Today, millions of borrowers owe more than $1.4 trillion in outstanding student debt in the U.S. including debt from both the federal government and private lenders.
Although the majority of student loans taken out by borrowers are through the government in the form of federal student loans, private lenders offering alternatives for financing education expenses have become increasingly popular.
At a Glance: Sallie Mae vs. Discover Student Loans
|Fixed APR||5.24% – 12.99%²||5.24% – 11.85%¹|
|Variable APR||3.87% – 11.87%²||4.00% – 11.35%¹|
|Loan Terms||Up to 20 years||5 – 15 years*|
|Loan Amounts||$1,000 up to 100% of school-certified cost of attendance¹||$1,000 up to 100% of school-certified cost of attendance¹|
Lowest Discover rates shown include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
Sallie Mae and Discover Student Loans have subtle differences in the interest rates offered, loan fees charged to borrowers, loan minimums and maximums, available repayment plans, borrower eligibility, and added benefits.
This Sallie Mae vs. Discover Student Loans review will look into how the two student loan lenders stack up against each other.
Interest Rates and Loan Fees
Sallie Mae offers a variety of private student loan options for undergraduate and graduate students, dental and medical professional students, and MBA and career training students. DSL provides options for students pursuing undergraduate or graduate degree programs, health professionals, MBA students, and law and residency students.
Both Sallie Mae and Discover Student Loans give borrowers the option of variable or fixed interest rate loans. Sallie Mae has no origination, application, or prepayment penalty fees assessed. Discover Student Loans prides itself on its “zero fees required” student loans. That means you will not be required to pay any fees, including application, origination, or late fees. There are no prepayment penalties.
Variable interest rates on loans offered by Sallie Mae start as low as 4.62% and can be as high as 11.47%.1 Fixed interest rates on Sallie Mae student loans range from 5.74% up to 11.85%.1 DSL offers variable interest rates on private student loans as low as 4.49% up to 13.49%, with its fixed interest rates ranging from 5.99% to 13.99%. Lowest rates include an interest-only repayment discount and 0.25% interest rate reduction for automatic payments. Interest rates for both fixed and variable loans offered by Sallie Mae and Discover Student Loans are based on the creditworthiness of applicants.
Loan Amounts and Repayment Plans
As with most private student loan lenders, Sallie Mae and DSL limit the maximum amount a student can borrow to 100 percent of the school-certified cost of attendance (aggregate loan limits apply).3 Both private lenders may approve a lower student loan amount than the total cost of attendance for any borrower, based on their underwriting guidelines. Sallie Mae has a minimum loan amount of $1,000. Discover Student Loans also has a minimum loan amount of $1,000.
Sallie Mae offers a number of different repayment programs to borrowers to help them meet their financial needs. Under the lender’s deferred repayment option, borrowers are not required to make any payments on borrowed funds while they are enrolled in school at least half-time or for a six-month grace period after leaving school. Once the grace period ends, borrowers must pay principal and interest payments per the agreed upon terms at the time of application.
Sallie Mae also offers a fixed repayment option which required borrowers to repay $25 per month while in school and throughout the grace period.1 After a borrower leaves school, principal and interest payments are required until the loan is repaid in full. The interest repayment option through Sallie Mae requires students to pay the monthly interest on all outstanding student loan balances during their time in school and the grace period. Principal and interest payments are due once the grace period ends.
DSL also offers different repayment plans, including in-school options and a deferred option. Students who choose a loan with an in-school repayment have the option to make either interest-only or $25 fixed, monthly payments while in school and during the grace period. The deferred repayment plan does not require any payment while a student is enrolled in school at least half-time, nor during the grace period after leaving school. Undergraduate borrowers can take advantage of a six-month grace period, and graduate borrowers can opt for a nine-month grace period. Both repayment plans require full principal and interest payments per the agreed upon terms after the grace period ends.
Sallie Mae and Discover Student Loans have stringent underwriting requirements which must be met prior to being approved for a new education loan. Sallie Mae requires that borrowers be at least 18 years of age, while DSL requires the borrower to be at least 16. Sallie Mae require the borrow to be a U.S. or permanent resident, while DSL offers loans to U.S. citizen, permanent residents, and international students (provided they have a U.S. citizen or permanent resident as a cosigner).
New student loans are made available to borrowers who are enrolled or plan to enroll at least half-time in a degree-earning program at an eligible school. An evaluation of credit history and score is completed for each new borrower applying for either a Sallie Mae loan or a DSL private student loan, but a co-signer may be added to an application should the student borrower not have sufficient or strong credit to qualify on his or her own.
Sallie Mae offers a unique benefit to new student loan borrowers through Chegg Tutors which provides up to 120 minutes of online tutoring at no added cost. Borrowers who use Sallie Mae also have access to a quarterly FICO credit score** through the lender’s website at no cost, as well as an interest rate discount of 0.25 for establishing automatic payments. Sallie Mae also provides an option for borrowers to request a 12-month period of interest-only payments upon graduation.
Discover Student Loans also provides a unique benefit to borrowers who earn good grades. Those who have at least a 3.0 GPA or equivalent can earn a one-time 1 percent cash reward, based on the amount of each new Discover student loan taken out. Also, DSL offers an interest rate discount of 0.25 when borrowers are enrolled in automatic payments.2
Both Sallie Mae and Discover are great choices when it comes to private student loans. The option that’s better for you will depend on the rates you are eligible for and your personal financial situation.
If you aren’t sold on Sallie Mae or Discover, here are some other resources that you may want to check out:
Discover Student Loan Disclosures
- Aggregate loan limits apply.
- Lowest rates shown include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.50% as of July 1, 2019. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please click here for more information about interest rates.
**Borrowers and cosigners who have an available FICO® Score, may receive their score quarterly after [the first] disbursement of their loan. The FICO® Score provided to you is the FICO® Score 8 based on TransUnion data, and is the same score that Sallie Mae uses, along with other information, to manage your account. FICO® Scores and associated educational content are provided solely for your own non-commercial personal review, use and benefit. This benefit may change or end in the future. FICO® is a registered trademark of the Fair Isaac Corporation in the United States and other countries.
Author: Jeff Gitlen
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