Best Private Student Loans

Federal student loans charge every borrower the same rate, regardless of credit, and that rate stays fixed for the life of the loan. For loans first disbursed on or after July 1, undergraduates pay 6.52%, graduate students 8.07% on unsubsidized loans, and parents 9.07% on Parent PLUS, with a 4.228% fee taken off the top of PLUS disbursements. Undergraduates with financial need may also get subsidized loans, where the government covers interest while they’re in school.

The rate is only part of the comparison. Federal loans offer income-driven repayment, which can drop payments to a percentage of income, plus Public Service Loan Forgiveness, generous deferment for unemployment and hardship for existing borrowers, and discharge if you become totally and permanently disabled or die. Private lenders offer some forbearance and many offer death and disability discharge, but none offers federal income-driven plans or PSLF.

That said, the federal advantage is narrower than it used to be. New federal borrowers can now repay only through the Repayment Assistance Plan or a tiered Standard plan, and forgiveness on RAP takes 30 years. For a borrower with excellent credit, a strong cosigner and a field with reliable income, a private rate several points below 8.07% can be a rational choice for graduate debt, as long as they go in clear-eyed about what they’re giving up.

When we lined up each lender’s disclosure pages, three things stood out more than the headline low rates. First, the low end of nearly every range requires a near-perfect credit profile, usually from a cosigner, plus the shortest term and immediate full payments while in school. Almost nobody gets the advertised floor. Second, the high ends cluster between about 14.5% and 18%, and that’s where a borrower with thin credit and no cosigner can land. Third, the two nonprofit lenders here, MEFA and INvestEd, have much narrower ranges: their best rates aren’t the lowest, but their worst rates are far lower than anyone else’s ceiling.

Terms matter as much as rates. A 15- or 20-year term lowers the monthly payment but raises total interest substantially, and some lenders charge higher rates on longer terms. Sallie Mae publishes separate ranges for graduate, medical and law programs, with medical loans on a 20-year term, and SoFi publishes separate ranges for parents and for graduate, medical and dental students. Graduate and professional borrowers should compare the program-specific products rather than the general undergraduate rates.

Several states charter nonprofit or state-affiliated lenders. They usually offer fixed rates only, with lower ceilings, no origination fees and, in some cases, features closer to federal loans. Eligibility varies: some serve only state residents, others also serve out-of-state students attending in-state schools, and a few lend nationwide. New Jersey’s NJCLASS program, for instance, publishes three fixed options this year: 5.95% on a 10-year loan with immediate repayment, 7.25% on a 15-year loan with interest-only payments in school, and 8.65% on a 20-year loan with full deferment, plus a 0.25% autopay discount. Its page also links to income-based repayment and disability relief options, which are uncommon in private lending.

Other state programs to check include MEFA in Massachusetts, RISLA in Rhode Island, ISL Education Lending in Iowa, Brazos in Texas, CHESLA in Connecticut, EDvestinU in New Hampshire, NC Assist in North Carolina, PA Forward in Pennsylvania, the Vermont Advantage Loan and Minnesota’s SELF program. Ask your financial aid office which ones your school works with.

The calculator assumes six months of grace after school and that unpaid interest is added to the balance when repayment starts, which is how most private loans work. It uses simple monthly interest during school. The federal comparison assumes an unsubsidized loan deferred through school and grace on the same term; for Parent PLUS it adds the 4.228% fee to the amount you’d need to borrow to receive the same cash. It doesn’t model RAP or other income-driven plans.

Release rules sound generous until you read the fine print. Sallie Mae, for example, requires 12 on-time principal-and-interest payments, no payments 30 or more days late in the past 12 months, no hardship forbearance or modified repayment in that window, and no bankruptcy, foreclosure or 90-day delinquency in the past 24 months. Only the borrower can apply. Interest-only payments made in school usually don’t count toward the 12. Other lenders add their own income and credit tests at the time you apply.

History suggests caution. A federal Consumer Financial Protection Bureau review of the market in 2015 found that about 90% of borrowers who applied for cosigner release were rejected. Practices have changed since then, but the lesson holds: plan as if your cosigner will be on the loan until it’s refinanced or paid off. If release is a priority, choose a lender with a short release window, make every payment on time from the start, and keep the cosigner’s credit and your own clean.

The same report flagged another risk worth checking: “auto-default” clauses that could declare a loan in default if a cosigner died or filed for bankruptcy, even when payments were current. Many lenders say they no longer do this, but contract language varies. Before signing, search the promissory note for what happens if the cosigner dies, and look for a death and disability discharge that covers both borrower and cosigner.

Starting July 1, new graduate borrowers can take up to $20,500 a year in federal unsubsidized loans with a $100,000 lifetime cap, while students in designated professional programs such as medicine, dentistry and law can borrow $50,000 a year and $200,000 total. Students who were already enrolled and had borrowed before July 1 may keep the old rules for up to three academic years or until they finish. Everyone else fills any gap with savings, school aid or private loans.

The private graduate market is small compared with what it’s being asked to replace. Federal graduate lending ran about $42 billion a year, while private graduate originations have hovered around $1.4 billion. Analysts expect a significant expansion, concentrated in high-earning fields where lenders feel confident, and weaker access in lower-earning fields like social work and counseling. Some schools are responding with institutional loans, rate buydowns or partnerships with lenders, so ask your financial aid office what’s available before you shop on your own.

Graduate borrowers should compare program-specific products. Sallie Mae publishes separate graduate, medical and law ranges, with medical loans on a 20-year term, and SoFi has separate graduate and medical-dental ranges. Look for residency deferment if you’re in medicine or dentistry, and ask whether interest capitalizes when deferment ends.

We found the biggest mistake in borrower stories isn’t picking the wrong lender. It’s borrowing the full cost of attendance in year one “just in case,” then paying interest on money that sat in a checking account. Living expenses are part of cost of attendance, but if you can cover them with work or family help, borrow less. Every $1,000 not borrowed at 10% over 10 years saves about $590 in interest.

A fixed rate never changes, so your payment is predictable from the first bill to the last. A variable rate is tied to a benchmark index plus a margin set by your credit, and it can move as often as monthly or quarterly depending on the lender. Variable loans often start lower, which is why they look attractive in a comparison table. The problem is time. A student who borrows as a freshman may not finish paying until their mid-thirties, and nobody can predict rates that far out. Lenders publish a maximum variable rate; SoFi, for example, caps its variable rates at 17.95% unless state law requires lower, and Citizens’ maximum is the greater of 21% or prime plus 9%. If you choose variable, make sure you could afford the payment at that ceiling.

There’s one case where variable makes sense: a borrower who will pay off the loan within a few years, such as a graduate student with a confirmed high-paying job or a family that plans to pay the balance down quickly from savings. For everyone else, the small starting discount rarely justifies the long-term risk.

Set up autopay as soon as repayment starts. Most lenders knock about 0.25 percentage points off your rate for it, and many published ranges already assume you’ll take that discount, so skipping autopay can leave you above the rate you were quoted. Make any payment you can while in school, even $25 a month, because it chips away at interest that would otherwise be added to your balance when repayment begins. And when you get a raise, a bonus or a tax refund, put a lump sum toward the loan with the highest rate; private lenders don’t charge prepayment penalties.

Watch the end of your grace period. Private loans typically give six months after you leave school, then unpaid interest is added to your principal and full payments start. Log in a month before that date, confirm the first payment amount and make sure the lender has your current address and email. Missed first payments are surprisingly common simply because borrowers didn’t know the bill had started.

Call your lender before you miss a payment, not after. Private lenders don’t offer federal income-driven plans, but most have hardship forbearance, temporary interest-only payments or modified repayment programs, usually granted a few months at a time with a lifetime cap. Ask exactly how interest is handled during each option and whether it affects cosigner release eligibility, since many release programs reset after a hardship arrangement.

If you’re already behind, know that private loans don’t have federal tools like rehabilitation, and a defaulted private loan can be sent to collections and sued over, which puts your cosigner’s credit at risk too. Getting current, even through a short forbearance, protects both of you. Each state also sets a statute of limitations on lawsuits over private debt, so if you’re contacted about a very old loan, talk to a consumer attorney before paying or signing anything.

Refinancing replaces your existing private loans with a new loan from another lender. It’s worth checking once your credit score has improved, you have steady income, or market rates have fallen since you borrowed. It’s also the cleanest way to remove a cosigner if your lender’s release program turns you down. Check refinance offers every year or two; like prequalification for new loans, most lenders show refinance rates with a soft credit check. Keep any federal loans out of a private refinance unless you’re certain you’ll never need income-driven repayment or forgiveness.