In recent years, the skyrocketing cost of higher education has prompted borrowers to look at alternatives for their student loan needs. In fact, many students turn to private educational loans to help cover college expenses, and Discover Student Loans offers competitive options for private college loans.
After the 2008 financial crisis, many private student loan lenders pulled out of the market. However, Discover Student Loans continued to offer private student loans and, as a result, became one of the largest lenders in the industry.
Below, we look in detail at Discover’s student loan offerings for undergraduate and graduate students, and consolidation loans, including interest rates, terms, and loan limits.
On this page:
- Discover Student Loans
- Discover Student Loan Refinancing
- Benefits and Drawbacks of Discover Student Loans
- Alternative Options
Discover Student Loans Review for Borrowers
What we like:
Cash rewards for good grades²
|Fixed Rates||5.99% – 13.99%1|
|Variable Rates||4.49% – 13.49%1|
|Loan Terms||15 or 20 years|
|Loan Amounts||$1,000 to 100% of school-certified college costs3|
Discover college loans are made by Discover Bank. While most of us know Discover for its credit cards, Discover Student Loans is quietly one of the biggest private student loan lenders on the market.
Discover offers private student loan options for many different types of students. The company offers private student loans to students in undergraduate, graduate, MBA, Law, Residency, Health Professions, and Bar Exam programs. Aggregate loan limits apply depending on the program. In this Discover Student Loans review, we’ll focus on loans for undergraduate and graduate students as well as consolidation loans.
Undergraduate Student Loans
Private student loans from Discover are offered to undergraduate students enrolled at an eligible, accredited college or university, at least half-time. There are several factors to note about undergraduate student loans from Discover, including interest rates, repayment terms, fees, and loan limits.
Discover Student Loans are issued based on a borrower’s creditworthiness and other factors. Applicants with higher creditworthiness receive lower interest rates. Discover’s college loans have competitive interest rates for qualified borrowers. Variable rates start at 4.24% APR and go up to 12.24% APR. The lowest rates include an interest-only repayment discount and an Auto Debit reward of a 0.25% interest rate reduction.
Discover’s variable interest rates are lower than the company’s fixed interest rate products. Fixed interest rates start at 5.99% APR for the most creditworthy borrowers, and go up to 13.49% APR for those less qualified. If you choose a variable rate Discover loan product, you should know that your interest rate may change over time as variable rates are tied to an index.
Terms, Fees and Loan Limits
Discover’s undergraduate student loans for college have a repayment term up to 15 years. Discover student loans do not have any required fees on its undergraduate loans, including application, origination, or late fees. There are also no prepayment penalties.
Discover student loans can cover up to 100 percent of school-certified costs, with a minimum loan amount of $1,000.
Discover student loans for undergraduate students have three repayment options.
- Fixed payment plan, which requires a $25 loan payment while in school, then full principal and interest payments after school ends.
- Deferred payment option in which payments are not required until six months after the borrower leaves at least part-time attendance status or graduates.
- Interest-only repayment plan that allows borrowers to pay any interest charges as soon as the loan is funded, while they attend school.
Graduate Student Loans
Discover also offers graduate student loans to qualified borrowers. The rates, loan terms, fees, limits, and repayments options are below.
The interest rates offered for graduate-level students are either variable or fixed. Variable interest rates range from 4.59% up to 12.99% APR. Fixed interest rates range from 6.34% up to 13.99% APR.
All graduate-level student loans from Discover have repayment terms up to 20 years.
Fees and Loan Limits
Like Discover undergraduate private loans, borrowers are not required to pay prepayment penalties, application, origination, or funding fees. Loan limits are up to the school-certified total cost of attendance, and the minimum to borrow is $1,000.
Discover graduate loans have the same loan types as undergraduate loans:
- The fixed-payment option is $25 while the student is in school, followed by full payments after graduating.
- Deferred repayment does not require any monthly payment until after a six-month grace period after graduation.
- Interest-only payments allow graduate students to pay only interest while in school, then full principal payments after that.
Refinance & Consolidation Loans
What we like:
<span updateval=”discover-refi-9-whatwelike” class=”productupdate”>Numerous deferment options</span>
|Fixed Rates||5.74% – 8.49%|
|Variable Rates||4.99% – 7.99%|
|Loan Terms||10 or 20 years|
|Loan Amounts||$5,000 – $150,000|
Discover also offers consolidation, or refinance loans, for qualified borrowers. You can refinance federal and private educational debt together into one new loan. Consolidation is the process of refinancing existing private or federal loans to a loan with a lower interest rate and more favorable repayment terms.
Refinance and consolidation can be a smart move for those looking to make only one payment on their student loans, or those looking to lower their monthly payment. Borrowers are more likely to get approved after they have started working a full-time job, as they have likely established credit scores and a history of income.
Private student debt consolidation rates with Discover range from 4.74% to 7.99% APR for variable rate loans. Fixed-interest rate loans range from 5.74% up to 8.49% APR.
Repayment terms for Discover consolidation student loans are either 10 or 20 years.
Fees and Loan Limits
Like other Discover private student loans, consolidation loans through the lender have no required fees for origination, application, funding, or prepayment. Loan limits are up to $150,000.
Because consolidation loans through Discover are only available to students who have graduated or left their degree program, the only repayment option is full principal and interest, starting 30 days after the loan is funded.
Should You Apply for Discover Student Loans?
Discover Student Loans offers many noteworthy benefits to students and families. The lender can cover up to 100 percent of school-certified costs, and Discover does not have any required fees on its student loans, including application, origination, or late fees.
Also, students who receive good grades – carrying a 3.0 GPA or better – receive a one-time cash reward of 1 percent for each new undergraduate or graduate loan they take out. So it can literally pay to study if you are a Discover Student Loans borrower.
Discover is also known for having good customer service. The company prides itself on having only U.S.-based Student Loan Specialists. The lender’s application is also straightforward, meaning students and cosigners are able to fill out their application online in 15 minutes or less.
One of the biggest downsides to Discover Student Loans is the minimal number of repayment terms available to borrowers.
Undergraduate borrowers have a repayment term up to 15 years, regardless of the amount borrowed, while graduate students have a repayment term up to 20 years. Consolidation loans through Discover offer 10 or 20 year terms, but no other options.
Additionally, qualifying for a Discover Student Loan when refinancing or consolidating may be difficult for borrowers who have a low credit score, low income, or no cosigner.
Lastly, Discover Student Loans do not come with the same provisions as federal student loans. Income-based repayment plans, forbearance, and potential student loan forgiveness are not available with private student loans from Discover.
Applying for Discover Student Loans
Applying for a Discover student loan can be a simple online process. Borrowers need to provide information about their current loans or attendance at a college or university, as well as details about their income, residence, Social Security number, and date of birth.
Once Discover has received the application, it will review it and provide a decision within a few days. The loan funds for undergraduate and graduate students are then paid to the school, while consolidation loan proceeds are sent to the borrower’s current student loan servicer for payoff.
Alternatives to Discover’s College Loan Product
There are a number of financial aid programs designed to help you afford a higher education. But first, you need to explore all of the different financial aid options available to you.
Financial aid awards can come from a number of places. Most often, financial aid awards are provided by the Department of Education. You should get started by submitting the Free Application for Federal Student Aid (FAFSA). It is free to file the FAFSA, and the majority of students may qualify for some type of financial aid, including Pell Grants, work-study programs, and federal loans.
Nonprofits and other private organizations play an important role in providing financial aid in the form of scholarships and grants.
These organizations often look to provide awards to future members or individuals that exemplify the values of the organization. Some companies give scholarships for academic merit received by a student, others give because of performance in a particular sport, like basketball or football.
Also, some companies might give a scholarship because a student is a member of a particular church while some companies award scholarships to employees’ children.
Unlike student loans, scholarship and grant awards do not need to be paid back. However, if you withdraw from school before completing your course, you might be required to repay a part or the entire grant.
Moreover, if you’ve been awarded a scholarship from a private organization there may be restrictions on how the funds can be used if you withdraw from classes.
Choosing the Right Student Loan for You
Discover Student Loans offers competitive options for students looking for private education loans. However, this might not be the best option for every borrower. Before signing that promissory note, you should shop around to make sure you are getting the best private student loan on the market.
Some credit unions and community banks have similar products that may be more beneficial.
If you are unsure about Discover’s refinance product, and would like to compare additional options, you can check out our picks for the best companies to refinance student loans.
We want to be transparent. LendEDU does receive compensation from Discover in exchange for online advertisements on our website. However, the findings of our research are based on authentic and unbiased analysis of product features.
1. 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 2.63% as of April 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.
2. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please click here for any applicable reward terms and conditions..
3. Aggregate loan limits apply.4.05 Discover Student Loans
Author: Melissa Horton
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