Discover Student Loans Review
Discover offers student loans for both undergraduate and graduate students, as well as a loan to refinance and consolidate existing loans. Discover Student Loans have competitive rates, unique benefits, and may be a good choice for you depending on your situation.
In recent years, the skyrocketing cost of higher education has prompted more students to take out private student loans to help cover college expenses.
One option, Discover Student Loans, offers competitive rates, terms, and benefits, and is worth considering if you are looking for a private student loan. Discover is rated as one of our best private student loan lenders for 2019.
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 students, graduate students, and those looking to refinance existing student loans, including interest rates, terms, and loan limits.
In this review:
- 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||5.49% – 12.99%2|
|Variable Rates||4.24% – 11.99%2|
|Loan Terms||15 or 20 years|
|Loan Amounts||$1,000 to 100% of school-certified college costs3|
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 students in undergraduate, graduate, MBA, Law, Residency, Health Professions, and Bar Exam programs. Aggregate loan limits differ based on the program.
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.
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.
The lowest rates include an interest-only repayment discount and an Auto Debit reward of a 0.25% interest rate reduction.
If you choose a variable rate Discover student loan, you should know that your interest rate may change over time as variable rates are tied to the market.
Terms, Fees, and Loan Limits
Discover’s undergraduate student loans have a repayment term of 15 years. This is longer than many lenders offer and borrowers have the option of paying off their loan early without any penalty.
Discover student loans do not have any required fees on its undergraduate loans, including application, origination, or late fees.
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% APR3. Fixed interest rates range from 6.34% up to 13.99% APR3.
All graduate-level student loans from Discover have a repayment term of 20 years. This long repayment term allows for lower monthly payments as compared to shorter terms and borrowers can still pay off the loan early without penalty.
Fees and Loan Limits
Like Discover undergraduate private loans, borrowers are not required to pay 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:
Numerous deferment options
|Fixed Rates||5.74% – 8.49%5|
|Variable Rates||4.99% – 7.99%5|
|Loan Terms||10 or 20 years|
|Loan Amounts||$5,000 – $150,000|
Discover also offers consolidation/refinance loans for qualified borrowers. You can refinance and consolidate federal and/or private student loans together into one new private loan.
Refinancing and consolidation can be a smart move for those looking to make only one payment on their student loans and for those looking save on their loans through a lower interest rate.
Borrowers are more likely to get approved after they have started working a full-time job, as they likely have established credit scores and a history of income and payments on other debt.
Interest rates on Discover’s refinance loans range from 4.74% to 7.99% APR for variable rate loans and 5.74% to 8.49% APR for fixed rate loans.
Repayment terms for Discover consolidation student loans are either 10 or 20 years. The 10-year repayment term will lead to higher monthly payments but less total interest paid, and vice-versa for the 20-year term. As with Discover’s in-school student loans, there are no prepayment penalties, so you can always pay off your loan early if you want.
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. The maximum loan limit is $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:
- Can cover full cost of attendance. The lender may cover up to 100 percent of school-certified costs.
- No required fees. Discover does not have any required fees on its student loans, including application, origination, prepayment or late fees.
- Auto-pay discount. If you opt to make automatic payments, you can receive a 0.25% interest rate discount.
- Good grade discount. Students who carry a 3.0 GPA or better receive a one-time cash reward of 1% of the total loan balance for each new undergraduate or graduate loan they take out.
- Great customer service. Discover is known for it’s exceptional customer service and the company prides itself on having only U.S.-based Student Loan Specialists.
- Easy application process. Discover’s application is straightforward and can be completed completely online in 15 minutes or less.
There are also some downsides to consider when it comes to Discover Student Loans:
- Limited repayment terms. Undergraduate borrowers have a repayment term of 15 years, regardless of the amount borrowed, while graduate students have a repayment term of 20 years. Consolidation loans through Discover offer 10 or 20 year terms, but no other options. Many other lenders allow borrowers to choose among a wide range of repayment terms.
- Strict eligibility requirements. Qualifying for a Discover Student Loan may be difficult for borrowers who have a low credit score, low income, or no cosigner.
- No cosigner release. Many student loan lenders allow borrowers to release cosigners from their loans after a certain amount of on-time payments have been made. Discover does not currently offer this option.
- No soft credit pull for pre-approval. Some lenders allow borrowers to be pre-approved and receive rate estimates via a soft credit pull before submitting the full application. Discover, however, only makes approval decisions based on a hard credit check which will likely temporarily ding your score a few points.
- Less protections than federal student loans. Most private student loans do not come with the same protections as federal student loans. Income-driven repayment plans, forbearance, and potential student loan forgiveness are not available with private student loans from Discover (and most other private lenders).
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
The first step to paying for college is seeing what kind of financial aid you are eligible for 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 student loans.
The next step is to look for scholarships and grants from nonprofits and other organizations. Organizations typically give scholarships and grants for academic merit, financial need, or outstanding performance in sports or an art.
After you have exhausted all federal and state financial aid options, scholarships and grants, and college savings, the next step is to look for private student loans.
Discover Student Loans offers competitive rates, terms, and benefits and may be a good option for you depending on your situation. As always, it is smart to shop around and compare other lenders before making a decision.
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.
Discover Student Loan Disclosures
- Aggregate loan limits apply.
- 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.
- 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.
- View Auto Debit Reward terms and conditions.
- Get a variable interest rate from 4.74% APR to 7.74% APR (3-Month LIBOR + 2.12% to 3-Month LIBOR + 5.12%) for either a 10-year or 20-year repayment term. Or lock in a fixed interest rate from 5.74% APR to 8.49% APR for a 10-year repayment term or from 5.99% APR to 8.49% APR for a 20-year repayment term. 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 may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change https://lendedu.com/blog/true-discover-student-loans-facts/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. The lowest listed APRs include a 0.25% rate reduction for automatic payments. Visit discover.com/student-loans/consolidation for more information, including up-to-date interest rates and APRs. https://www.discover.com/student-loans/consolidation.html
Author: Melissa Horton
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