Private Student Loans

on May 19, 2017

Private student loans are non-federal education loans that are made by banks, credit unions, state agencies and other non-bank financial institutions. Private student loans can be used to finance the gap between college costs, family resources, financial aid and federal student loans. About 1.5 million undergraduate and graduate students borrow private student loans each year, typically about $5,000 to $10,000 each on average.

 

The lenders listed below offer some of the best private student loans. The first table shows cost characteristics of these private student loans.

 

Click on the lender name for more information about their private student loans.

 

Lender

Interest Rates

(Variable)

Interest Rates

(Fixed)

Fees

Discounts

Citizens Bank

2.99% - 9.99%

5.25% - 11.75%

None

0.25% interest rate reduction (auto-debit)

0.25% interest rate reduction (loyalty)

College Ave

3.22% - 9.89%

5.24% - 11.76%

None

0.25% interest rate reduction (auto-debit)

Connext

4.82% - 10.42%

6.12% - 10.76%

None

0.25% interest rate reduction (auto-debit)

iHELP

3.53% - 8.98%

N/A

None

0.30% interest rate reduction (after first

24 on-time payments)

Raise

4.95% - 15.35%

(16% cap)

N/A

None

0.25% interest rate reduction (auto-debit)

RISLA

N/A

4.49% - 6.42%

None

0.25% interest rate reduction (auto-debit)

$2,000 forgiveness (internship)

Sallie Mae

3.00% - 10.01%

5.74% - 11.85%

None

0.25% interest rate reduction (auto-debit)

 

Note that some private student loans may provide interest rates that are competitive with the interest rates on some federal education loans, especially for borrowers with excellent credit, but these private student loans may lack some of the superior benefits available on federal student loans. Interest rates may also depend on choice of repayment term and in-school payment options.

 

None of these lenders charge applicant, origination or disbursement fees.

 

The second table shows repayment characteristics of the private student loans.

 

Lender

Repayment Term

(Years)

In-School

Payment Options

Cosigner Release

(Months)

Discharges

Citizens Bank

5, 10, 15

Immediate

Interest Only

Full Deferment

36

Death

Disability

College Ave

8, 10, 12, 15

Immediate

Interest Only

Fixed

Full Deferment

24

Death

Disability

Connext

10, 15

Immediate

Full Deferment

36

 

iHELP

20

Immediate

Interest Only

Full Deferment

24

 

Raise

5, 7, 10

Immediate

Interest Only

 

 

RISLA

Level: 10, 15

IBR: 25

Immediate

Full Deferment

24

Death

Sallie Mae

5-15

Parent 10

Interest Only

Fixed

Full Deferment

12

Death

Disability


There are no prepayment penalties on federal and private student loans. So, you can pay off the debt quicker than the stated repayment terms by making extra payments.

 

Each lender offers all or some of the following payment options during the in-school and grace periods:

  • Full deferment: No payments of principal and interest until the loan enters repayment.
  • Fixed payment: A monthly payment of $25 per month. Sometimes called a “flat payment.”
  • Interest-only: A monthly payment of the new interest that has accrued since the previous payment.
  • Full payment: A fully amortized payment of principal and interest.

Some lenders offer cosigner release after the borrower has made a number of consecutive, on-time monthly payments, if the borrower satisfies credit criteria and other requirements. If the lender offers cosigner release, the number of months is listed in the table. Some lenders do not offer cosigner release.

 

Advice for Borrowers of Private Student Loans

 

Prospective borrowers of private student loans should pay attention the following important pieces of advice:

  • Apply for gift aid. Use scholarships, grants and other free money that does not need to be repaid to cover college costs before financing the remaining costs using student loans.
     
  • Borrow federal first. Federal student loans are cheaper, more available and have better repayment terms than private student loans.
     
  • Shop around. The interest rate you get may differ from the advertised rates, since eligibility and interest rates depend on your creditworthiness and the creditworthiness of your cosigner.
     
  • Consider a cosigner. Applying with a cosigner can increase your chances of getting the loan and a lower interest rate. Note that a cosigner is a co-borrower, equally obligated to repay the debt.   

Disclaimer: This is not intended to be an endorsement of any one student loan product over another. Please note that Cappex.com is paid by Credible Labs, Inc. for advertisements that appear on this website.

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