study, and residency status.

Generally, you will need to be a U.S. citizen or permanent resident, have a credit score of 700 or higher, be attending school at least half-time, and meet some income threshold to be eligible for a private student loan without a cosigner.

Our State of Private Student Loan report found that the average approved private student loan applicant had a credit score of 748 and annual income of just under $77,000. In addition, only 8.84% of applicants without a cosigner were approved for a loan.

If you aren’t able to qualify for a private student loan on your own, adding a creditworthy cosigner can help. The same study found that when students applied with a cosigner, the approval rate jumped to 30.69%.

If you don’t have a cosigner and don’t meet the eligibility requirements on your own, you should consider looking into student loans for those without a cosigner or student loans for those with bad credit.

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How does the application process work?

Applying for private student loans is usually easy and can almost always be done online. There are also many mobile-friendly applications that allow you to apply directly from your phone.

Here are the general steps of applying for a private student loan:

1. Fill out some basic personal and educational information and have your cosigner fill out similar information (if applicable). In most cases, the lender will use this information to run a soft credit check to see if you meet the initial eligibility requirements.
2. Next, you will likely have to upload documents so the lender can verify that you are eligible and what your interest rate will be. This process usually takes a few hours up to a few days. If the lender runs a hard credit check as part of the application process, this is when it will happen.
3. Once you receive your loan options, you will have to decide which to accept, if any. The offers will most likely have varying interest rates based on loan term lengths.
4. After choosing the loan that best fits your needs, the last step is to sign the promissory note. This is a legally binding contract that requires you to pay back the student loan over time with interest.
5. Shortly after you sign the promissory note, your student loan funds will be sent to your school for disbursement.

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How do interest rates work?

Your interest rate is the biggest factor in the total cost of your student loan. The higher your rate, the more you will pay.

Interest starts accruing on most private student loans the day they are disbursed. Each month, your payment will first go towards unpaid interest and then will be applied to your principal balance.

Private student loan interest typically compounds daily. So each day, some interest will be charged based on your principal balance. The next day, the interest charge will be based on your total balance including the principal and any unpaid interest.

To figure out how much interest accrues on your loan each day, you can divide your interest rate by 365 to find the daily rate. Then multiply this number by your total loan balance (including both principal and unpaid interest) to find how much interest you are charged daily.

If you are curious how much interest you will pay over the life of your loan, you can use our student loan payment calculator.

Having a good credit score or a creditworthy cosigner can help you secure a lower rate. To help you get a better idea of what rates you can expect, here are the average rates LendEDU users received in 2019 based on our State of Private Student Loans Report:

• Students with a cosigner:
• 10.20% variable
• 9.30% fixed
• Students without a cosigner:
• 11.20% variable
• 10.20% fixed

Variable interest rates fluctuate with the market whereas fixed rates remain the same for the life of the loan. Generally, if you anticipate that rates will go up, or if you don’t want to have to worry about your rate increasing, you should go with a fixed rate. If you think rates will go down in the future, a variable rate may be the better (yet riskier) choice.

Keep in mind that rates will vary based on the lender and other factors. It’s important to shop around for the best rate so you can pay as little as possible on your loan.

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Is private student loan interest tax deductible?

Yes, you can deduct up to $2,500 in student loan interest from your taxable income each year if you meet certain requirements. Most private student loans qualify for this interest deduction.

If you are a parent that cosigned your child’s student loan, you can deduct the interest from your taxes if your child is your dependent and you make payments on it.

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Do private student loans have fees?

While most of the lenders shown on this page don’t charge any fees, it’s important to know what kinds you may come across when shopping around.

Origination fees

This is a fee that is charged when you take out a loan and is calculated as a percentage of the loan amount. For example, if you have a $10,000 loan with a 5% origination fee, the cost would be $500.

Origination fees are typically deducted from the amount of money you are given. In the example above, you would only receive $9,500 after the origination fee is taken out.

One advantage of private student loans over federal loans is that they typically don’t have any origination fees. Federal loans currently have origination fees of 0.000% or 0.000% depending on the type of loan.

Late payment fees

This is a fee that is charged if you don’t make a payment on time. Late fees may be a flat amount (such as $25) or may be based on a percentage of the payment (such as 5%).

Prepayment penalties

This is a fee that is charged if you pay off your loan early. Typically lenders charge this because it cuts into their profit when you prepay your loan. Luckily, most private student loan lenders don’t charge this fee, so you can pay your loan off at any time without penalty.

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Do I have to make payments while in school?

While in school, most private lenders give you the option of making payments or deferring them until after graduation. Here are the most common in-school repayment options lenders offer:

• Full payments: Immediately start making full payments. This option saves the most in interest over the life of the loan.
• Partial payments: Make a partial payment each month, such as $25. Doing this can help save on interest costs as well.
• Interest-only payments: Pay only the interest that accrues on your loan each month. When you graduate, your loan balance will be the same amount that you took out.
• Full deferment: No payments due until after you graduate. Lenders that offer this will typically defer payments until a set period of time after you graduate (called the grace period) of around six months.

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How do private student loans compare to federal student loans?

We recommend maxing out your federal student loans before turning to private loans. Federal loans typically have lower interest rates, better financial hardship options, and more repayment plans to choose from.

For example, with federal student loans, you have the option of enrolling in an income-driven repayment plan that caps payments at a percentage of your income.

In addition, federal student loans have fixed interest rates whereas private loans may have fixed or variable rates. The government may also pay the interest that accrues while you are in school and during periods of deferment with subsidized federal student loans.

Lastly, federal student loans are much easier to qualify for than private loans. Whereas private student loans typically require you to have good credit or a creditworthy cosigner, any student attending an eligible school can usually qualify for federal loans.

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Recap of the Best Private Student Loan Companies

Find Other Types of Private Student Loans