Figuring out student loans is overwhelming. People start throwing out loan lingo left and right, and all the terms start to blend together.The term “cosigner” is one popular example of this loan lingo and often becomes a point of confusion. Understanding what a student loan cosigner is and when you may want to have one is crucial in the student loan process. Let’s break it down.
What is a Cosigner?
A cosigner is someone who agrees to sign onto a loan alongside you, the borrower. By doing so, the cosigner takes legal responsibility for repaying the loan if you do not. A cosigner is often a family member or friend but can be anyone who is willing to cosign.
Private student loans, on the other hand, come from private entities and are given out based on your creditworthiness.* If the lender deems you not creditworthy enough to borrow from them, you may need a cosigner to secure the loan.
*Creditworthiness is essentially how much a lender trusts you to pay back your debts. The higher your credit score, the more creditworthy you appear to lenders.
Why Would I Need a Cosigner?
There are a variety of reasons why you may need a cosigner to get approved for a private student loan, such as:
Your credit score or income is too low
Your credit or employment history is too short
Your credit report shows a variety of other debt or a checkered history in repaying it
Your residency status requires applying with a citizen or permanent resident cosigner
From the lender’s perspective, having a creditworthy cosigner lessens the risk associated with lending to you. It assures them that there is a responsible individual able to pay the loan in full and on time.
In these instances, having someone cosign may be your only option for actually securing a loan with that specific lender. Even if you are deemed creditworthy enough to take out a loan on your own, having a creditworthy cosigner can help you qualify for and borrow loans with more attractive terms.
Is Having a Cosigner a Bad Thing?
Needing a cosigner isn’t necessarily a bad thing and is actually quite common. According to a study conducted by MeasureOne, in the 2019-2020 academic year, over 90% of undergraduate students needed a cosigner for at least one private loan they took out. Even if you don’t need a cosigner, including one on your application may have additional positive benefits.
Benefits of Having a Cosigner
If you are able to have a creditworthy cosigner on your private student loans, there are numerous benefits, such as:
The ability to secure a loan. Without a cosigner, you may not be able to secure a loan on your own.
Lower interest rates. If your cosigner has demonstrated creditworthiness, private lenders will likely give you a lower interest rate on your loans.
Less expensive over time. Lower interest rates on your loans means lower payments, which means less money spent over time.
The person cosigning can also benefit from doing so. If the primary borrower demonstrates responsibility in making their loan payments, the cosigner’s credit score can go up, too.
Can You Get a Loan Without a Cosigner?
The short answer here is yes. However, more often than not, you will need a cosigner on a private student loan, particularly if you’re an undergraduate.
You should shop around for a lender that will offer you the best interest rates and terms, but you may find that many require a cosigner for first-time, inexperienced borrowers.
If you can get a loan without a cosigner and still get the same interest rate either way, it’s best to take the loan out without the cosigner. It’s better to build your own credit over time without the cosigner being legally responsible for your debt.
What to Look For in a Cosigner
If you’re unable to get approved without a cosigner, having anyone willing to cosign will be helpful. But, if you do have a choice, here are a few things to look for in a potential cosigner:
Someone with stable income who could genuinely handle paying off your loan if you struggle to do so yourself
Someone with little to no debt themselves as it could be challenging to support your loan payments (if needed) with their own debt
Someone with a high credit score
Someone with a solid debt repayment history
Final Thoughts from the Nest
Whether you need a cosigner may be a bit out of your control. The good news is that most college students need a cosigner and ultimately benefit from having one. Understanding what they are and how to proceed if you do need one is the most important first step.
If you’re struggling to find a cosigner, don’t worry. We’ve partnered with several lenders to offer Sparrow members non-credit-based student loans that don’t require a cosigner. To see what loan options you prequalify for, fill out the Sparrow application.
The interest rate on your student loan(s) will drastically impact how much you pay over the life of the loan. Even a small increase in the interest rate could result in thousands of dollars more over your repayment term.
Finding a low interest student loan should be of utmost priority when selecting the best option for you. Here are the best student loan rates of September 2024.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EdvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 7.00% to 10.57% Variable Interest Rate: 8.12% to 11.02% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Interest rates will vary significantly based on the lender and type of loan. So, there really isn’t a specific threshold of what is considered a “good” interest rate. Generally speaking, however, an interest rate at or above 10% is considered very high, while interest rates less than 7% are on the lower end.
Across all student loans, 5.8% is the average interest rate. Use the average interest rate as a marker when determining if the interest rate offered to you is good.
Rates Are Just One Piece of the Puzzle
While the interest rate on your student loan is an incredibly important factor, it is only one piece of a much more complex puzzle. When selecting a student loan, you should also consider factors such as whether the interest rate is fixed or variable, the repayment period, and the projected monthly payment.
Fixed vs Variable Interest Rate
A fixed interest rate will remain the same throughout the life of the loan, while a variable interest rate is subject to change due to market conditions. So, if you borrowed a loan with a 5% fixed interest rate, it would remain at a 5% interest rate up until the day you pay it off. On the other hand, if you borrowed a loan with a variable interest rate starting at 5%, the rate could fluctuate up and down throughout the life of the loan.
There are pros and cons to both fixed and variable rate loans. Select the option you feel most comfortable with.
Repayment Period
Generally speaking, the longer the repayment period, the more you will pay over the life of the loan. Consider the repayment periods offered to you and how they will impact what you pay throughout repayment.
Principal Balance
$30,000
$30,000
Interest Rate
5%
5%
Repayment Period
10 years
15 years
Monthly Payment
$318
$237
Total Paid
$38,184
$42,703
With a shorter repayment period, you will have larger monthly payments. However, if you’re able to afford them, a shorter repayment period can save you quite a bit over the life of the loan.
Projected Monthly Payment
During repayment, you will be required to make at least the minimum monthly payment on your loan. As illustrated by the table above, the monthly payment will change based on the repayment period and interest rate you have.
Some private student lenders may only offer one or two repayment periods. Before agreeing to a student loan, consider the projected monthly payment amount. If the amount does not seem feasible for you given your projected monthly income after graduation, you may want to explore other student loan options.
How to Find the Best Student Loan Rate
Before agreeing to any loan, it’s important to do your research. To simplify the search process, we built Sparrow.
Rather than hopping from site to site comparing loans one by one, Sparrow allows you to compare personalized, pre-qualified student loan rates from 15+ lenders in one form. To find the best student loan rate for you, start the process with Sparrow.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Typically, it’s recommended that borrowers have a good credit score to access competitive student loan offers. But what if you have no credit at all?
Don’t fret — there are a variety of student loan options for borrowers with no credit.
Keep reading to learn how you can get student loans with no credit and to explore our top picks for lenders.
Can You Get Student Loans if You Don’t Have Credit?
It depends on the type of loan you are borrowing. For federal loans, you do not need to have credit to qualify. On the flip side, most private student loans will require you to have a strong credit history.
However, there are still private loan options for those without a credit history. Borrowers can either apply for non-credit-based loan options or have a cosigner with a strong credit history cosign their loan. That said, borrowers should consider a cosigned loan option before non-cosigned, non-credit-based loans because the interest rates can be higher for the latter.
Student Loan Options if You Have No Credit
There are plenty of loan options available for prospective borrowers without any credit.
Federal Student Loans
Experts recommend that borrowers exhaust their federal loan options before resorting to private loans. Federal loans have controlled interest rates, strong borrower benefits, and variousrepayment plans, making them the preferred option.
Generally, most federal student loans have fixed interest rates that are set by Congress. This means that the interest rate on the loan will never change, protecting your interest rate from fluctuations due to the economy.
If you opt for private student loans, look into the lenders below. Rather than searching for lenders one-by-one, we recommend comparing your no credit options with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Here are the best private student loans for no credit:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Ascent’s Non-Cosigned, Outcomes-Based loan is a great option for high school upperclassmen (including DACA recipients and international students) with limited credit/income and no cosigner. Qualifying students must have a GPA above 2.9.
Fixed interest rate: 13.09% to 15.08% Variable interest rate: 13.07% to 15.02%
Edly’s income-based repayment (IBR) loan is not like your average student loan. Students who are approved for an Edly IBR loan do not make payments during school but can make payments based on their income after graduation.
IBR loans are best for borrowers who want a loan that doesn’t require a cosigner or have a minimum credit score, in addition to flexible repayment plans and competitive repayment terms.
The APR on an IBR loan depends on your projected income, but the Edly IBR loan has a maximum 24% APR.
If you are a high-achieving undergraduate student with limited credit history and income, Funding U is the lender for you.
Funding U offers student loans without a cosigner, credit history, or income. Your eligibility as a borrower depends on your GPA and estimated future earnings.
Fixed interest rate: 7.49% to 12.99% Variable interest rate: Funding U does not offer variable interest rates.
MPOWER offers non-cosigned loans to domestic, international, and DACA undergraduate and graduate students. MPOWER is available in all 50 states and offers special discount rates for responsible borrowing.
Fixed interest rate: 13.74% (14.75% APR) Variable interest rate: MPOWER does not offer variable interest rates.
As a borrower, finding the best loan option for you is important for your future finances. As you sift through your options, be sure to compare loans across interest rates, repayment plans, and borrower protections.
Given the rising cost of college, finding affordable college financing is more important than ever. As a parent, it’s both understandable and admirable to want to support your child through the process of paying for college. It’s essential that you have the tools to pick the best college loan.
If you’re curious about your parent loan options, you’re in the right place. Here’s what you need to know to pick the best college loan for parents.
The best parent loan for you will ultimately be the one that suits your needs best. However, having a list of options that offer competitive interest rates, flexible repayment options, and strong customer service will make the search process easier.
The following are our top picks for the best private college loans for parents.
Parent Loans vs. Traditional Private Student Loans
While parent loans and traditional private student loans are similar in nature, there are some key differences you’ll want to consider before choosing one over the other.
A parent loan allows you to borrow on behalf of your child to finance their education. While you may require your child to make payments directly to you, you are legally the sole person responsible for paying back the loan.
A traditional student loan, however, is one that your child borrows on their own behalf. If you cosign the student loan, both you and your child are legally responsible for paying back the loan.
Both federal and private lenders offer parent loans. While similar in that parents can borrow both loan types on behalf of their child, they differ in several ways.
The only federal student loan parents can borrow on behalf of their child is the Parent PLUS Loan. To receive a Parent PLUS Loan, you must:
Be the biological or adoptive parent of a dependent undergraduate student who is enrolled at least half-time at an eligible school
Not have an adverse credit history
Meet the general requirements to receive federal student aid
The interest rate for Parent PLUS Loans is fixed and set by the government each year. For Parent PLUS Loans disbursed on or after July 1, 2022 and before July 1, 2023, the interest rate is 7.54%.
Like other federal student loans, Parent PLUS Loans have the opportunity to be forgiven, which is not available for private student loans. This is an important factor to consider if you plan to pursue any loan forgiveness programs.
Before borrowing a Parent PLUS Loan, you should check to see what rates you qualify for in private parent loans. You may find that some private lenders are able to offer you rates lower than the Parent PLUS Loan interest rate.
Private Parent Loans
Private parent loans are provided by private student loan lenders. Unlike federal Parent PLUS Loans, each individual private lender will offer different interest rates and terms. The eligibility criteria for private parent loans will vary, but in general, you must:
Meet income and/or credit requirements
Be borrowing on behalf of a student attending an eligible school
While it is commonly assumed that private student loans always have higher interest rates than federal student loans, that isn’t necessarily true. You should always compare both federal and private parent loan options before agreeing to one or the other.
Commonly Asked Questions About College Loans for Parents
What is the best way for parents to pay for college?
There is no single best way for parents to pay for their child’s college education. Generally speaking, however, you should begin by encouraging your child to pursue scholarship and grant opportunities. Both forms of aid do not need to be repaid.
Following that, consider what you’re able to contribute out-of-pocket. It’s important to minimize the amount you need to borrow.
After you’ve exhausted both options, consider both federal and private student loans.
Is it better to borrow a Parent PLUS Loan or a private parent loan?
One option isn’t necessarily better than the other. If you plan to pursue any loan forgiveness programs, you may prefer a Parent PLUS Loan over a private parent loan. If you are more concerned with finding a competitive interest rate, however, you may find that a private parent loan suits you better.
Do parents need good credit for student loans?
It depends on the lender. While most federal student loans do not factor your credit score into your eligibility, private student loans often do. That said, there are a variety of private student lenders that work with parent borrowers with lower credit scores.
To borrow private parent loans, see what rates you qualify for by completing the Sparrow application. In less than 3 minutes, we’ll show you which parent loans you qualify for and at what rates.
Final Thoughts from the Nest
There are a variety of parent loan options available, and while beneficial, it can make the process of picking the best option overwhelming. To simplify the process, start with Sparrow. Rather than searching endlessly for a parent loan that works for you, fill out the Sparrow application, and we’ll do the search for you. We’ll show you which parent loans you qualify for and at what rate so you can find the best option for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Some rates listed may include an Autopay Discount, which requires you to agree to make your monthly payments by an automatic monthly deduction (ACH) from a valid bank account. To verify whether the interest rates listed include an Autopay Discount, please read the individual lender disclosures.
The best student loan for you will always be the one that suits your individual needs best. However, it’s helpful to have a few strong options to start with so you can get a better idea of what your loan options will look like.
Whether you’re pursuing an undergraduate degree, a law degree, or a medical degree, there are loan options designed just for you. Likewise, whether you value the ability to have a non-cosigned loan, flexible repayment options, or finding the best interest rate, there’s a loan that will meet your needs.
The loan options shared are in no particular order. Interest rates shown in this article were last updated on 03/06/23. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Best Student Loans for Undergraduate and Graduate Degrees
There are a wide variety of undergraduate and graduate student lenders, making the search process even more important. The following are our top picks for private student loans for undergraduate and graduate degrees.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Best Student Loans for Law, Dental, and Medical School
Law,dental, and medical school are notoriously expensive. So, when searching for a student loan for these programs, you’ll want to pay close attention to the lender’s borrowing limits. While you don’t need to stick with one lender for the entire duration of your program, many borrowers do for easier repayment.
If you plan to stick with one lender throughout the duration of your degree, you’ll need to make sure their maximum borrowing limit covers your estimated total cost of attendance.
Fixed Interest Rate: Starts at 2.71% Variable Interest Rate: Starts at 5.32% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700
College Ave – Law, dental, and medical school loans
Fixed Interest Rate: 5.05% to 14.47% Variable Interest Rate: 5.49% to 14.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for flexible repayment options.
Fixed Interest Rate: Starts at 4.42%* Variable Interest Rate: Starts at 5.66%* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Nelnet Bank – Law, dental, and medical school loans
Fixed Interest Rate: 4.49% to 15.47% Variable Interest Rate: 6.29% to 15.51% Maximum Borrowing Limit: $500,000 total Minimum Credit Score: 680 individually; 640 with a qualified cosigner
Best for: Borrowers who need a high borrowing limit and want competitive interest rates.
Fixed Interest Rate: 4.99% to 14.05% Variable Interest Rate: 5.99% to 13.67% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose
Many student loan options will require you to have a creditworthy cosigner in order to qualify. If you are without a cosigner, however, don’t worry. There are a variety of loan options available that do not require a cosigner.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% Variable Interest Rate: 6.15% to 16.08% Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 625 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
As an international student, there are a few factors you will want to consider when looking for a student loan:
Does it require a cosigner?Some private student loans will require you to have a U.S. citizen or permanent resident cosigner. However, as an international student, you may not have access to one. If you don’t, look for a student loan that does not require a cosigner.
What is the borrowing limit?As an international student, you will not have access to the federal aid that U.S. citizen students have. So, the cost of your education may be higher. If so, make sure the lender you choose allows you to borrow enough to cover the amount you need.
What is the interest rate? When borrowing a student loan without a cosigner, the interest rate will typically be higher. Always verify the interest rate before borrowing to make sure it is reasonable and something you’re comfortable with.
Are payments required while in school? Some international student loans may require you to make payments while in school. If this is not feasible for you, consider looking for a student loan option that allows you to defer payments until after graduation.
The following are our top picks for international student loans that dorequire a cosigner.
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Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% – 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
*Rates include a 0.25% AutoPay discount.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675
Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
Best Student Loans for Bad Credit
Most private student loans will require you to have a solid credit score or a creditworthy cosigner with one. If you do not have a solid credit score, there are options. There are private student loans with lower credit score requirements.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670
Fixed Interest Rate: 4.83% to 16.16% (undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% to 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660
Best for: Borrowers who want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
What to Look for in a Student Loan
With any student loan, it’s important to consider a variety of factors before borrowing the loan:
Interest rate. The interest rate you get on a loan will directly affect how much you pay over the life of the loan. Typically, the lower the interest rate the better.
Credit requirements. Most private student loans will require you to have a certain credit score in order to qualify. If you are concerned about your credit score’s impact on your student loan eligibility, it may be beneficial to look for lenders with lower credit score requirements.
Repayment options. Each lender will offer a different selection of repayment options. While some may require you to begin repayment immediately after the loan is disbursed, others may allow you to defer payments until after graduation. Make sure the lender has a repayment option that suits your needs before borrowing the loan.
Cosigner vs. no cosigner. Many private student loans will require you to have a cosigner in order to qualify. If you do not have a cosigner, you will want to explore no-cosigner loan options.
Borrower benefits. Most private student lenders offer borrower benefits, from autopay discounts to free career training and everything in between. Consider a lender’s borrower benefits if they are an important factor to you.
Final Thoughts from the Nest
The best student loan for you will always be the loan that suits your needs and desires best. To find the loan that does that, use Sparrow. Sparrow allows you to compare personalized loan options from 17+ premier lenders side-by-side.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Earnest offers both private student loans and student loan refinancing.1 Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Fixed APR Range: 4.42% to 15.90%* (undergrad; includes 0.25% auto pay discount); 4.42% to 14.30%* (grad; includes 0.25% auto pay discount) Variable APR Range: 5.62% to 16.20%* (undergrad; includes 0.25% auto pay discount); 5.89% to 14.97%* (grad; includes 0.25% auto pay discount)
Loan Amounts: $1,000 up to the total cost of attendance
• Competitive interest rates • Flexible repayment options • Wide range of loan terms to match your budget • Nine-month grace period3 • Option to skip 1 monthly payment per year4 • Allows biweekly payments via autopay5
• Loans aren’t available to borrowers in Nevada • Students enrolled less than half-time are not eligible • No cosigner release
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for an Earnest student loan, you’ll have access to some of the best rates in the industry. Earnest’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate, MBA, Law and Medical Students
Fixed APR*
4.42% to 15.90%*
4.42% to 14.30%*
Variable APR*
5.62% to 16.20%*
5.89% to 15.97%*
*Rates as of November 1, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of in-school repayment options
Earnest offers you four repayment options for your student loans.6
If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students are limited to interest only and immediate repayment options.
Wide range of loan terms to match your budget
Earnest offers a wide range of loan terms to reduce the burden of your student debt. If you have a cosigner, you can choose a loan term of 5, 7, 10, 12, or 15 years. If you don’t have a cosigner, you’ll have to choose between a 10, 12 or 15-year loan term, unless you are a graduate student. In that case, you may be considered for 5, 7, 10, 12, and 15 year loan terms.6
Offers a nine-month grace period3
After you are no longer in school at least halftime – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. While most lenders offer a six-month grace period, some require immediate repayment.
Earnest, on the other hand, offers a nine-month grace period on its student loans. This can be a massive benefit if you need some extra time to find a job and stabilize your income.
Be careful though – interest starts to accrue as soon as the loan is disbursed so delaying your payments means you’ll be paying more interest over the lifetime of your loan.
Option to skip one monthly payment every year4
Earnest is the only lender that allows you to skip one monthly payment on your student loan every year. This can be incredibly helpful if you lose your job or face an unexpected expense.
In order to qualify, you must:
Make the request at least five business days before the payment is due.
Make the request after six months of timely payments of both interest and principal.
While this feature can be extremely helpful when life hits a bump in the road, do note that the principal and interest from that payment will be spread out across your remaining payments, resulting in increased monthly payments.
Allows biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, Earnest gives you the option to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
In addition to offering biweekly payments via autopay, Earnest gives you the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Earnest, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Drawbacks of Earnest Student Loans
Loans aren’t available to borrowers in Nevada
If you live in Nevada, you’ll have to consider other lenders for your private student loan. A variety of lenders offer private student loans to borrowers in Nevada, such as College Ave, Ascent, and more.
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through Earnest. If you’re studying less than half-time, you may want to consider another lender for your private student loan.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky. Unfortunately, Earnest does not offer any form of cosigner release. Instead, you will have to apply to refinance your student loan, which is only available once you’ve graduated.
Earnest: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.42% to 15.90%* (undergrad); 4.42% to 14.30%* (grad)
Variable APR Range
5.62% to 16.20%* (undergrad); 5.89% to 15.97%* (grad)
Loan Terms
For cosigned loans: 5, 7, 10, 12 or 15 years.6 For solo borrowers: 10, 12 or 15 years.6 For graduate students with non-cosigned loans, you may be considered for 5, 7, 10, 12, and 15-year loan terms.6
Loan Amounts
$1,000 up to cost of attendance.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
$35,000 for cosigned loans.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
65%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Primary borrower must have a Social Security number. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident.
Location
Not available to borrowers in Nevada.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Fixed repayment: Pay $25 a month during school.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
9 months.
In-school Deferment
Yes.
Military Deferment
Yes.
Internship, Residency, or Fellowship Deferment
Borrowers can defer payments for up to 48 months during a medical residency, internship, or fellowship program.
Forbearance
Up to 12 months available.
Cosigner Release
No. Borrowers may refinance with Earnest and release their cosigner.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Earnest.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Online application: a few minutes. Approval: Varies by applicant.
Before you take out a loan from Earnest…
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FAQ
Is Earnest7 a legitimate lender?
Yes, Earnest is a legitimate lender that was founded in 2013 and has been providing private student loans since 2019.
Is Earnest available in all 50 states?
Earnest is available in all 50 states except Nevada.
How long does it take to get an Earnest student loan?
Submitting an application through Earnest takes a few minutes. Once you’ve submitted your loan application, Earnest will return a decision about your eligibility, but the exact timeline of this response varies by applicant. If you qualify, you will receive the rate and terms of your loan.
What happens if I don’t qualify for an Earnest student loan?
If you don’t qualify for an Earnest student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Earnest student loans federal or private?
Earnest loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.8
Does applying for a loan through Earnest hurt my credit score?
Applying for a loan through Earnest could hurt your credit score. Earnest has both eligibility check (hard credit check that may temporarily impact your credit score) and rate check (soft credit check, which will not impact your credit score).
Earnest Disclosures
1 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for total cost of your refinanced loan.
2 Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.67% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 16.35% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
3 Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.
4 Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
5 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
6 Earnest’s Loan Cost Examples: These examples provide estimates based on principal and Interest payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $118.28) and a 11.69% APR would result in a total estimated payment amount of $21,290.40. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $126.82) and a 13.03% APR would result in a total estimated payment amount of $22,827.79.
These examples provide estimates based on interest only payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $145.41) and a 11.69% APR would result in a total estimated payment amount of $26,173.03. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $156.59) and a 13.03% APR would result in a total estimated payment amount of $28,186.67. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on fixed $25 payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $169.92) and a 11.69% APR would result in a total estimated payment amount of $30,584.74. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $188.42) and a 13.03% APR would result in a total estimated payment amount of $33,915.55. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on deferred payments. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $174.79) and a 11.69% APR would result in a total estimated payment amount of $31,462.16. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $193.75) and a 13.03% APR would result in a total estimated payment amount of $34,874.28. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
7 Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.
Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant and work-study opportunities. 2) Next, fill out a FAFSA® form to apply for federal student loans. Federal student loans do not require a credit check or cosigner, and offer various protections if you’re struggling with payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.
Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
The best student loan for you will always be the one that suits your individual needs best. However, it’s helpful to have a few strong options to start with so you can get a better idea of what your loan options will look like.
Whether you’re pursuing an undergraduate degree, a law degree, or a medical degree, there are loan options designed just for you. Likewise, whether you value the ability to have a non-cosigned loan, flexible repayment options, or finding the best interest rate, there’s a loan that will meet your needs.
The loan options shared are in no particular order. Interest rates shown in this article were last updated on 11/14/2023. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Best Student Loans for Undergraduate and Graduate Degrees
There are a wide variety of undergraduate and graduate student lenders, making the search process even more important. The following are our top picks for private student loans for undergraduate and graduate degrees.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Best Student Loans for Law, Dental, and Medical School
Law,dental, and medical school are notoriously expensive. So, when searching for a student loan for these programs, you’ll want to pay close attention to the lender’s borrowing limits. While you don’t need to stick with one lender for the entire duration of your program, many borrowers do for easier repayment.
If you plan to stick with one lender throughout the duration of your degree, you’ll need to make sure their maximum borrowing limit covers your estimated total cost of attendance.
Fixed Interest Rate: Starts at 2.71% Variable Interest Rate: Starts at 5.32% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700
College Ave – Law, dental, and medical school loans
Fixed Interest Rate: 5.05% to 14.47% Variable Interest Rate: 5.49% to 14.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for flexible repayment options.
Fixed Interest Rate: Starts at 4.42%* Variable Interest Rate: Starts at 5.66%* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Nelnet Bank – Law, dental, and medical school loans
Fixed Interest Rate: 4.49% to 15.47% Variable Interest Rate: 6.29% to 15.51% Maximum Borrowing Limit: $500,000 total Minimum Credit Score: 680 individually; 640 with a qualified cosigner
Best for: Borrowers who need a high borrowing limit and want competitive interest rates.
Rates listed have an autopay discount only on the lower boundary.
Sallie Mae – Law, dental, and medical school loans
Fixed Interest Rate: 5.25% to 14.47% (law); 5.25% to 14.47% (dental); 5.25% to 14.46% (medical) Variable Interest Rate: 6.00% to 15.59% (law); 6.00% to 15.58% (dental); 5.99% to 15.58% (medical) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who need a high borrowing limit and want competitive interest rates.
Fixed Interest Rate: 4.99% to 14.05% Variable Interest Rate: 5.99% to 13.67% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose
Many student loan options will require you to have a creditworthy cosigner in order to qualify. If you are without a cosigner, however, don’t worry. There are a variety of loan options available that do not require a cosigner.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% Variable Interest Rate: 6.15% to 16.08% Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 625 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
As an international student, there are a few factors you will want to consider when looking for a student loan:
Does it require a cosigner?Some private student loans will require you to have a U.S. citizen or permanent resident cosigner. However, as an international student, you may not have access to one. If you don’t, look for a student loan that does not require a cosigner.
What is the borrowing limit?As an international student, you will not have access to the federal aid that U.S. citizen students have. So, the cost of your education may be higher. If so, make sure the lender you choose allows you to borrow enough to cover the amount you need.
What is the interest rate? When borrowing a student loan without a cosigner, the interest rate will typically be higher. Always verify the interest rate before borrowing to make sure it is reasonable and something you’re comfortable with.
Are payments required while in school? Some international student loans may require you to make payments while in school. If this is not feasible for you, consider looking for a student loan option that allows you to defer payments until after graduation.
The following are our top picks for international student loans that dorequire a cosigner.
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Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% – 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
*Rates include a 0.25% AutoPay discount.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675
Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
The following are our top picks for international student loans that do notrequire a cosigner.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
Best Student Loans for Bad Credit
Most private student loans will require you to have a solid credit score or a creditworthy cosigner with one. If you do not have a solid credit score, there are options. There are private student loans with lower credit score requirements.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670
Fixed Interest Rate: 4.83% to 16.16% (undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% to 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660
Best for: Borrowers who want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
What to Look for in a Student Loan
With any student loan, it’s important to consider a variety of factors before borrowing the loan:
Interest rate. The interest rate you get on a loan will directly affect how much you pay over the life of the loan. Typically, the lower the interest rate the better.
Credit requirements. Most private student loans will require you to have a certain credit score in order to qualify. If you are concerned about your credit score’s impact on your student loan eligibility, it may be beneficial to look for lenders with lower credit score requirements.
Repayment options. Each lender will offer a different selection of repayment options. While some may require you to begin repayment immediately after the loan is disbursed, others may allow you to defer payments until after graduation. Make sure the lender has a repayment option that suits your needs before borrowing the loan.
Cosigner vs. no cosigner. Many private student loans will require you to have a cosigner in order to qualify. If you do not have a cosigner, you will want to explore no-cosigner loan options.
Borrower benefits. Most private student lenders offer borrower benefits, from autopay discounts to free career training and everything in between. Consider a lender’s borrower benefits if they are an important factor to you.
Final Thoughts from the Nest
The best student loan for you will always be the loan that suits your needs and desires best. To find the loan that does that, use Sparrow. Sparrow allows you to compare personalized loan options from 17+ premier lenders side-by-side.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their education. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy co-signer.
Fixed APR Range: 4.44% to 14.70%
Variable APR Range: 5.49% to 14.03%
Loan Amounts: $5,000 up to your total cost of attendance
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. Although SoFi has strict qualification requirements, the borrowers who do qualify have access to some of the best rates in the industry. SoFi’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate
Parent
Fixed APR*
4.44% to 14.70%
4.99% to 14.48%
6.50% to 14.83%
Variable APR*
5.49% to 13.97%
5.99% to 13.97%
6.32% to 14.03%
*Rates as of July 21, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of repayment options
SoFi offers you four repayment options for your student loans, with terms of 5, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students (i.e. a parent loan) are limited to interest only and immediate repayment options.
Co-signer release option after 24 months of timely repayment
If you need a co-signer for your student loan, SoFi might be a good option for you. Unlike several other lenders, SoFi allows you to release your co-signer after 24 months of timely payments. This can be helpful if you want to build credit in your own name.
Offers additional borrower protections
While borrowing federal student loans gives you access to federal protections (income-driven repayment, loan forgiveness, and loan forbearance) that most private lenders cannot match, SoFi offers generous borrower protections such as deferment and forbearance. Check out the table below to see if you qualify for any of SoFi’s borrower protections:
Deferment
Forbearance
• Returning to school • Rehabilitation treatment for a disability • Unemployment • Economic hardship/job loss • Military service
• Unemployment • Economic hardship/job loss • Military mobilization • Natural disaster • National emergency
Note: During deferment and forbearance, interest will still accrue, but the loan will be re-amortized.
Includes perks like member events, wealth management, and other personal finance services
SoFi offers a variety of perks that help you take control of your financial future.
Member events: SoFi organizes workshops, speaker series, and social events to help you build a strong community.
No-fee wealth management: SoFi offers a no-fee wealth management and investing platform to help you get your money right.
Referral bonus: You can send a link to your friends to use SoFi’s student loan, investment, or credit card service and deduct up to $75 in student loans. The rules can be found here.
Discount on other SoFi loans: SoFi offers its members a 0.125% discount on additional loans taken out through SoFi, including mortgages and personal loans.
Drawbacks of SoFi Student Loans
Unclear about credit requirements
While SoFi used to have a minimum credit score requirement of 650, the company no longer shares an explicit minimum credit score. SoFi only shares that “good or excellent” credit scores will be approved, and for student loans, this usually means those around or above 700. If you do not have a strong credit score, a cosigner with a good credit score will likely be necessary.
Don’t have a strong credit score? Complete Sparrow’s two-minute form to check rates with 15+ different lenders. It’s quick, easy, and does not impact your credit score.
Not accessible to students enrolled less than half-time
If you are not enrolled in school at least half-time, you are ineligible for SoFi student loans.
Enrolled less than half-time? Complete Sparrow’s two-minute form to check rates with 15+ different lenders. It’s quick, easy, and does not impact your credit score.
High loan minimum of $5,000
SoFi does not offer private student loans below $5,000. If you need less than $5,000 to cover the cost of your education, you may be better off looking at other lenders that offer smaller loans.
Looking for a loan that’s less than $5,000? Complete Sparrow’s two-minute form to check rates with 15+ different lenders. It’s quick, easy, and does not impact your credit score.
SoFi: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.44% to 14.70%
Variable APR Range
5.49% to 14.03%
Loan Terms
5, 10 or 15 years.
Loan Amounts
$5,000 up to your cost of attendance.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
Does not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Does not disclose.
Typical Income of Approved Borrower
Does not disclose.
Maximum Debt-to-Income Ratio
Does not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. Citizen, permanent resident or non-permanent resident alien.
Location
Available in all 50 U.S. states.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid. Most four-year public and private institutions are accepted.
Percentage of borrowers who have a cosigner
83%.
Repayment Options
In-school Deferment
Yes.
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Yes, up to 12 months.
Cosigner Release
Yes, after 24 months.
Death or Disability Discharge
Yes, loans will be forgiven due to a borrower’s death while in school and/or repayment.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
MOHELA.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Within minutes.
Before you take out a loan from SoFi…
Complete the Sparrow form to compare pre-qualified rates from 15+ different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is SoFi a legitimate lender?
Yes, SoFi is one of the largest online lenders in the industry with millions of customers. The company offers student loans and student loan refinancing, along with other financial services such as mortgages, personal loans, insurance, and investment accounts.
Is SoFi available in all 50 states?
Yes, SoFi student loans are available to borrowers in all 50 U.S. states.
How long does it take to get a SoFi student loan?
Submitting an application through SoFi takes a few minutes. Once you’ve submitted your loan application, SoFi will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan:
Refinance: You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
In-School Loans: Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a SoFi student loan?
If you don’t qualify for a SoFi student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, pre-qualified rates from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are SoFi student loans federal or private?
SoFi’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through SoFi hurt my credit score?
In order to estimate what rate you qualify for, SoFi conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the SoFi loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
An important factor when shopping for student loans is looking at the interest rate. But interest rates can be a little confusing. You may ask yourself questions like:
What is a good interest rate?
How do they vary?
What should I even look for?
Before you panic, don’t worry. We’ve got your back. To give you an idea of what to look for in interest rates, let’s go over the average student loan interest rates.
Average Student Loan Interest Rate
Interest rates influence the total repayment costs you’ll have. So, to help you make a better-informed decision, it’s a good idea, then, to learn what interest rates are now. The interest rates will vary depending on a variety of factors. This includes what type of loan you get, your lender, and sometimes even your credit score.
For example, let’s take a look at the different federal student loan interest rates. These all vary depending on the type of loan and student. According to the federal student aid website, the current federal student loan interest rates are as follows:
Direct Unsubsidized Loans for Graduate or Professional Students – 6.54%
Direct PLUS Loans for Parents or Graduate/Professional Students – 7.54%
These interest rates are only applicable for the 2022-2023 school year. This includes any loans taken out on or after July 1, 2022, and before July 1, 2023.
Meanwhile, the average private student loan interest rate ranges from 6% to 7% according to Education Data. The exact interest rate you might get depends on your lender and financial situation. The overall average student loan interest rate, though, is 5.8%. This number includes data from both private and federal loans.
Student Loan Interest Rates on Sparrow
When shopping around for student loans, you want to look for the best interest rates. Sparrow partners with private lenders to get you those best rates. Here’s a quick overview of what interest rates you can find on Sparrow.
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Keeping in mind that you’ll repay not only the loan principal but the interest also, a good student loan interest rate is going to be low. In general, the lower, the better. This is because the interest rate is an indicator of how much interest you’ll pay. The higher the interest rate, the more you can expect to pay during repayment. For example, let’s say you took out a $30,000 loan on a 15-year repayment term. Using that information, let’s create two scenarios with different interest rates.
In the first scenario, you’ll have an interest rate of 7%. With this interest rate, you’ll pay $48,537 over the course of your repayment period.
In scenario two, you’ll have an interest rate of 5.8%. With this interest rate, you’ll pay $44,987 throughout your repayment period.
Here’s a table to help you understand the information easier:
Scenario 1
Scenario 2
Loan Principal
$30,000
$30,000
Repayment Period
15 years
15 years
Interest Rate
7%
5.8%
Total Paid
$48,537
$44,987
Notice how even just a 1.2% difference in interest rates results in saving thousands of dollars. That’s why the best interest rates are the lowest rates you can get along with good repayment terms. Doing this will help you save a lot of money in the long run.
Final Thoughts from the Nest
Interest rates can be a little tricky. They vary a lot depending on the type of loan you have (or are looking for). The most important thing to keep in mind is to try to get as low an interest rate as you can with good loan terms.
As you saw earlier, Sparrow offers great interest rates from our partnering lenders. All you have to do to take advantage of these rates is fill out the Sparrow application. Once you do, it will match you with what you are qualified for from any of our 15+ partner lenders. So, get started now to find great private loans that best match what you need.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Rates in this article were last updated on 11/07/2023. Rates may include an autopay discount and they are subject to change.
“Can I get a student loan even though I have bad credit?”
The simple answer: yes. The more complicated answer: welllll, yes, but it’s going to be trickier.
While most federal student loans don’t require you to have a good credit score, or any credit at all, most private student loans, on the other hand, do. If you’re worried about your poor credit score preventing you from being able to pay for college, don’t fret. While it may be more difficult, it isn’t entirely impossible.
Here’s what you can do to get a student loan with bad credit.
Generally speaking, you will need a credit score of at least 670 or higher to qualify with most private lenders. That said, what each individual lender considers “bad” credit will vary. And, there are several lenders that work with borrowers with lower credit scores.
It’s important to note that most private lenders use the FICO credit scoring model. The FICO scale uses a range of 300-850 to measure creditworthiness, so the closer you are to 850 the better.
First, here’s is a list of the top 5 student loans for bad credit. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA has a minimum credit score requirement of 670. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores. Ascent’s minimum credit requirement varies based on the loan.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos does not disclose their minimum credit requirement. Brazos is a great option if you live in Texas and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a student loan with College Ave, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. Earnest has a minimum credit score requirement of 650. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. An Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 660. It’s best for students who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Can You Get Federal Student Loans with Bad Credit?
Most federal student loans don’t require you to have a good credit score (or any credit at all). They also tend to have lower interest rates and better terms and conditions. These qualities make them a great place to start when thinking about financing your college education.
There are four main types of federal student loans, three of which do not require a credit check or a high credit score to qualify.
Federal Loans that Don’t Require a Credit Check
Direct Subsidized Loans
Direct Subsidized Loans are available only to undergraduate students who demonstrate financial need. This means that you may not qualify for Direct Subsidized Loans.
If you do, the government will pay the interest on your Direct Subsidized Loans while you are in school. Once you graduate, you’ll be in charge of paying them back, interest included.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to both undergraduate and graduate students, and you do not need to prove financial need to qualify. However, while in school, the government does not pay interest on these loans. So, while you’re hitting the books, interest will be accumulating in the meantime.
Direct Consolidation Loans
Direct Consolidation Loans allow you to combine more than one federal loan into one. So, if you have several federal loans and want to simplify your payments, you can combine them into one singular loan, and thus, one singular payment. When you consolidate, your new interest rate is the average of your previous loans’ interest rates.
Federal Loans That Do Require a Credit Check
Direct PLUS Loans
Direct PLUS Loans are available to graduate/professional students and parents of students. Like Unsubsidized Loans, you will be responsible for any interest that accrues, even while in school. However, unlike all other federal loan types, Direct PLUS Loansdo require an adverse credit check.
While the credit check process could be a bummer if you have bad credit, there is hope if you don’t pass it. Adding a creditworthy endorser to the loan may allow you to qualify.
How to Get Federal Loans with Bad Credit
In order to get federal aid, you need to fill out the Free Application for Federal Student Aid (FAFSA). This form will ask you to provide information regarding you and your family’s financial situation to determine your eligibility for aid, but it will not run a credit check as part of that evaluation.
It’s important to note that you don’t have to accept all the federal aid that you qualify for. You should always consider the terms and conditions and think about what makes most sense for you and your educational journey.
While federal loans do tend to be a better choice in comparison to private student loans, they won’t always be best. There’s a variety of different financial aid options for students, so make sure you understand what they all are and what they all mean before agreeing to one.
The goal of student loan refinancing is typically to score a lower interest rate or monthly payment, saving you money in the long run. If you have a bad credit score, it may be challenging to secure a lower rate than what you currently have.
Here is a list of the top refinance loan companies for bad credit. In just three minutes, you can compare real and personalized student loan refinancing rates from 17+ lenders – for free – by using the Sparrow application.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides student loan refinancing for Arkansas residents. ASLA has a minimum credit score requirement of 670.
College Ave offers student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. Their student loan refinance offering is best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget. To qualify for a refinance loan with College Ave, you will need a credit score in the mid-600s.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 660. It’s best for students who want generous cosigner release and forbearance policies.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. Earnest has a minimum credit score requirement of 650. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
ISL is a nonprofit lender that offers both private student loans and student loan refinancing. ISL’s student loan refinancing is best if you haven’t graduated and want generous forbearance policies. ISL has a minimum credit score of 670.
SoFi is one of the largest student loan refinance companies in the industry. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with an associate’s degree or higher or borrowers with a high income. SoFi has a minimum credit score of 650.
What to Do if You Were Denied a Student Loan Due to Bad Credit
If you were initially denied a private student loan due to poor credit, your best bet is to look for a creditworthy cosigner. A cosigner is someone who agrees to sign onto the loan. In doing so, they agree that if the borrower fails to repay the loan, the cosigner will take responsibility for paying it back.
Having a cosigner is valuable because their credit score will be factored into the lender’s decision to work with you, which can also help you secure a better interest rate and terms. So, if your credit score isn’t up to par but theirs is, you may be in luck.
Make sure you don’t pick just anyone to cosign unless you really, really have to. Make sure to find someone that is creditworthy and has a history of managing their finances effectively. Additionally, always make sure to have open conversations with whoever you choose before they agree to cosign. Explain the pros and cons of being a cosigner and what impact it could have for them. Discussing expectations around repaying the loan is also important so your cosigner knows what to expect.
Improving your credit score won’t happen overnight, but it is worthwhile to take any steps you can throughout the loan process to boost your credit.
Here’s a few tips to help get your credit score in check.
Stay Aware of How Much Debt You’re Taking On
Your credit score is calculated based on a variety of factors, one being your payment history. In fact, your payment history is the most important part of your credit score, making up 35% of the calculation.
When you take on debt, such as student loans, you are doing so with the understanding that that money will be paid back and paid on time. If you make consistent, on-time payments, it’s good for your credit, as it demonstrates an ability to pay back debts successfully. If you pay late or miss payments, it could hurt your credit, as it demonstrates an inability to pay back debts successfully.
While this may sound like a no-brainer, you’ll want to be aware of how much debt you’re taking on. If you take on too much, it could make you more likely to miss a payment or go into loan default.
Remember to be realistic about how much you will be able to afford in monthly payments. Utilizing a student loan calculator to estimate your monthly loan payments after graduation is a great way to get real about whether the loan will be feasible when repayment starts. Let’s use an example here.
Let’s say you’re studying to be a public school teacher, and you land a job making $50,000 a year after graduation. This would land you around $4,200 per month (if we round up) to budget with. (For the ease of this example, we aren’t factoring in taxes.)
Now, let’s say your monthly expenses are as follows:
You’re left with $1,950 each month. This example is simple and doesn’t factor in taxes or other expenses such as savings, car maintenance, pet costs, entertainment, and more.
If you’re debating a $30,000 student loan at a 9% interest rate and a 15-year repayment term, you’d be looking at a $304 minimum monthly payment. Now remember, this is for one loan. If you took out four of these loans, one for each year you’re in school, you’re looking at an even heftier monthly payment.
So, before taking out a student loan, consider whether the estimated monthly payments would be affordable for you given your future income potential. Being realistic about what you may be able to afford could prevent you from missing a payment down the line.
The length of your credit history is another important factor in determining your credit score. The longer you have had open lines of credit, the better your credit score will typically be. Having, and properly managing, your credit for a long time shows lenders that you’re responsible.
While it may sound counterintuitive, closing any open lines of credit you currently have could hurt your credit score because it shortens the length of your credit history. Unless you absolutely need to, stay away from closing any current accounts.
Don’t Open New Lines of Credit
Opening new lines of credit will cause what’s called a hard inquiry. A hard inquiry occurs when a financial institution checks your credit report before making a lending decision. When lenders do a hard inquiry, they’re attempting to assess how you’ve handled your credit in the past.
Just like you’d only lend money to someone you trust, lenders want to make sure you’re a sound investment for them before dishing out the cash. A hard inquiry, though, can temporarily hurt your credit. So, if you’re looking to take out a student loan anytime soon, we recommend holding off on opening any new lines of credit.
Check Your Credit Report
If you have bad credit but aren’t totally sure why, you may want to check your credit report. Your credit report is important to look over for many reasons, but especially to check for errors, fraud, or identity theft. Even a small error on your credit report can significantly hurt your credit score, so we recommend checking fairly often.
There are many financial institutions, such as banks and credit card companies, that offer free credit reports. If yours don’t, utilize the free Annual Credit Report website. You are, by law, entitled to these reports yearly.
Final Thoughts from the Nest
So, yes. You can get a student loan with bad credit. However, it might make the process a bit more challenging. Start thinking ahead about where your credit is at, and if it’s not ideal, start taking small steps to build it. To find a private student loan for students with bad/no credit, complete the Sparrow application today.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
While a cosigner can help you qualify for loans and get you better repayment terms, that may not be an option for you. If you’re finding yourself without a cosigner, know that it’s okay. There are plenty of student loans you can get without a cosigner. So, let’s get into it.
Compare Student Loans without a Cosigner
To help get you started, here are our best picks for student loans with no cosigner. We recommend you use Sparrow to find the best student loan rates for no cosigner and to compare across multiple lenders in minutes.
Before you jump right into taking out loans for college, let’s explore some other ways you can get money. First, you’ll want to apply for scholarships and grants and get a couple of those. These are great ways to receive money for college because you will usually never have to pay it back. It’s basically free money.
Next, you’ll want to see if you qualify for work-study programs. Many schools participate in the work-study program, which allows college students to work on campus in exchange for financial aid. Most colleges that participate offer a wide variety of jobs. The best part? Since it’s a work-study, they’ll adjust your working schedule around your school schedule. Fill out the FAFSA to take advantage of this.
Finally, you can move on to loans. Specifically, you’ve got two main loans you’ll be hearing about: federal and private. Loans should always come last in the process of paying for college as they’re money you’ll need to pay back with interest. Plus, they may be more challenging to secure without a cosigner.
You’ll want to check out federal student loans first. These usually don’t require a cosigner in order to qualify. The only federal loan where you might need a cosigner or an endorser is with a PLUS loan. And that’s only if you have an adverse credit history. Federal student loans also have benefits like flexible repayment options and possible loan forgiveness.
After you’ve looked at federal student loans, it’s time to start looking for private student loans. There are two ways to get private student loans without a cosigner. The first is to qualify for a private student loan on your own. To do so, you’ll have to meet these general requirements:
Have a good credit score. Many lenders will do a credit check and require you to have a credit score in at least the mid-600s. So, if you don’t meet that minimum credit score, look into building your credit to help you qualify. A simple way to do this is to pay your bills on time.
Be a U.S. Citizen or Eligible Noncitizen. If you’re a U.S. citizen, be at least the age of majority in your state.
Meet the income requirements. Some lenders may require you to have a certain income in order to qualify without a cosigner.
Lenders may have their own additional requirements, but these are basic ones to meet.
The second option is to find a student loan company that doesn’t require a cosigner. While these loans typically have higher interest rates, they usually have easier requirements. So, there’s a higher chance of you being able to qualify for loans.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. In order to qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you live in Texas, have a strong credit history, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. In order to qualify for a student loan with College Ave without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5 or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. An Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA, and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at least 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. Accordingly, they’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. They do not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. Although, if you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
Final Thoughts from the Nest
Figuring out how to pay for your college career can be a hassle, especially if you can’t find a cosigner. Luckily, you now have 13 options for student loans with no cosigner. Sign up with Sparrow to help make the process easier. In doing so, you can save and compare your matches from the Sparrow application to help you make a decision.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
LendKey offers both private student loans and student loan refinancing. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan refinance offering is available to graduates with strong credit and stable income. It’s best if you want to work with a credit union or community bank to access loan offers you otherwise might have overlooked.
Fixed APR Range: 7.11% to 11.18%
Variable APR Range: N/A
Loan Amounts: $5,000 to $300,000, depending on degree
• Work with a credit union or community bank, rather than a traditional lender • Access to competitive interest rates • Offers up to 18 months of forbearance • Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
• Eligibility criteria excludes part-time students, parents, and non-U.S. citizens/permanent residents • Varying cosigner release policies • Loans aren’t available in Maine, Nevada, North Dakota, Rhode Island, or West Virginia • Biweekly payment via autopay is not available • You may have to become a member of a credit union
Compare LendKey Rates:
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
LendKey allows you to access refinance offers from a network of non-traditional lenders that you otherwise might have overlooked. On its platform, LendKey connects you with hundreds of community banks and credit unions simultaneously. While the credit unions and community banks don’t have the name recognition that some of the traditional banks and online lenders have, they typically offer lower rates and personalized customer service. In addition, the credit unions and community banks are often non-profits, so you’ll be working with a lender that has your best interest in mind.
Competitive interest rates and zero fees for qualified borrowers
When looking to refinance your student loan, finding a low interest rate is typically a top priority. If you qualify for a LendKey student loan refinance, you’ll have access to competitive interest rates from credit unions and community banks that you might not be able to find elsewhere. While most of the lenders on LendKey’s platform do not charge any origination fees, application fees, or prepayment penalties, some may charge late fees or insufficient funds fees. The terms will vary depending on which lender you choose, so be sure to read the terms and conditions of your loan carefully.
LendKey Student Loan Refinance
Fixed APR*
7.11% to 11.18%
Variable APR*
N/A
*Rates as of September 14, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Offers up to 18 months of forbearance due to economic hardship or natural disaster
If you experience economic hardship or a natural disaster, LendKey offers generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
On 5, 7, and 10-year loans, LendKey allows you to postpone payments for up to four months at a time, for up to 12 months total.
On 15 and 20-year loans, LendKey offers up to 18 months of forbearance, in six-month increments. While LendKey handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
When you borrow through LendKey’s platform, you’ll get free access to special borrower benefits that help you achieve your financial and personal goals. These benefits include:
Career Assistance: LendKey partners with NextJob to offer free tools and online resources to help you succeed, including:
Online mock interviews
A resume builder
Hidden job opportunities waiting to be uncovered
A personality test to help you find the right career path
Credit Health Analysis: To help you reach your financial goals, LendKey has partnered with Curu, a platform that provides comprehensive credit analysis designed to help you improve your credit health
Curu analyzes your spending, net worth, and credit utilization to generate personalized tasks that show your path to credit success.
Curu displays your real-time financial account information all in one place so you always know where you stand.
Curu sends you notifications for upcoming credit card payment due dates so you’ll never miss a payment again.
Federal Student Loan Assistance: LendKey partners with Savi to provide an online, concierge service that searches across 150+ federal loan forgiveness and repayment options and recommends a path forward based on a borrower’s unique financial situation and goals. Savi then automates and digitizes the application process to reduce mistakes, simplify the process, and save time.
Access a free, instant estimate of monthly savings
Detect eligibility & simplify enrollment for national and state repayment and forgiveness programs
Receive 1:1 support as needed from a team of student loan experts
Drawbacks: LendKey Student Loan Refinance
Strict eligibility criteria
In order to qualify for student loan refinance through LendKey, borrowers must meet the following criteria:
A U.S. citizen or permanent resident
Graduated with at least an associate degree
You or your cosigner have a credit score of 660
You have an annual income of $24,000 per year, or $12,000 per year with a cosigner
LendKey’s strict eligibility criteria excludes non-U.S. citizens/permanent residents, non-graduates, parents, and those who don’t meet the credit or income requirements.
Haven’t earned an associate’s degree?EDvestinU accepts borrowers without a degree.
Don’t have a credit score of 660 (or a creditworthy cosigner)? Earnest accepts borrowers with a lower credit score.
If you do not meet LendKey’s criteria for a student loan, you may want to look elsewhere to refinance your private student loan. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all bidding for your business. And best of all, it won’t impact your credit score.
Varying cosigner release policies
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
If you earn less than $24,000 per year or have fewer than 36 months of credit history, a cosigner is required in order to borrow from LendKey.
Unfortunately, it’s not clear how quickly you can release your cosigner from your LendKey loan. Since LendKey partners with credit unions and community banks (each of which have their own internal policies), you will need to check with your specific lender to confirm their cosigner release policy.
Loans aren’t available in certain states
LendKey does not offer student loan refinance to borrowers who live in Maine, Nevada, North Dakota, Rhode Island, or West Virginia. If you live in any of these states, try using our rate comparison tool to see which refinance lenders you qualify with.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through LendKey, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With LendKey, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
You may have to become a member of a credit union
One of the major advantages of borrowing through LendKey is that the platform allows you to access loan offers from a network of non-traditional lenders (credit unions and community banks) that you otherwise might have overlooked.
Unfortunately, that also means you may have to become a member of the institution you borrow from, which typically costs around $5. Although the process of becoming a member of a credit union is relatively simple, it adds another step to the borrowing process that traditional banks and online lenders don’t require.
LendKey Student Loan: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
7.11% to 11.18%
Variable APR Range
N/A
Loan Terms
5, 7, 10, 15, or 20 years.
Loan Amounts
$5,000 to $125,000 for undergraduate degrees; up to $250,000 for graduate degrees; and up to $300,000 for medical, dental or veterinary degrees.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is $5 to $10, depending on the lender).
Eligibility Requirements – Financial
Minimum Credit Score
660.
Minimum Income
24,000 per year, $12,000 per year with a cosigner.
Typical Credit Score of Approved Borrowers or Cosigners
751.
Typical Income of Approved Borrower
$65,000.
Maximum Debt-to-Income Ratio
50%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after five years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens or permanent residents.
Location
Available to borrowers in all 50 states, except Maine, Nevada, North Dakota, Rhode Island, and West Virginia.
Must have graduated
Yes, with at least an associate degree.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
37%+.
Repayment Options
Academic Deferment
No.
Military Deferment
No.
Disability Deferment
Did not disclose.
Forbearance
On 5, 7, and 10-year loans, postpone payments for up to four months at a time, for up to 12 months total. On 15 and 20-year loans, postpone payments for up to six months at a time, for 18 months total.
Cosigner Release
Did not disclose.
Death or Disability Discharge
Not guaranteed by the loan agreement, but common practice, according to LendKey.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
LendKey.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
No.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
Did not disclose.
Before you take out a loan from LendKey…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is LendKey a legitimate lender?
Yes, LendKey is legitimate. The platform connects borrowers with credit unions and community banks offering private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing. Since its founding in 2009, LendKey has helped fund $3.1 billion in loans for 99,000-plus borrowers — it also services more than $2 billion worth of student loans.
Is LendKey available in all 50 states?
LendKey is available to borrowers in all 50 states, except Maine, Nevada, North Dakota, Rhode Island, and West Virginia.
How long does it take to get a LendKey student loan?
Submitting an application through LendKey takes a few minutes. Once you’ve submitted your loan application, LendKey will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. However, you can speed up the process by requesting debt payoff letters from your current lenders and loan servicers.
What happens if I don’t qualify for a LendKey student loan?
If you don’t qualify for LendKey student loan refinance, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or try with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all bidding for your business. Best of all, it won’t impact your credit score.
Are LendKey student loans federal or private?
LendKey’s student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through LendKey hurt my credit score?
In order to estimate what rate you qualify for, LendKey conducts a soft credit check — this does not affect your credit score. If you choose to accept the LendKey refinance offer, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Brazos is a non-profit lender that offers private student loans and student loan refinancing. Since it was launched in 1975, Brazos has focused on bringing transparency and low-cost loans to Texas residents. While Brazos private student loans are only available to borrowers who are residents of, or students in, Texas, the non-profit lender offers a wide range of options for undergraduate, graduate, MBA, law, medical, dental veterinary, or doctoral students, as well as parents. Accordingly, it’s best if you live, or attend school, in Texas, have strong credit, and want competitive interest rates.
Fixed APR Range: 2.71% to 6.86%
Variable APR Range: 5.32% to 9.47%
Loan Amounts: $1,000 up to the total cost of attendance, minus other aid received
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. To do so, we suggest you use the free Sparrow application to see the rates and terms you’d qualify for with 17+ premier lenders.
Here are Brazos’ rates in comparison to other top lenders:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Work with a non-profit, rather than a traditional lender
Brazos is a Texas nonprofit student loan company that has been helping Texas families finance the cost of their college education for over 40 years. Brazos is not affiliated with any school. As a non-profit, its goal is to save you money by offering the most competitive rates possible. While Brazos doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for a Brazos student loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Graduate, MBA, Law, Medical, Dental, Veterinary, and Doctoral Students
Fixed APR*
2.71% to 6.86%
Starts at 2.71%
Variable APR*
5.32% to 9.47%
Starts at 5.32%
*Rates as of November 1, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Offers up to 12 months of forbearance due to economic hardship, natural disaster or military duty
If you experience economic hardship or a natural disaster or are called up for active-duty military service, Brazos offers up generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
Brazos offers up to 12 months of forbearance, in three-month increments. While Brazos handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
In order to qualify for a private student loan through Brazos, borrowers must meet the following criteria:
A U.S. citizen, permanent resident or, if applying with an eligible cosigner, a non-citizen with a work or student visa, or a DACA recipient
Be a resident of, or student in, the State of Texas
At least 18 years old
Enrolled at least half-time in a degree-granting program
Have a credit score of 720 (or apply with a cosigner who does)
Have an annual income of $60,000-plus, or $30,000 if applying with a cosigner
Don’t live, or attend school, in Texas? Then complete our 2-minute form to see if you qualify and at what rate with over 15 different lenders. Doing so is quick, easy, and does not impact your credit score.
Don’t have a credit score of 720? Then look into Ascent and Funding U (they offer future income-based loans that don’t have a credit requirement).
Don’t have an annual income of $60,000? Then SoFi is a great option (it has no income requirement.) In addition, Ascent and Funding U offer future income-based loans that don’t have an income requirement.
Limited repayment options
Brazos only offers two repayment options on its private student loans: Immediate Repayment and Deferred Repayment. Compared to other online lenders that offer up to four repayment options, Brazos’ repayment options may seem limited.
Check out the table below to understand the difference between Brazos’ student loan repayment options: 1.) Immediate Repayment and 2.) Deferred Repayment.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no / limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky.
Unfortunately, Brazos does not offer any form of cosigner release. Instead, you will have to apply for a new loan through Brazos.
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. In addition, many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through Brazos, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Brazos, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
$1,000 up to the total cost of attendance, minus other aid received.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (5% of the monthly payment or $7.50, whichever is greater. Maximum fee is $35).
Eligibility Requirements – Financial
Minimum Credit Score
720 or 690 with a qualified cosigner.
Minimum Income
$60,000 or $30,000 if applying with a cosigner.
Typical Credit Score of Approved Borrowers or Cosigners
N/A.
Typical Income of Approved Borrower
$128,244 for borrowers or $118,262 for cosigners.
Maximum Debt-to-Income Ratio
40%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
U.S. citizen, permanent resident or, if applying with an eligible cosigner, a non-citizen with a work or student visa, or a DACA recipient.
Location
Borrower must be a resident of, or student in, the State of Texas.
Must be enrolled half-time or more
Yes.
School requirement
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
17%.
Repayment Options
In-school Repayment Options
Immediate Repayment: Make full payments as soon as the loan is disbursed, while you’re still in school.
Deferred Repayment: Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
Grace Period
No.
Academic Deferment
No.
Military Deferment
Yes, up to 36 months.
Disability Deferment
Did not disclose.
Forbearance
Yes, hardship forbearance for up to 12 months (in three-month increments).
Cosigner Release
No. Borrowers must reapply for a new loan individually.
Death or Disability Discharge
Yes, if the benefiting student dies the loan is discharged for the parent borrower and the cosigner, if there is one. If the parent borrower dies and there is no cosigner, the loan is discharged. If the parent borrower dies and there is a cosigner, the cosigner is still responsible for paying the loan.
Loan discharge if cosigner dies or becomes disabled
No. If the cosigner dies, the cosigner is removed from the loan, and the borrower continues to be responsible for repayment on the loan for the remainder of the repayment term.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark.
In-house Customer Service Team
Only for the application process.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Initial approval is online and takes only a few minutes. Brazos will then ask for documentation to verify your information.
Before you take out a loan from Brazos…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
Yes, Brazos is legitimate. The lender is part of the nation’s largest group of nonprofit student loan organizations and has $30 billion in loans for over 2 million students.
Is Brazos available in all 50 states?
Brazos is available to residents of, or students in, the State of Texas.
How long does it take to get a Brazos student loan?
Submitting an application through Brazos takes a few minutes. Once you’ve submitted your loan application, Brazos will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Brazos student loan?
If you don’t qualify for a Brazos student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Brazos’ student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Brazos hurt my credit score?
In order to estimate what rate you qualify for, Brazos conducts a soft credit check — this does not affect your credit score. If you choose to accept the Brazos loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
LendKey offers both private student loans and student loan refinancing. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan offering is available to undergraduate and graduate students. It’s best if you have strong credit and want generous cosigner release and forbearance policies.
Fixed APR Range: 4.39% to 11.11%
Variable APR Range: 5.84% to 11.11%
Loan Amounts: $1,000 up to the total cost of attendance, minus other aid received
• Work with a credit union or community bank, rather than a traditional lender • Access to competitive interest rates • Good grades could lower your rate • Offers up to 18 months of forbearance • Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
• Eligibility criteria excludes part-time students, parents, and non-U.S. citizens/permanent residents • You can’t see if you’ll qualify and at what rate without a hard credit check • Varying cosigner release policies • Biweekly payment via autopay is not available • Limited repayment options • You may have to become a member of a credit union
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
LendKey allows you to access loan offers from a network of non-traditional lenders that you otherwise might have overlooked. On its platform, LendKey connects you with hundreds of community banks and credit unions simultaneously. While the credit unions and community banks don’t have the name recognition that some of the traditional banks and online lenders have, they typically offer lower rates and personalized customer service. In addition, the credit unions and community banks are often non-profits, so you’ll be working with a lender that has your best interest in mind.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for a LendKey student loan, you’ll have access to competitive interest rates from credit unions and community banks that you might not be able to find elsewhere. While most of the lenders on LendKey’s platform do not charge any origination fees, application fees, or prepayment penalties, some may charge late fees, or insufficient funds fees. The terms will vary depending on which lender you choose, so be sure to read the terms and conditions of your loan carefully.
*Rates as of July 20, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Good grades could lower your rate
LendKey has developed the Academic Credit Score, a proprietary scoring model that assesses your creditworthiness by looking at standard metrics (you and your cosigner’s credit score) as well as non-traditional metrics such as your GPA and major. This allows LendKey to get a holistic understanding of who you are as a borrower and as a student. It also rewards you for your hard work in the classroom through lower rates on your student loan, and a lower rate could mean substantial savings over the lifetime of your loan.
Offers up to 18 months of forbearance due to economic hardship or natural disaster
If you experience economic hardship or a natural disaster, LendKey offers generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
LendKey offers up to 18 months of forbearance, in six-month increments. While LendKey handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
When you borrow through LendKey’s platform, you’ll get free access to special borrower benefits that help you achieve your financial and personal goals. These benefits include:
Career Assistance: LendKey partners with NextJob to offer free tools and online resources to help you succeed, including:
Online mock interviews
A resume builder
Hidden job opportunities waiting to be uncovered
A personality test to help you find the right career path
Credit Health Analysis: To help you reach your financial goals, LendKey has partnered with Curu, a platform that provides comprehensive credit analysis designed to help you improve your credit health.
Curu analyzes your spending, net worth, and credit utilization to generate personalized tasks that show your path to credit success.
Curu displays your real-time financial account information all in one place so you always know where you stand.
Curu sends you notifications for upcoming credit card payment due dates so you’ll never miss a payment again.
Federal Student Loan Assistance: LendKey partners with Savi to provide an online, concierge service that searches across 150+ federal loan forgiveness and repayment options and recommends a path forward based on a borrower’s unique financial situation and goals. Savi then automates and digitizes the application process to reduce mistakes, simplify the process, and save time.
Access a free, instant estimate of monthly savings
Detect eligibility & simplify enrollment for national and state repayment and forgiveness programs
Receive 1:1 support as needed from a team of student loan experts
Drawbacks of LendKey Student Loans
Strict eligibility criteria
In order to qualify for a private student loan through LendKey, borrowers must meet the following criteria:
A U.S. citizen or permanent resident
At least the age of majority in your state (typically 18 to 21)
Enrolled at least half-time in a degree-granting program
3 years of credit history
An annual income of $24,000-plus
LendKey’s strict eligibility criteria excludes part-time students, parents, non-U.S. citizens/permanent residents, and those who don’t meet the credit or income requirements.
If you do not meet LendKey’s criteria for a student loan, you may want to look to different lenders for your private student loan.
Not a U.S. citizen or permanent resident?MPOWER and Prodigy Finance offer private student loans to international students. In addition, Earnest, College Ave, and Ascent all offer private student loans to international students who have a U.S. citizen as a cosigner.
Don’t have 3 years of credit history?Ascent and Funding U offer future income-based loans that don’t have a credit requirement.
Don’t have an annual income of $24,000?Ascent and Funding U offer future income-based loans that don’t have an income requirement.
You can’t see if you’ll qualify and at what rate without a hard credit check
Unlike many other online lenders, LendKey does not allow you to qualify and receive rate estimates without undergoing a hard credit check. This means you will have to undergo a hard credit check, which temporarily hurts your credit, in order to see if you qualify and at what rate. If you want to see if you qualify and at what rate with over 17 different lenders, try our 2-minute form. It’s quick, easy, and does not impact your credit score.
Varying cosigner release policies
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
If you earn less than $24,000 per year or have fewer than 36 months of credit history, a cosigner is required in order to borrow from LendKey.
Unfortunately, it’s not clear how quickly you can release your cosigner from your LendKey loan. Since LendKey partners with credit unions and community banks (each of which have their own internal policies), you will want to check with your specific lender to confirm their cosigner release policy.
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through LendKey, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With LendKey, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
LendKey only offers two repayment options on its private student loans, both of which require you to make in-school payments. Compared to other online lenders that offer up to four repayment options, LendKey’s repayment options may seem limited. With that said, if you’re able to make in-school payments, it’s the best way to reduce interest and minimize the amount of debt you owe.
Check out the table below to understand the difference between LendKey’s student loan repayment options: 1.) Flat-fee repayment and 2.) Interest-only repayment.
Pay a flat fee of $25 a month while you’re in school for up to 60 months. Full payments are due after that point.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Interest-Only Repayment
Pay only interest while you’re in school. With this option, there is a maximum of 60 months of payments (5 years).
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments. If you plan to take more than 60 months to complete your program, you will have to make full payments after the first 60 months.
You may have to become a member of a credit union
One of the major advantages of borrowing through LendKey is that the platform allows you to access loan offers from a network of non-traditional lenders (credit unions and community banks) that you otherwise might have overlooked.
Unfortunately, that also means you may have to become a member of the institution you borrow from, which typically costs around $5. Although the process of becoming a member of a credit union is relatively simple, it adds another step to the borrowing process that traditional banks and online lenders don’t require.
$1,000 up to the total cost of attendance, minus other aid received.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is $5 to $10, depending on the lender).
Eligibility Requirements – Financial
Minimum Credit Score
660.
Minimum Income
24,000 per year.
Typical Credit Score of Approved Borrowers or Cosigners
689.
Typical Income of Approved Borrower
$32,000.
Typical Income of Approved Cosigner
$85,000.
Maximum Debt-to-Income Ratio
33%, not including housing costs.
Ability to qualify if you’ve filed for bankruptcy
Yes, after five years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens or permanent residents
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
90%+.
Repayment Options
In-school Repayment Options
Flat-fee repayment: Pay a flat fee of $25 per month while you’re in school for up to 60 months. Full payments are due after that point.
Interest-only repayment: Only pay interest while you’re in school for up to 60 months. Full payments are due after that point.
Grace Period
6 months.
In-school Deferment
No.
Military Deferment
No.
Disability Deferment
Did not disclose.
Forbearance
Yes, hardship and natural disaster forbearance for up to 18 months, in six month increments.
Cosigner Release
Yes (requires 24 months of timely repayments). Death or disability discharge: Not guaranteed by the loan agreement, but common practice, according to LendKey.
Death or Disability Discharge
Did not disclose.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
LendKey.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
No.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Immediate.
Before you take out a loan from LendKey…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is LendKey a legitimate lender?
Yes, LendKey is legitimate. The platform connects borrowers with credit unions and community banks offering private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing. Since its founding in 2009, LendKey has helped fund $3.1 billion in loans for 99,000-plus borrowers — it also services more than $2 billion worth of student loans.
Is LendKey available in all 50 states?
LendKey is available to borrowers in all 50 states.
How long does it take to get a LendKey student loan?
Submitting an application through LendKey takes a few minutes. Once you’ve submitted your loan application, LendKey will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a LendKey student loan?
If you don’t qualify for a LendKey student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are LendKey student loans federal or private?
LendKey’s student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through LendKey hurt my credit score?
Yes. In order to check your eligibility and receive your rate, LendKey will conduct a hard credit check. A hard credit check may temporarily impact your credit score.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products shown here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
EdvestinU is a student loan program from the nonprofit New Hampshire Higher Education Loan Corp. They offer private student loans and student loan refinancing to students across the country. In order to qualify for EdvestinU’s student loan refinancing, you do not need to be from New Hampshire or even have graduated school. EdvestinU’s refinance offering is best for those who do not have a degree and are looking to refinance up to $200,000 of student loans.
• Work with a non-profit, rather than a traditional lender • You can refinance your students loans without a degree • Exclusive benefits for New Hampshire residents
• Maximum loan of $200,000 is lower than most refinance lenders • Students cannot take over parent PLUS loans that parents took out on their behalf
Compare EdvestinU Refinance Rates:
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Work with a non-profit, rather than a traditional lender
EdvestinU has been helping families across the country finance the cost of their college education for nearly 60 years. EdvestinU is not affiliated with any school. As a non-profit, its goal is to save you money by offering the most competitive rates possible. While EdvestinU doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
You can refinance your student loan without a degree
While most lenders require you to have graduated in order to refinance your student loan, EdvestinU accepts borrowers who don’t have a degree. This is a huge benefit to borrowers who left school before earning their degree.
Regardless of whether or not you have earned your degree, you will still need to meet EdvestinU’s credit and income requirements to qualify for refinancing.
Credit Score: You’ll need a credit score of at least 700.
Income: You’ll need $30,000 in gross income if you plan to refinance less than $100,000. You’ll need $50,000 in gross income if you plan to refinance more than $100,000.
If you do not meet that criteria, you could still be eligible for refinancing if you apply with a cosigner who does.
Exclusive benefits for New Hampshire residents
EdvestinU, as well as many other private student lenders, offers a 0.25% discount if you enable automatic payments. This is the lender’s way of incentivizing you to turn on autopay so that you don’t miss a payment.
EdvestinU has taken this to another level by offering New Hampshire residents a 1% rate reduction on fixed rate loans and a 0.25% rate reduction on variable loans.
EdvestinU also offers in-person support and counseling to borrowers from New Hampshire.
If you’re a New Hampshire resident, EdvestinU might be the best option for you.
Drawbacks of Refinancing with EdvestinU
Maximum loan of $200,000 is lower than most lenders
While other lenders often will refinance loans up to the total cost of attendance, the maximum loan amount that EdvestinU will refinance is $200,000. Accordingly, EdvestinU is a great option if you are refinancing relatively smaller student loans. However, if you are refinancing loans from medical school or graduate school that exceed $200,000, you might want to consider other lenders that accept larger loans.
Students cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). However, EdvestinU does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through EdvestinU — it will just be in your name, not the student’s name.
If you’re looking for a lender that does allow you to transfer parent PLUS loans to the student, you may want to consider SoFi.
EdvestinU: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.41% to 7.78%
Variable APR Range
8.04% to 9.79%
Loan Terms
5, 10, 15 or 20 years.
Loan Amounts
$7,500 to $200,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, five percent of the monthly payment.
Eligibility Requirements – Financial
Minimum Credit Score
700.
Minimum Income
$30,000 if you plan to refinance less than $100,000; if you plan to refinance more than that, the minimum income is $50,000.
Typical Credit Score of Approved Borrowers or Cosigners
756.
Typical Income of Approved Borrower
Approximately $70,000.
Maximum Debt-to-Income Ratio
43%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 10 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or a permanent resident.
Location
Available to borrowers in all 50 states.
Must have graduated
No.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
52%.
Repayment Options
Academic Deferment
Yes, but interest-only payments are due during the deferment.
Military Deferment
Yes, but interest-only payments are due during the deferment.
Disability Deferment
Yes, you can postpone payment while undergoing rehab for a disability.
Economic Hardship Deferment
Yes, borrowers are eligible for 12 months of economic hardship deferment, in three-month increments, over the life of the loan.
Forbearance
Discretionary forbearance is available for 12 months.
Cosigner Release
Yes, after 36 months of consecutive, on-time payments. Borrowers must also have a credit score greater than 749 and a minimum gross income of $30,000.
Death or Disability Discharge
The loan will be forgiven if the borrower dies, but not in instances of total or permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
At least 30 days.
Before you take out a loan from EdvestinU…
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FAQ
Is EdvestinU a legitimate lender?
Yes, EdvestinU is a legitimate lender that has close to sixty years of experience lending and refinancing in higher education.
Is EdvestinU available in all 50 states?
Yes, EdvestinU is available in all 50 states.
How long does it take to get an EdvestinU student loan?
Submitting an application through EdvestinU takes a few minutes. Once you’ve submitted your loan application, EdvestinU will immediately return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. However, you can speed up the process by requesting debt payoff letters from your current lenders and loan servicers.
What happens if I don’t qualify for an EdvestinU student loan?
If you don’t qualify for an EdvestinU student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are EdvestinU student loans federal or private?
EdvestinU loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through EdvestinU hurt my credit score?
In order to estimate what rate you qualify for, EdvestinU conducts a soft credit check — this does not affect your credit score. If you choose to accept the EdvestinU loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Earning a graduate degree is a great way to increase your income potential. In fact, Indeed reported that, on average, the earnings increase from a bachelor’s to master’s degree is roughly 20%. Nonetheless, it can be difficult to understand how to pay for grad school.
Graduate school can be expensive. According to FinAid.org, a graduate degree costs anywhere from $30,000 to $120,000, depending on the program. This makes financial decisions around paying for graduate school even more important.
While that reality may be overwhelming, there are several ways to pay for your graduate degree. Let’s break down your top 5 options: scholarships, fellowships, grants, work-study, and loans.
How To Pay for Grad School
As with any degree, there is a certain order you should follow when it comes to how you finance your education.
Scholarships, fellowships, and grants are all forms of free aid, or gift aid. Typically, scholarships, fellowships, and grants do not need to be paid back, so you’ll want to accept these first.
After accepting any free money available to you, you should pursue work-study next. Federal work-study is considered earned money, meaning you have to trade your time to receive it. While not everyone will receive federal work-study, it’s a great option for those who do.
Loans should always come last in the process because they are borrowed money. When you borrow a loan, it’ll typically accrue interest, and by the time you pay it back, you’ll have paid a significant amount in interest.
#1: Finding the Best Scholarships for Graduate School
Graduate scholarships are typically awarded based on academic or professional achievements. However, there are scholarships awarded based on other factors such as:
What GPA Do You Need to Get Graduate School Scholarships?
Typically, you’ll need around a 3.5 GPA to be a competitive applicant for most graduate school scholarships. That said, there are scholarship programs that have a lower GPA minimum.
Where Can You Find Graduate School Scholarships?
You can find graduate school scholarships in a variety of places such as:
Professional organizations
From your school’s financial aid office
Online search engines
For example, the American Bar Association offers scholarships to first-year law students from underrepresented communities through theirLegal Opportunity Scholarship.
For search engines, there are a wide variety of options available such as ScholarshipOwl, Scholarships.com, Chegg, and Fastweb.
#2: Exploring Graduate Fellowship Options
A fellowship is another form of free aid that you’ll want to seek out before taking on student loans.
What is a Graduate Fellowship?
A fellowship is an award given to graduate students to subsidize the cost of education. Some fellowships are awarded simply to fund your education, similar to scholarships. Other fellowships are awarded specifically to fund academic projects such as dissertations, thesis projects, or research.
Fellowships are awarded by schools, professional organizations, and nonprofits, typically based on merit.
The amount you receive from a fellowship depends on the specific program. For example, the NSF Graduate Research Fellowship Program is a five-year fellowship that provides three years of financial support. Recipients receive an annual stipend of $34,000 and a cost of education allowance of $12,000.
The International Dissertation Research Fellowship (IDRF), however, provides a one-time stipend that varies depending on the research plan of the recipient. On average, each IDRF recipient receives $23,000.
When searching for a graduate fellowship, pay close attention to the length of the program and how the funds are disbursed to you or your university.
Is a Fellowship Better Than a Scholarship?
Fellowships and scholarships are both forms of free money, but you may have to complete an academic project to receive fellowship funding. If you’re interested in a particular academic project, a fellowship may be a solid option for you. If you’d prefer to receive free money with no strings attached, a traditional scholarship may be better for you.
While one is not necessarily better than the other, it’s important to understand how each one works to make an educated decision.
#3: Finding the Best Grants for Graduate School
Grants are similar to both scholarships and fellowships — they are free money you don’t need to pay back.
Who is Eligible for a Grant for Graduate School?
Typically, grants are awarded based on financial need. Some grant providers may have additional eligibility requirements such as having a certain GPA or enrollment in a specific program. Some may even require you to have specific research goals.
Graduate school grants can come from a variety of sources such as the federal and state government, your school, and professional organizations.
Federal Grants
To be eligible for any federal grants, you must complete the FAFSA. The information you provide on the FAFSA is used to determine your financial need, which is then used to determine your federal grant eligibility.
Does the Pell Grant Cover Graduate School?
As a graduate student, you are not eligible for the Pell Grant. The Pell Grant is intended for undergraduate students, minus a few exceptions.
State Grants
State grants are provided by individual U.S. states, and thus, each state grant program runs a little differently. Reach out to your state’s department of education to learn more about the grants they may offer.
School Grants
Some universities offer grants to students pursuing a graduate degree at their institution. Check with your specific program to learn more about the grants offered for your field of study. Don’t hesitate to ask the school’s financial aid office as well. There may be generic institutional grants available to both undergraduate and graduate students that you qualify for.
Professional Organization Grants
Professional organizations focus on advancing individuals within a particular profession or with specific interests. Because of this, they tend to offer financial assistance to those pursuing degrees within their field. For example, the American Bar Association and the American Marketing Association provide grants to eligible individuals pursuing related degrees.
Work-study is a federal aid program that provides part-time jobs to undergraduate and graduate students with financial need. To be eligible for work-study, you must complete the FAFSA. Your application will determine if your level of financial need meets the minimum requirement of the work-study program.
Both full-time and part-time graduate students are eligible for work-study. If you accept the work-study aid offered to you, you will be responsible for finding a work-study role through your college/university. Speak to your school’s financial aid office for specific information regarding how work-study functions at your school.
How Much Money Can You Get in Work-Study?
The exact amount you receive in work-study will depend on the school you attend. Although, at minimum, work-study roles must pay the federal minimum wage. However, there are some work-study roles that offer more generous hourly rates.
#5: Finding the Best Student Loans for Graduate School
Student loans should always be the last option when determining how to pay for grad school. The more you borrow, the more you will have to pay back due to the interest that accrues. That makes selecting a good student loan that much more important.
A cosigner is an individual that signs onto a loan alongside you, taking full responsibility for the loan if you’re unable to pay it back. A creditworthy cosigner can help you secure a lower interest rate and better terms.
If you don’t have access to a cosigner, that is okay, too. Non-cosigned loan options are available, but they may have higher interest rates.
If you are pursuing a graduate degree immediately after your undergraduate degree, you may not have a substantial full-time income just yet. Some private lenders have minimum income requirements, so if you plan to take out the loan without a cosigner, you’ll need to make sure you meet that income threshold.
Interest Rate
Each student loan will have its own unique interest rate and terms. Always compare interest rates carefully to select the loan that is best for you.
Each individual lender will offer a unique set of repayment options. While some lenders may offer a deferred repayment option, allowing you to postpone repayment while in school, others may only offer immediate repayment. This would force you to begin making loan payments while in school, which many students are unable to do. Be realistic about which repayment options would work for you and ensure the lender you select offers them.
Federal & Private Loan Options for Graduate School
As a graduate student, you will likely have access to both federal and private student loans.
Federal
Federal student loans are provided by the federal government. To be eligible for a federal student loan, you must complete the FAFSA.
Private
Private student loans are provided by private entities such as banks, financial institutions, and nonprofits. To see what private student loans you qualify for, complete the Sparrow application.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering private student loans to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Therefore, Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offering is available for undergraduate, graduate, professional, and career school students, as well as parents of students. Accordingly, it’s best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan offering is available to undergraduate and graduate students. In addition, it’s best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students. Accordingly, it is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that offers non-cosigned graduate student loans to international students. Accordingly, it is best for international students who don’t have a credit history and can’t access a qualified cosigner.
SoFi is a strong option for undergraduate, graduate, law, and MBA students, as well as parents looking to fund their child’s education. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
While graduate school can be a costly affair, there are a variety of ways to pay for it. When figuring out how to pay for grad school, always remember to pursue aid in the following order: scholarships, grants, fellowships, work-study, student loans.
When it comes time to check out private student loan options, start with Sparrow.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
If you’re a borrower, you may be wondering, “Are student loan payments tax deductible?”
For qualifying borrowers, the answer is yes. Student loan payments ARE tax deductible. The student loan interest deduction is a federal tax break that lowers how much of your income is taxed. The federal government created this deduction to assist borrowers in paying for higher education.
To find out if you’re eligible for this tax deduction, keep reading.
What Is The Student Loan Interest Deduction?
The student loan interest deduction is a federal income tax deduction that allows qualifying borrowers to deduct up to $2,500 from their taxable income.
Your eligibility for this deduction depends on your filing status and income level.
How Does the Student Loan Tax Deduction Work?
The student loan tax deduction enables you to subtract up to $2,500 from your taxable income for the interest paid on your student loans. Accordingly, this deduction helps you pay less in federal taxes. The Internal Revenue Service (IRS), the federal tax collection agency, offers various tax deductions, including student loan interest deduction.
To receive the deduction, you need to claim an “adjustment to income” on a 1040 form. Fortunately, you do not have to fill out a Schedule A, which is used for itemized deductions. To make this process as quick and easy as possible, gather the following information:
Filing status
Basic income information
Your adjusted gross income
Educational expenses paid with nontaxable funds
If you paid more than $600 in interest on your student loan debt, your lender/loan provider will give you a 1098-E.
Note: The deduction applies only to non-federal loans that gathered interest, as the Biden administration placed federal student loans in forbearance in 2021. Learn more about Biden’s student loan forgiveness.
Who Qualifies for the Student Loan Tax Deduction?
To qualify for the student loan tax deduction, you must meet the following eligibility requirements in income, filing status, loan timeline, and loan type.
Income Your modified adjusted gross income (MAGI) is your income after subtracting applicable tax penalties and tax deductions. While you can calculate your MAGI manually, online calculators can simplify the process.
If you are a single filer, your MAGI must be less than $85,000 to qualify for the student loan tax deduction.
If you are a joint filer, your MAGI must be less than $170,000 to qualify.
Filing Status To claim the student loan tax deduction, the eligible loan must have been borrowed for one of the following:
You are claimed as a dependent on someone else’s tax return.
You borrowed the student loan in your name but your parents are making the loan payments.
You are a parent paying for the loan taken out in your child’s name, as you are not the legal owner of the loan.
Loan Timeline The student loan must have been taken out during an academic period when you were enrolled for at least half the time at a qualifying post-secondary institution.
Additionally, it must have been used during a reasonable period after it was taken out, with loan amounts used within 90 days of the academic period.
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Loan Type Both federal and private student loans qualify for this deduction. However, you must have paid interest for the loan in 2019, as the student loan interest deduction was introduced in the 2020 Coronavirus Tax Relief.
Note: You can claim prepaid loan interest and origination fees for the student loan tax deduction.
Is It Worth Claiming Student Loan Interest on Taxes?
Regardless of your income class, you should claim your student loan interest on taxes if you qualify. Claiming this deduction will not result in any loss, as it lowers your taxable income.
How Much Can You Save with the Student Loan Interest Deduction?
The amount of money you can save depends on your income. The following table shows the average deduction values you can expect, based on your income class.
Income Class
Deduction Value
Below $10,000
$214
$10,000 to $20,000
$89
$20,000 to $30,000
$136
$30,000 to $40,000
$142
$40,000 to $50,000
$155
$50,000 to $75,000
$213
$75,000 to $100,000
$183
$100,000 to $200,000
$214
$200,000 and over
$74
Closing Thoughts From the Nest
If you qualify for the student loan interest deduction, be sure to claim the adjustment on your 1040 tax form. Doing so will reduce your taxable income. Accordingly, it will reduce the amount of taxes you owe.
Sallie Mae and SoFi are two reputable lenders in the private loan industry, so you truly can’t go wrong with either. If you’re debating Sallie Mae vs SoFi, here’s what you should know about their private student loans before borrowing with either lender.
Sallie Mae vs. SoFi: A Side-by-Side Comparison
The table below offers an overview of what Sallie Mae and SoFi have to offer.
4.44% to 13.80% (undergrad); 4.99% to 13.60% (grad); 6.50% to 14.83% (parent).
Variable APR Rate
5.49% to 15.83%
5.99% to 14.30% (undergrad); 5.99% to 14.10% (grad); 6.32% to 14.83% (parent).
Loan Terms
10 to 20 years
5, 10, or 15 years
Loan Amounts
$1,000 to your school-certified, total cost of attendance
$5,000 up to your school-certified, total cost of attendance
Minimum Credit Score
Mid-600s
Mid-600s
Minimum Income
No minimum income requirement
No minimum income requirement
Cosigner Release Options
Yes, the cosigner can be released after 12 months.
Yes, the cosigner can be released after 24 months of timely payments.
Ability to Transfer a Parent Loan to a Student
No
No
Student Status
Students enrolled at a degree-granting institution qualify for student loans.
Must attend an institution that is authorized to receive financial aid
State Restrictions
None
None
Sallie Mae: The Pros and Cons
Sallie Mae student loans are good options for DACA recipients, international students, and individuals who want a short turnaround for cosigner release.
Pros
Cons
Offers competitive interest rates.
Sallie Mae does not offer biweekly student loan payments via autopay. Payments must be paid on a monthly basis.
Has 4 different repayment plans.
Sallie Mae does not offer loan prequalification, meaning that borrowers must submit a formal application and incur a hard credit check to see what they qualify for.
Sallie Mae offers private loans to international and DACA students.
Loans are not accessible to students who are enrolled less than part-time.
Cosigners can be released from a student loan after 12 months of timely payments.
Sallie Mae offers a 6-month grace period for students who have graduated, dropped below part-time enrollment, or left school.
Sallie Mae vs. SoFi: Which is Better for Student Loans?
In the battle of Sallie Mae vs. SoFi, there is no objectively “better” option for borrowing student loans.
If additional borrower perks like job assistance and career coaching are important to you, you may prefer SoFi. For DACA recipients and international students, Sallie Mae would be the more fitting option.
If you plan to have a cosigner on your student loan, consider asking your cosigner whether they prefer a shorter or longer cosigner release option. Sallie Mae has a cosigner release option after 12 months of timely payments, while SoFi offers the option after 24 months.
Closing Thoughts From the Nest
Both Sallie Mae and SoFi are great, reputable lenders. To compare personalized loan offers from both companies, consider submitting a free application with Sparrow. Your credit score will not be negatively affected by your pre-qualified offers.
Refinancing your student loans is a great way to lower the interest rate or monthly payment of your current loan. If you’re debating between Earnest vs SoFi, here’s what you should know about both lenders before picking one to move forward with.
Earnest offers student loan refinancing with customizable repayment plans, letting you choose your repayment term down to the month. It also has forward-looking eligibility requirements and offers competitive interest rates. Earnest is best if you don’t have a cosigner and want a repayment plan customized to your situation.
SoFi is one of the biggest student loan refinancing companies in the industry. You have to have an associate’s degree or higher to qualify, but if you do qualify, you’ll have access to a wide variety of repayment options and exclusive member benefits. SoFi best if you have at least an associate’s degree, are a creditworthy borrower, and want to take advantage of their borrower benefits.
Understanding the difference between Earnest vs SoFi can be difficult. Here’s an overview of how Earnest and SoFi differ when it comes to student loan refinancing.
$5,000 ($10,000 minimum for California residents) – $500,000
$5,000 to your outstanding balance
Minimum Credit Score
650
650
Minimum Income
No minimum income requirement. Applicants must have a consistent income or have a job offer starting within the next 6 months.
No minimum income requirement. SoFi looks at your income after taxes and any payments.
Cosigner Release Options
No option for cosigner release, but refinancing removes the original cosigner.
No
Ability to Transfer a Parent Loan to A Student
No
Yes
Must Have Graduated
Must have graduated or be in your last academic semester with either a consistent income or job offer.
Must have graduated with an Associate’s degree or higher.
State Restrictions
Residents of Alabama, Delaware, Rhode Island, Kentucky, and Nevada cannot qualify for loan refinancing.
None
Earnest: The Pros and Cons
Earnest student loan refinancing is a great option for borrowers who have fair credit and are seeking strong borrower protections and flexible repayment terms.
Pros
Cons
Individuals with fair credit can qualify for loan refinancing with Earnest. You do not need excellent or good credit to qualify.
You cannot refinance your student loans during medical or dental residency.
Earnest does not charge late fees if you miss a payment.
You cannot apply with a cosigner.
You can skip a loan payment once every six months.
You cannot transfer parent loans to your name.
Earnest lets you customize your loan term to fit your financial situation. You can choose a repayment period between 5-20 years.
You can choose your monthly payment with Earnest’s Precision Pricing program.
When looking at Earnest vs SoFi, there is no lender that is objectively “better.” Both Earnest and SoFi are reputable lenders and which one you choose should depend on your unique circumstances.
If you’re finishing your medical or dental residency, or want to transfer a parent loan to a student, you may find offers from SoFi more compelling. If you have a fair credit score, want borrower protections for loan delinquency, or want to select your repayment term, you may want to consider Earnest.
Otherwise, SoFi and Earnest are generally similar in terms of loan terms, APR rates, minimum income, and loan amounts.
To better explore your fit for student loan refinancing, use a student loan refinancing calculator to calculate what your optimal refinancing plan would be. Once you determine this, compare refinancing offers and their corresponding repayment plans from Earnest and Sofi by completing the Sparrow application.
Closing Thoughts From the Nest
Rest assured that whether you refinance with Earnest or SoFi, you truly can’t go wrong with either company. However, remember to consider your financial status and how that fits with the offerings of both companies.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products shown here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
If you are considering going to grad school after college, you may be wondering, “How much does grad school cost?”
Making the decision to attend graduate school is one thing, but paying for it is another issue. Whether you plan to take out graduate student loans, receive a scholarship, or pay out-of-pocket, being aware of the average cost of grad school and how it varies is important.
On Average, How Much Does Grad School Cost?
The average cost of tuition for public grad schools is roughly $30,000 per year, while private grad schools cost around $40,000 per year. However, these figures do not apply to specialized degrees in medicine and law, which usually cost significantly more.
While you are calculating the cost of grad school, be sure to think about the cost of attendance (COA), in addition to the tuition. The COA is the total amount of money you will have to pay to attend grad school, including tuition and other fees like transportation, room and board, school supplies, and more.
There is no “right” answer to the question of whether grad school is more expensive than undergrad, as the price depends on your field of study, type of degree, and other factors.
Generally, medical, law, and other specialized degrees cost more than an MBA or a Master of Arts. STEM degrees can also be pricier than a degree in humanities or social sciences, given that there may be additional costs in labs, equipment, and other materials.
Is Graduate School Worth the Price?
The question of whether grad school is worth the cost ultimately depends on your personal aspirations and financial standing.
Before making the decision, be sure to carefully weigh the pros and cons. Here are some things to consider:
Pros of Attending Grad School
More scholarship opportunities: Grad schools are usually more generous with their scholarship offerings than undergraduate programs are. If you take the time to find and apply for scholarships, you may be able to offset the cost of your tuition.
Career advancement: An advanced degree can unlock career doors for you that may not have been accessible with only a Bachelor’s degree.
Increased salary: The average salary of an individual with a Master’s degree is higher than the average salary of an individual with a Bachelor’s degree. By going to grad school, you can increase your earning potential.
Specialized study in the field you love: If you’re going to grad school, you are probably going to study something that you love and enjoy. By attending graduate school, you will be able to have an in-depth, specialized study of the field and become an expert.
Loss of opportunity to make more money: A majority of undergraduates decide to work in the industry after graduation. Going to grad school may be a potential loss of income that you could have made had you begun working instead.
Loss of time: Attending grad school can take anywhere from one to three years, in general, which may set you behind in comparison to your peers.
Potential student debt: If you don’t receive any financial aid or gift aid, you may need to take out graduate student loans to afford the cost of attendance. If you have previous debt from your undergraduate education, you may be shouldering even more student loan debt.
Delayed work experience: You may miss out on industry experience if you decide to go to grad school.
As with any degree, there is a certain order you should follow when it comes to how you finance your education.
Scholarships, fellowships, and grants are all forms of free aid, or gift aid. Typically, scholarships, fellowships, and grants do not need to be paid back, so you’ll want to accept these first.
After accepting any free money available to you, you should pursue work-studynext. Federal work-study is considered earned money, meaning you have to trade your time to receive it. While not everyone will receive federal work-study, it’s a great option for those who do.
Loans should always come last in the process because they are borrowed money. When you borrow a loan, it’ll typically accrue interest, and by the time you pay it back, you’ll have paid a significant amount in interest.
Attending grad school is a big decision to make. Be sure to reach out to current graduate students, academic mentors, and other role models who have been in your position before.
When it comes to financing the cost of your grad school tuition, be sure to consider all of your options. If you want to explore graduate student loans, consider submitting a free application with Sparrow. Sparrow allows you to compare your pre-qualified, private student loan options across 17+ different lenders.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
With average college tuition costs rising every year due to inflation, it’s increasingly important to be aware of the costs associated with higher education.
One aspect of this is understanding what exactly tuition is, along with how it differs across factors like geographical location and institution type.
Tuition vs. Cost of Attendance
Tuition and cost of attendance may seem like the same thing, but there is a significant difference between the two.
Tuition is the base amount of money you pay to attend the institution and take classes, while the cost of attendance is the estimated total of expenses you will pay as a student, which includes the cost of tuition, fees, and other student expenditures.
Cost of attendance = Tuition + Room and Board + School Supplies + Transportation Fees…
What is the Average Cost of Tuition in the US?
The average cost of tuition for a four-year, in-state, public institution is $9,377, while the average cost is $27,091 for out-of-state. For private institutions, the average cost of tuition for a non-profit is $37,641, while a for-profit costs an average of $18,244.
Average College Tuition by State
As you explore potential colleges, keep in mind that tuition can also be influenced by geographic region. Historically, public colleges in the northeast have been the most expensive, while the least expensive schools are in the Plains and the South.
The table below shows the average total cost of college tuition by state, ordered from greatest-to-list.
State
Tuition & Fees
Tuition + Room & Board
Vermont
$17,593
$30,752
New Hampshire
$16,749
$29,222
Illinois
$14,579
$26,252
Pennsylvania
$14,532
$26,040
Connecticut
$14,487
$28,425
New Jersey
$14,184
$28,335
Massachusetts
$13,939
$28,317
Virginia
$13,931
$25,761
Michigan
$13,716
$24,777
Rhode Island
$13,697
$26,946
South Carolina
$12,544
$23,181
Minnesota
$11,836
$21,858
Oregon
$11,537
$24,517
Arizona
$11,410
$24,681
Delaware
$11,343
$24,862
Kentucky
$10,976
$22,317
Alabama
$10,617
$20,993
Maine
$10,377
$20,677
Tennessee
$10,271
$20,639
Hawaii
$10,197
$22,012
Ohio
$10,049
$22,860
Indiana
$9,656
$20,572
Louisiana
$9,656
$20,031
Maryland
$9,401
$22,380
Iowa
$9,373
$19,788
Missouri
$9,310
$19,394
Colorado
$9,269
$22,288
Kansas
$9,081
$19,082
North Dakota
$9,065
$18,057
South Dakota
$9,012
$17,177
Alaska
$8,849
$22,185
Wisconsin
$8,782
$17,875
Nebraska
$8,761
$19,352
Mississippi
$8,642
$19,221
Arkansas
$8,468
$18,262
New York
$8,416
$24,231
California
$8,401
$24,015
West Virginia
$8,252
$19,312
Oklahoma
$8,064
$17,283
Texas
$8,016
$18,325
Georgia
$7,525
$18,711
Washington
$7,485
$21,027
Idaho
$7,482
$16,518
New Mexico
$7,393
$17,113
North Carolina
$7,260
$17,113
Montana
$6,993
$16,931
Utah
$6,764
$14,653
Nevada
$6,434
$18,065
District of Columbia
$6,152
N/A
Wyoming
$4,785
$14,584
Florida
$4,541
$15,543
Private vs. Public Schools
Public institutions are funded by the government, while private schools are funded by tuition and endowment funds.
Generally, private colleges have more expensive tuition than public schools. In the graph below, we can see that private four-year colleges have historically cost more than your average public four-year, public two-year, and private two-year school.
However, it’s important to note that the average cost of attendance differs from student to student.
A low-income student may receive more financial aid from private universities instead of public universities, given that several private universities are 100% need-based. On the other hand, it may be cheaper for an in-state, middle-income student to attend public schools instead of a private school, due to in-state grants.
All this is to say that you should explore your financial resources at every school you are interested in, public or private. Most schools offer an online tuition calculator that estimates what the total cost of tuition may be for your financial standing. Reach out to the financial aid office if you have any questions.
Closing Thoughts From the Nest
As you explore your college options, be sure to make note of the average undergraduate tuition for the institutions you are interested in. Whether you plan to borrow student loans or not, it’s important to be mindful of how much your education costs.
If you’re looking for private loans to finance your education, consider using Sparrow. Sparrow offers a free, online tool that allows you to compare pre-qualifying private loans across 15+ private lenders.
Both federal and private student loans can be used for educational expenses. While that typically means costs like tuition and fees, there’s a variety of items that fall under the umbrella.
In fact, you can use your student loans for living expenses, child support, and even study-abroad programs.
Can I Get a Student Loan to Cover Living Expenses?
Yes, you can use student loans for living expenses. After your student loans are disbursed to your school, your school will usually return the remaining funds to you after tuition, room/board, and other costs have been paid for.
These remaining funds can be used for a variety of expenses, such as institutional fees, transportation costs, and more.
What Counts as Living Expenses for Student Loans?
Any academically-related expense can be counted as a living expense for student loans. This doesn’t mean that you are strictly limited to purchasing school supplies or textbooks, however.
Your student loans cover living expenses you have to pay as a student, such as rent, bills, groceries, and even furniture for your campus apartment.
The following table outlines the most common expenses that student loans can be used for.
Expense
Tuition and Fees + Room and Board
Your institution will usually take a portion of your student loans to cover costs such as tuition and fees, room and board, and your meal plan. You will not have to pay the university directly. If you are opting for off-campus housing, your school will usually subsidize your rent up to the amount of housing costs you would have to pay if you lived on-campus. Your remaining student loans can be used to pay your bills.
Institutional Fees
If your school has mandatory health insurance, parking fees, or other fees, you can spend a portion of your student loans to cover these costs.
School-Related Living Expenses
Student loans can cover personal expenses that are necessary for your educational career. This includes groceries, new bed sheets, furniture for your apartment or dorm, and other living expenses.
Books and Supplies
Your student loans can cover anything from textbooks, notebooks, to a new book bag.
Transportation Costs
Whether you commute or drive to school, you can use a portion of your student loans to cover transportation costs like gas, bus fares, and other expenses.
Child Care Expenses
If you are supporting yourself in addition to a dependent, you can use your student loans to cover child care expenses, like daycare, baby food, and other child-specific necessities.
Study Abroad Expenses
If you decide to study abroad, you can use a portion of your student loans to cover any related expenses. Note that the study abroad must be either approved by or offered by your school to be a qualifying expense.
What Doesn’t Count as Living Expenses for Student Loans?
Any personal costs that are not absolutely necessary as a student do not count as living expenses. The following table outlines what you can’t spend your student loans on.
Expense
Entertainment
Movie tickets, ice skating tickets, and other forms of entertainment do not count as a living expense.
Clothes
Unfortunately, buying a new wardrobe does not count as a living expense that can be covered by your student loans.
Vacation/Travel
While a spring break trip to Bali would be nice, you can’t use student loans to cover it. Personal vacations and travel do not count as a valid living expense to use your student loans on. However, your student loans can be used for study abroad programs that are approved by or administered by your school.
Down Payments
You cannot use your student loans as a down payment to buy a new car, house, or equivalent.
Debt
While it might be tempting to knock out some credit card debt with your student loans, your personal expenses do not count as a living expense. However, if you paid for academic or necessary living expenses with your credit card, an exception can be made.
Is It a Good Idea to Use Student Loans for Living Expenses?
Generally, it is okay to use student loans for living expenses. However, you should consider the cost of doing so before making the decision.
Likewise, you’ll want to make sure essential academic-related expenses are covered before covering potentially non-essential living expenses with loans.
Leftover amounts from your student loans should be saved for future, unforeseen academic expenses like books for next semester or sudden charges to your bursar account.
You can consider other avenues for paying for your personal needs, such as picking up a new side hustle, tapping into your savings, or asking your parents for an allowance.
What Happens If You Use Student Loans for Something You Shouldn’t?
While no one is actively tracking what you spend your student loans on, you can face serious consequences if you’re caught for student loan misuse.
Using your loan funds improperly is essentially breaking a contract, as you agreed to use your loans for academic expenses only in your promissory note.
If you are caught for loan misuse, you may be reported to your school’s financial aid office and the federal Department of Education and have your loans taken away.
Best Student Loan Options to Cover Living Expenses
Here are some of Sparrow’s top picks for student loans that can cover living expenses.
SoFi: Best for borrowers with a strong credit score or a creditworthy cosigner.
Closing Thoughts From the Nest
While student loans can be used for living expenses, be careful what else you use them for. While it may be tempting to use the funds to treat yourself to a fancy dinner or splurge on a new wardrobe for the semester, it’s important to use your student loans wisely. After all, student loans are borrowed money that you will have to eventually pay back in the future.
Consider using the leftover amount from your loans to make your first loan payment, or saving it for an academic rainy-day fund.
If you need to take out student loans to pay for educational costs, you’re not alone. With rising college prices, it’s no surprise that one in seven Americans currently hold student loan debt.
If you’re a first-time borrower, you may be wondering, “How long does it take to get a student loan after submitting an application?”
While the process of loan disbursement differs between private and federal loans, it’s useful to know the general timeline of what you should expect.
How Long Does it Take to Get a Private Student Loan?
Generally, it takes around two to three weeks for funds to be disbursed after you submit your application. In the worst-case scenario, however, it may take up to two to three months if there are any delays.
It’s important to note that turnaround times for private loans vary by lender. You’ll want to contact your lender directly for a definitive answer.
How Long Does it Take to Get a Federal Student Loan?
The FAFSA is an application that gauges how much federal aid you qualify for by asking you to fill in information about your family’s financial history. The application opens every year on October 1st and closes on June 30th.
After your FAFSA is processed, your school will use the information to create a financial aid package for you. You should receive your package, which includes any federal loans you qualify for, around 3 weeks after submitting the FAFSA. If you choose to accept your aid amount, the funds will be disbursed accordingly.
If there are leftover funds after your loans are used to pay off tuition, your college will most likely refund you the remaining balance after a few weeks. Note that some schools have a 30-day delay for first-time borrowers.
How to Get Student Loans Faster
If you want to speed up the process of receiving your loan money, try out these quick tips.
Use Sparrow
If you want to check what private loans you qualify for without having to send out multiple applications, consider using Sparrow. If you submit a free application with us, you can see all the private loans you prequalify for across 15+ different lenders.
In addition to comparing your options across projected totals and interest rates, you can see how different cosigners impact your loan terms. When using Sparrow, your credit score will not be impacted and you do not have to pay any fees.
Make Sure Your Application is Completely Filled Out
Before hitting submit on your loan applications, be sure to go back and triple-check that the application is completely filled out with accurate, up-to-date information. These couple of minutes will save you more time in the long run.
With missing information, the lender will be unable to process your application and will have to contact you for any missing information. This can delay the process significantly.
Be Responsive to Emails
Keep an eye on your emails after you submit your loan applications. If the lender(s) contacts you, you’ll want to respond as quickly as possible. After all, the quicker they have all the information they need, the quicker your loan will be processed.
However, it is important to be alert about potential student loan scams. Your lender will never ask you to send any sensitive information over email or charge you an upfront fee. If you are contacted by a student loan scam, contact the actual lender immediately to report the incident.
How to Check the Status of Your Loan Application
For Federal Loans: Log into the account you created to submit your FAFSA to check the status of your federal loans.
For Private Loans: Contact the lender directly to check the status of your application. Depending on the lender, you will be able to check the status of your private loans online, by speaking with a worker on the phone, or via online chat.
Closing Thoughts From the Nest
The answer to the question, “How long does it take to get a student loan?,” varies between loan types and loan servicers. However, in general, expect at least 2-3 weeks minimum for your loans to be processed. If you don’t receive your loans for longer than expected, be sure to contact your loan servicer and/or your school’s student aid office.
Now that your student was accepted into their dream school, it’s time to figure out how to pay for their education (as if getting into college wasn’t difficult enough, eh?). From parent loans to student loans, you have a lot of options. Therefore, finding the most suitable way to afford educational costs can be difficult to navigate. Keep reading to learn more about the best parent student loans of 2024.
Below is a list of some of the best parent student loan options. Rather than searching for lenders one-by-one, we recommend starting the process with an automated parent student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Student loans are borrowed money that can be used to pay for educational expenses like tuition, room and board, school supplies, and more. Students can only qualify for these loans if they are enrolled at an accredited institution at least half-time.
Student loans almost always accrue interest. Interest is a small percentage of the loan that is added on top of the total loan amount. Therefore, how much you originally borrow is not the amount you will pay back. Accordingly, it is essential that you choose your loans carefully and compare total cost projections.
Types of Student Loans
There are two main types of student loans you can borrow: federal student loans and private student loans.
The main difference between federal and private student loans is who offers them. The federal government offers federal student loans. In contrast, private student loans are offered by credit unions, banks, and other private institutions.
The following chart details the nuances of federal student loans and private student loans.
Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds.
No financial need is required; anyone can apply.
Cosigner Needed?
No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans.
In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all.
Interest Rates
Interest rates tend to be lower than that of private student loans and are always fixed, meaning they do not change.
Interest rates tend to be higher for students because they lack a strong credit history. However, rates may vary with a cosigner.
Interest rates can be fixed (meaning they do not change) or variable (meaning they change based on the economic market).
Borrower Protection Plans
The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans.
Depends on the lender, but selections are often limited.
Credit Score Requirements
Typically, federal loans do not look at credit scores, except the Direct PLUS Loans.
Most private lenders will be looking for students and cosigners with strong credit histories and scores.
Borrowing Limits
For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year.
For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.
For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.
Federal student loans do not have to be paid if you are a current student who is enrolled at least half-time.
Direct Subsidized, Direct Unsubsidized, and the Federal Family Education Loan have six-month grace periods before you start making regular loan payments.
Some private loan lenders provide a six-month grace period, while others will require immediate repayment upon graduating, leaving school, or dropping below half-time enrollment.
Repayment Plans
The federal government offers eight repayment options: • Standard Repayment Plan • Graduated Repayment Plan • Extended Repayment Plan • Pay As You Earn Repayment Plan (PAYE) • Revised Pay As You Earn Repayment Plan (REPAYE) • Income-Based Repayment Plan (IBR) • Income-Sensitive Repayment Plan (ISR) • Income-Contingent Repayment Plan (ICRP)
Private student loans tend to have fewer repayment options in comparison to federal student loans.
When Should You Consider Student Loans?
Before pursuing student loan options, exhaust all other financial aid options. Specifically, this includes college savings accounts, scholarships, grants, and work-study. After all, borrowing money is far more expensive than spending it.
Consider the following options to finance educational costs before resorting to student loans:
College Savings Account
If you have a 529 Plan, a mutual fund, or a Roth IRA that you specifically created to finance your child’s educational costs, tap into them. Be sure to read the fine print so you are meeting withdrawal requirements.
Scholarships
Scholarships are a form of gift aid that is awarded based on academic merit, financial need, racial/ethnic group, specific affiliations, or outstanding achievements.
If your child has received any scholarships, use that money to cover a portion of their college tuition. If not, encourage your child to continuously apply for scholarships. They are offered year-round and can amount to a hefty total.
Grants
Grants are another form of gift aid that do not need to be paid back. They are offered by federal, state, public, and private entities.
Unlike scholarships, however, grants are awarded solely based on financial need. Your child should apply to any and all grants they qualify for.
Work-Study
Work-study is a federal program that employs students with an on-campus job. Specifically, students can work for an allocated amount of hours and use their paychecks at their own discretion. Generally, only students with demonstrated financial need can qualify for federal work-study.
If there is still a lot of money left to pay after you’ve exhausted the above options, consider a student loan.
A Parent’s Role in the Student Loan Process
As first-time navigators in the student loan process, it may be difficult to draw the line in regards to how involved you or your student should be.
Here are two ways parents can aid in the student loan process:
Parents can help guide their children through the student loan process by explaining how it works. Student loans can be a great opportunity to involve your student in the family’s finances and teach financial literacy. Working with your child to find student loans and discuss long-term goals will emphasize the responsibility of student loan debt and help your child in the long run.
You can be a cosigner for your child to help them qualify for private loans they may not otherwise qualify for. Unlike most federal loans, which do not require cosigners, students are generally unable to qualify for competitive private loan terms without a cosigner. If you have a strong credit history and are willing to put your name on a loan with your student, consider cosigning. It is a great way to strengthen the chances of your child receiving a more competitive rate.
Parent Loans vs. Student Loans: What Should You Do?
Between parent loans and student loans, they both have their individual pros and cons. Consider your family’s financial needs as you choose between them.
Federal Parent PLUS Loan
The Parent PLUS loan is a parent loan offered by the federal government. This is the only federal loan option for parents.
To qualify for the Parent PLUS loan, you must:
Be the biological or adoptive parent of a dependent undergraduate student (step-parents may qualify in certain cases)
Not have an adverse credit history
Meet general eligibility requirements for financial aid
If you borrow a Parent PLUS loan on or after July 1st, 2023, and before July 1st, 2024, the fixed interest rate is 8.05%, which may be relatively high for someone with a strong credit score. You may want to consider your private parent loan options because they may offer lower, more competitive interest rates.
However, the main benefit of Parent PLUS loans is the potential for loan forgiveness. Between federal parent loans and private loans, determine which option is most viable for your family by factoring in loan forgiveness and borrowing cost projections.
Pros and Cons of a Federal Parent PLUS Loan
Pros
Cons
You may have the option for federal loan forgiveness.
Federal loans offer extensive borrower protection plans.
Federal loans offer flexible repayment options.
All federal loans have a fixed interest rate, so you’ll never have to worry about your rate increasing.
Parent PLUS loans have higher interest rates relative to some private parent loan options.
Parent PLUS loans have origination fees. While an excellent credit score is not required, you must pass a credit check.
Repayment begins immediately after the loan is disbursed.
Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc.
With a private parent loan, you borrow on behalf of your child to pay for their education. Even though the loan is for your student, you have the legal responsibility to pay back the loan because it was originated in your name.
Countless private parent loans are offered by different entities, meaning that each loan has its own repayment terms and interest rates. As you look into your private parent loan options, make sure to compare them side by side and read the fine print so you know exactly what you are getting out of each loan.
Pros and Cons of a Private Parent Loan
Pros
Cons
You can qualify for competitive interest rates if you have good or excellent credit.
Given the amount of private lenders in the market, you will have many loan options to consider.
You can borrow a private parent loan regardless of your relationship with the student.
There are low or no origination fees.
Private parent loans are not eligible for loan forgiveness.
There are limited repayment options and borrower protections, in comparison to federal loans.
Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc. Interest rates may be higher for parents with low or bad credit.
Private Student Loan
Like private parent loans, private student loans are offered by private entities.
However, with a student loan, your child borrows the loan. While you can help your child with their loan payments, they have the legal responsibility to pay back the loan in full. If you cosign the student loan, you and your child are both legally responsible for paying back the loan.
Oftentimes, students are unable to qualify for a private student loan or receive competitive terms without a cosigner. This is because they have weak, or nonexistent, credit histories. As a parent, you can offer to cosign the loan so they qualify for more competitive loan terms.
Pros and Cons of a Private Student Loan
Pros
Cons
Your student can build up a strong credit history.
Borrowing limits usually meet, or are higher than, the tuition costs.
There is no financial need requirement.
The loan is in the student’s name if you do not cosign for it.
Private student loans do not qualify for loan forgiveness.
Students may require a cosigner to qualify.
Private student loans without a cosigner may have higher interest rates than federal student loans.
If you cosign the loan, your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc.
Which Loan Option is Best for Parents?
The best loan option is the one that works best with your family’s needs.
As you are exploring federal and private parent/student loan options, consider your financial standing. Is your family more suited to pay for a private loan with a low interest rate, or would your family benefit more from more flexible repayment options?
Do you want your child to borrow a student loan so they have skin in the game, or would you rather borrow a parent loan because you qualify for a more competitive interest rate and loan terms?
These are all questions you should consider as you compare your options. Remember, there is no one “right” answer. The only right choice is the one you know works best for your family.
Closing Thoughts From the Nest
As you and your student continue to navigate through the student loan process, remember to take a breath and relax. Navigating this process can feel overwhelming, but we’re here to help.
When comparing loan options, consider using Sparrow’s free search tool. If you submit a free application with us today, you can see all the private loans you qualify for across 15+ lenders. We’ll even help you view the long-term loan projections based on different repayment plans and compare loan terms with different cosigners.
According to the Education Data Initiative, around 15% of student loans are in default at any given time.
If you are in student loan default, it’s understandable to feel overwhelmed and discouraged. However, don’t lose hope. There are many ways to financially recover from it.
A student loan default happens when you fail to repay a loan according to the terms outlined in your loan contract (also known as a promissory note).
What Happens Before Default?
Before a federal student loan default, your loan enters into a stage called delinquency. You enter into loan delinquency when you miss one federal student loan payment.
While your federal student loan is delinquent, you still have the opportunity to:
Switch repayment plans to receive a lower monthly payment
Contact your loan servicer to discuss your next steps as soon as you enter federal loan delinquency. It is crucial to take advantage of the federal borrower protections you have while you are delinquent so you will not default on your loan.
On the other hand, private student loans do not enter delinquency after a missed payment. They simply default after you miss the number of payments outlined in your promissory note. Contact your loan servicer to discuss what options you have after missing a payment. Depending on your loan, you may have to enter loan deferment/forbearance, or lower your monthly payment temporarily.
When Does a Student Loan Enter Default?
Federal and private student loans enter default at different points.
Federal student loans enter default if payment has not been made for 270 days, or around around nine months of missed payments. Defaulting on a federal student loan makes you ineligible for forbearance and deferment, repayment plans, and applying for any other federal student loans.
Private student loans usually enter default after you miss three monthly payments, or if payment has not been made for 90 days. They can also enter default if you declare bankruptcy, default on another loan, or pass away. However, not all loans default after three missed payments.
Always read the fine print on your promissory note to be aware of the specific default timeline for your loan.
How to Know if Your Student Loans are in Default
To verify whether your student loans are in default or not, you have the following options:
Contact your loan servicer. This is the best way to determine whether your loans are in default, as your servicer will be able to provide you with up-to-date information.
For federal student loans: Log into your Federal Student Aid account and check whether or not your loans have entered into default. You may be able to find similar information by logging into your private student loan account as well.
Check your credit report. Your credit report will list all federal and private student loan defaults. However, this may not be the most accurate way to check because credit reports are not constantly being updated.
What Happens if You Default on a Student Loan?
Student loan default can impact you in the following ways:
Your credit score is damaged.
Entering student loan default and missing loan payments will be reflected on your credit history for the next seven years. Because your credit score will be significantly impacted, your chances of qualifying for new lines of credit may be extremely difficult (and in worst cases, impossible).
You’ll owe more money.
Despite being in loan default, late fees and interest will continue to be applied to your debt. Debt collection agencies may also charge collection fees, adding to the amount of money you owe. Try to get your loan out of default as quickly as possible to avoid incurring additional costs.
You may be contacted by debt collectors.
A collection agency is a company that loan servicers use to recover loans in default.
If you default on a federal loan and make no actions for payment arrangements, loan servicers can place your loan with a collection agency. Defaulted private loans are considered “uncollectible,” or “charged-off,” and can be sold to a collection agency.
Once your defaulted loan is in the hands of a collection agency, debt collectors can contact you to recover your delinquent funds. Oftentimes, debt collectors will use aggression or scare tactics to coerce you into paying off your debt.
That said, debt collectors are legally obligated to follow the Fair Debt Collection Practices Act, which provides borrowers certain rights. If any of your rights are violated, submit a complaint to the Consumer Finance Protection Bureau.
The federal government may withhold your wages, tax refunds, and/or federal benefits.
To collect on federal student loans, your loan servicer has the legal discretion to withhold your wages, tax refunds, and government payments. In addition to garnishment, you will not be eligible for any federal financial aid or federal borrower benefits.
Your loan servicer may sue you.
Unlike federal student loans, private student loan servicers cannot garnish your wages or tax refunds. Instead, however, they have the legal discretion to take you to court. If you are sued by your loan servicer, the court can rule in their favor and require you to give up your bank accounts, paychecks, or any capital to pay off your debts.
Your professional license can be suspended.
License suspension laws vary from state to state, but bear in mind that any licenses you have (ex. professional license, driver’s license, etc.) can be suspended if you default on your student loans. While this may be an extreme case, it is still possible.
How to Recover from a Student Loan Default
If you have defaulted on a student loan, do not feel discouraged. You still have many opportunities to recover from a student loan default.
How to Recover from Federal Student LoanDefault
If you want to recover from a federal student loan default, consider the following options.
Rehabilitation
Usually, student loan rehabilitation is the best way to recover from federal student loan default because it removes the default from your credit report (though late repayments will remain).
Contact your loan servicer to inquire about loan rehabilitation.
Make nine consecutive monthly payments that are 15% of your discretionary income. You may request a lower amount if need be.
Note, however, that loan rehabilitation is a one-time opportunity.
Consolidation
Student loan consolidation is when you merge your defaulted loan(s) and current loan(s) into oneDirect Consolidation Loan.
To consolidate your defaulted federal loans, you need to:
Agree to repay the new Direct Consolidation Loan under an income-driven repayment plan.
Make three consecutive, on-time, full monthly payments on the defaulted loan.
Enroll in Fresh Start.
What is Fresh Start?
Fresh Start is a new federal program that aims to help defaulted borrowers. The program will begin in December 2023, a year after the COVID-19 payment pause ends.
Through Fresh Start, borrowers will temporarily recover student aid benefits and have the opportunity to get out of loan default.
Federal Student Aid (FSA) will reach out to you in the coming months if you are eligible to participate in Fresh Start. Therefore, you’ll want to make sure your contact information is up-to-date with your loan servicer.
Which Is Better for a Federal Student Loan Default: Loan Rehabilitation or Loan Consolidation?
Between federal loan rehabilitation and loan consolidation, there is no “right” answer. Instead, you should examine which option best meets your financial needs.
That said, there are a few things you should consider as you make your decision:
Loan rehabilitation is a one-time opportunity. If you fail to rehabilitate your loan(s) the first time around, you will not be able to do it again.
Loan rehabilitation requires nine monthly payments, while loan consolidation only requires three monthly payments to qualify.
Loan rehabilitation removes the loan default from your credit history, though any reported missed payments will remain. Loan consolidation does not remove your default.
The following chart details the benefits you gain from loan rehabilitation and loan consolidation.
Benefits
Loan Rehabilitation
Loan Consolidation
Loan Deferment
Yes
Yes
Loan Forbearance
Yes
Yes
Eligibility for Federal Financial Aid
Yes
Yes
Repayment Plans
Yes
Yes
Loan Forgiveness
Yes
Yes
Removal of Default from Credit History
Yes
No
How to Recover From Private Student LoanDefault
Unfortunately, private student loans don’t offer the same recovery options as federal student loans. You will need to contact your lender to discuss options for getting out of loan default. You may be able to negotiate a resolution or work out a payment plan that works for your financial needs.
If you need additional assistance, consider contacting a student loan lawyer.
How to Fix Your Credit After Defaulting
Take the following steps to fix your credit after defaulting on student loans:
Get out of default.
The first thing you should do to repair your credit after a default is ensure that you are completely out of default. While getting out of default won’t instantly fix your credit score, it’s the first step in getting it back up.
Pay off your debts.
In addition to paying off your defaulted loan, you will want to stay on top of paying off any other debts you may have (credit card debt, home mortgage, etc.) Having less debt will lower your debt-to-income ratio, which in turn will help raise your credit score.
Do not open new lines of credit.
While you might consider borrowing a personal loan to pay off your student loans, experts advise against this. Borrowing more money will only put you in further debt. Instead, use your current resources to manage your debt balances.
Closing Thoughts From the Nest
While defaulting on a student loan may feel like the end of the world, you can still recover from it. The best thing to do is to attempt to get out of it. Contact your lender or loan servicer as soon as possible to set up payment arrangements that work for you. In addition to that, remember your borrower rights if you are contacted by debt collectors.
Borrowing a student loan is a big decision. Figuring out how much to borrow, where to borrow from, and how to navigate getting the money where it needs to go can be confusing.
Before anything else, you should consider what you intend to use the loan money for. While student loans need to be used for academic expenses, there are a variety of items that fall under that umbrella.
If you’ve ever wondered, “What can student loans be used for?,” you’re in the right place. Keep reading to learn about the do’s and don’ts for student loan usage.
What Can Student Loans Be Used For?
Student loans can only be used for academic expenses. Here are some of the common expense categories that qualify as an academic expense.
Expense
Tuition and Fees + Room and Board
Your institution will usually take a portion of your student loans to cover costs such as tuition and fees, room and board, and your meal plan. You will not have to pay the university directly.
Institutional Fees
If your school has mandatory health insurance, parking fees, or other institutional requirements, you can spend a portion of your student loans to cover these costs.
School-related Living Expenses
Student loans can be allotted to cover personal expenses that are necessary for your educational career (ex. a desk lamp to study, new bed sheets, or a microwave).
Books and Supplies
Your student loans can cover anything from textbooks, to notebooks, to multicolor highlighters, to a new bookbag.
Transportation Costs
Whether you commute or drive to school, you can use a portion of your student loans to cover transportation costs like gas, bus fares, etc.
Child Care Expenses
If you are supporting yourself in addition to a dependent, you can use your student loans to cover child care expenses, whether that be daycare, baby food, or other child-specific necessities.
Study Abroad Expenses
If you decide to study abroad, you can use a portion of your student loans to cover any related expenses. Note that the study abroad must be either approved by or offered by your school to be a qualifying expense.
Generally, federal student loans and private student loans have the same guidelines for usage, but make sure to double-check with your lender before spending any money.
What Student Loans Can’t Be Used For
Your student loans cannot be used to cover any personal expenses like:
Travel: Unless you go on a study abroad/school trip, you cannot use your student loans to fund personal travels.
Entertainment: Dinners with friends, movie tickets, and retail therapy cannot be covered by your student loans.
Personal finances: Down payments for a house, credit card payments, and other personal finances do not qualify as educational expenses.
These expenses must be paid for with your own money.
What Happens If You Use Student Loans for Something Else?
As tempting as it may be, it is extremely ill-advised to use your student loans for anything other than educational expenses for the following reasons:
Using your student loans for other expenses is essentially breaking a legal contract. The promissory note/loan agreement you signed when you took out the loans specifically outlines that you agree to only use your loan for educational expenses. Therefore, breaking this legal agreement you signed under “penalty of perjury” can have serious consequences.
While schools don’t actively look for student loan misuse, if you are caught for this charge, you may be reported to the federal Department of Education and have your student loan money taken away.
Beyond all legal reasons, misusing your student loan money can put you in more debt than you initially started with. Depending on your loan repayment plan, your debt will begin to accrue interest either after you graduate or from the first loan disbursement. If you use your student loans to buy nonessential items, you will end up having to pay more for the accrued interest on your debt.
If you deplete your student loan balance quickly, you may not have enough money to pay for future educational expenses.
What About Student Loan Refunds?
After covering all of your educational costs, including transportation, school supplies, and institutional fees, you may still have some money left.
Experts recommend that you do the following with the remaining student loan refund balance you have:
Return the money if your lender does not charge prepayment penalties. In addition to lowering your balance, returning the extra money will prevent unnecessary interest from accruing. Contact your lender to determine how you can return any excess student loan amounts.
Save the money. You may have future educational expenses you can put the money toward. Put the remaining balance into your savings account for unforeseen circumstances.
Use the money on your initial loan payments. With the extra cash you have, you can lower your debt even before repayment starts. If your repayment starts as soon as the loan is disbursed, you won’t have to pay out of pocket for your initial repayment.
Closing Thoughts From the Nest
Using your student loans responsibly is crucial to be out of debt quicker. Remember to use your student loans for academic purposes only and return or save what remaining balance you may have.
If you’re looking to explore private loan options, consider using Sparrow. Sparrow allows you to visualize the cost of your loans side-by-side so you can compare options and know exactly how much you’ll be paying off in your repayment period.
Americans have borrowed more than $136 billion from private student lenders. Private student loans are a popular option because they can help fill the monetary gaps that federal student loans and financial aid do not.
If you think borrowing private loans is the right option for you, keep reading. We’ll tell you everything that you need to know about how to apply for private student loans.
Make Sure Private Student Loans Are Right for You
Experts recommend that students exhaust federal financial aid options before borrowing private student loans. After all, private student loans do not come with the potential loan forgiveness, strong borrower protection, and varied repayment plans that federal loans offer.
If you haven’t taken advantage of all your federal options, consider exhausting these resources before resorting to private student loans.
However, if you are in the position where you need a private student loan, follow these five steps to apply:
Step 1: Figure Out How Much You Need to Borrow
Unlike federal loans, private loans generally do not have a hard “limit” in regards to how much you can borrow. With some lenders, you can borrow up to $500,000, depending on the degree type. Because of their high borrowing limits, these loans will usually cover your entire cost of attendance.
While you can borrow a significant amount, that doesn’t mean you should. Only borrow what you need, and try to minimize that amount before even considering private student loans.
Remember, the more you borrow, the more debt you will be in. And, given the way private student loans accrue interest, the amount you pay back will likely be much larger than the amount you borrow.
To determine how much you need to borrow in private loans, calculate the sum of the following:
Scholarships
Grants
Any out-of-pocket payments (whether made by you or your parents)
Federal loans
After adding up the total, subtract it from the total cost of attendance. This will give you a sense of how much you will need to borrow in private student loans.
Scholarships
Grants
Out-of-Pocket Payments
Federal Loans
Total
Cost of Attendance
Remaining Amount to Cover in Private Student Loans
$5,000
$3,000
$4,000
$6,500
$18,500
$22,000
$3,500
Step 2: Check Your Eligibility
Private student loans are distributed by private institutions like banks. Because each entity is separate, eligibility requirements for private loans will not be the same across the board.
However, there are general eligibility requirements that all borrowers will have to meet:
Be enrolled in a qualifying program. Private student loans are for students only, meaning you will have to be enrolled in an eligible university, trade school, college, etc.
Be a U.S. Citizen, permanent resident, or an eligible international student. Generally, private student loan lenders require you to have a Social Security Number and an eligible citizenship status. (If you are an international student, don’t worry. There are other options if you don’t have an SSN.)
Step 3: Complete the Sparrow Form
The Sparrow prequalification form allows you to receive personalized private loan offers from 15+ premier student loan lenders. The form takes just a few minutes and will ask you information such as:
Personal Information
Address
Loan Information
Financial Information
School Information
First and last name Email address Phone number Date of birth Citizenship status Social Security Number
Permanent address Mailing address
Amount needed When you need funds disbursed
Income Housing expenses
Name of school Degree(s) Grade level Expected graduation date
Step 4: Compare Loan Options
After submitting the Sparrow form, you’ll be able to see which private student loans you’re prequalified for. Then, it’s time to compare the loan offers side-by-side so you can select the best loan for you.
You’ll be able to compare aspects such as the interest rate, repayment term, and total cost of the loan(s). Make sure to consider the following:
Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is the yearly interest charged on the loan, including any additional fees like origination fees. The larger the annual percentage rate is, the more money you will have to pay. Therefore, it’s best to secure the lowest APR possible.
Interest Rate
An interest rate is the amount you will be charged to borrow the loan (not including any fees), expressed as a percentage of the principal amount you borrow. For example, if you borrow a loan of $20,000 with an interest rate of 12%, the interest that accumulates on the loan will be $2,400. Therefore, you will have to pay a grand total of $22,400. The larger the interest rate is, the more money you will have to pay. Therefore, Like APR, it’s best to secure the lowest interest rate possible.
Fixed vs. Variable Interest Rate
Fixed rates are set and will remain the same for the entirety of the loan. Variable rates, on the other hand, change based on the state of the economy.
Fixed rates tend to ease borrowers’ minds, given that you’ll never be subject to a higher interest rate, regardless of how the market changes. However, fixed rates can be higher than variable rates. While variable rates tend to be lower, they can be volatile depending on the market conditions.
Determine which you are more comfortable with, then opt for that type of interest rate.
Monthly Payment
Depending on the interest rate and repayment period you receive on each loan, your monthly payment may differ significantly. Therefore, compare the monthly payments you will have to make with each respective loan, and determine whether or not the amount will fit in your budget.
Repayment Terms
Repayment terms are basically the “contract” for private loans – it covers the interest rate of the loan, your specific repayment plan, any penalties you may be subject to, deferment and forbearance options, and more. Be sure to thoroughly understand each loan’s repayment terms so you know exactly what you are getting into.
Grace Period
A grace period is a period of time where borrowers do not have to make any student loan payments. Generally, borrowers have a grace period of six months after graduation. Determine if each student loan has a grace period, and gauge how useful it will be for your financial situation.
Cosigner Terms
Some private lenders may require you to have a cosigner to strengthen your credibility as a borrower. Think of it this way: lenders want to be confident you’ll return the money you borrowed safe and sound. So, if you don’t have a history of effectively managing debt (which is common for college-aged borrowers), you may need someone who does to cosign the loan alongside you.
Before accepting a loan offer and adding a cosigner, check if the lender offers the option for cosigner release. Some cosigners prefer to be released from loan after helping the borrower secure it, and without a cosigner release policy, they’ll be stuck with the loan until it’s paid off.
Forbearance
Forbearance is a period of time where you can stop making student loan payments due to financial hardship or other extenuating circumstances. Keep in mind that interest will still accrue during forbearance periods, however, it’s good to have as a back-up option if you need it.
Some private lenders offer forbearance options for borrowers, while others don’t. While you may never need to use it, it could be a safe option to have.
Total Cost
It’s important to calculate the total cost of the loan to see how much you’ll pay over time. This way, you can see how interest, fees, and other costs will affect the loan options, even when borrowing the same amount.
Lender Benefits
Some private lenders offer benefits like referral bonuses, free financial planning, airline miles, and other perks if you borrow with them. While lender benefits shouldn’t be the most important factor, they can be useful to consider when two loan options are virtually the same.
Step 5: Complete the Formal Application with the Lender You Choose
After identifying the private loan that best suits your needs, it’s time to submit a formal application with the lender.
Gather the following materials to make applying for the loan an easier process:
Social Security Number
Permanent address and/or school address
School enrollment information
Employment information
Financial information (monthly mortgage payments, income, auto payments, etc.)
Loan amount you are requesting, as well as information on financial aid
Closing Thoughts From the Nest
Searching for, choosing, and being approved for a private student loan can be a difficult and tedious process. However, Sparrow is here to help. Consider submitting a free application with us today to see which private student loans you qualify for.
Borrowing student loans is a common practice to afford educational expenses. That said, deciding which option is best can be a difficult decision to make. In the debate of student loan vs. parent loan, here’s what you should consider.
What to Consider Before Pursuing Loans
Before considering any loan, maximize all available financial aid. This includes scholarships, grants, and work-study. Both scholarships and grants are free aid, which means you won’t have to pay it back down the line. Work-study, on the other hand, is earned aid, meaning your child will have to work to receive the funds.
Only after exhausting all free and earned aid options should you consider borrowed money. When you do get to the point of considering loans, consider both a student loan and parent loan to determine which is better for you.
Student Loan vs. Parent Loan: What’s the Difference?
The main difference between a student loan and a parent loan is who borrows the loan. A student loan is borrowed by a student, while a parent loan is borrowed by a parent.
While parents can cosign a student loan, the student remains the primary borrower. This distinction determines who is ultimately responsible for the loan, at least on paper. Plus, for whoever’s name is on the loan, their credit score and history will be affected.
With that in mind, there are three main ways you can go about borrowing a loan:
Your student opens their (possibly) first line of credit and begins to build their credit score and history.
Your student could potentially receive unfavorable loan terms because they do not have a strong credit history (or a credit history at all), or they may not qualify for the loan at all.
Your student becomes financially responsible and builds financial skills necessary in the real world.
Your student takes on new outstanding debt, which could impact their credit score and chances of being able to buy a house or open new significant lines of credit in the future.
What is the Best Student Loan Option for my Child?
If your child decides to borrow a student loan, consider federal loan options first. Experts recommend maximizing federal aid options before pursuing private options due to federal benefits like flexible repayment options, potential loan forgiveness, and strong borrower protections.
Additionally, federal student loans tend to have lower interest rates than private student loans and don’t require credit checks for students. This often makes federal student loans more affordable and accessible than private student loans.
While private loans are a good option, federal options should be pursued first.
(Option Two) Student Borrows the Loan and You Cosign
Pros
Cons
Your student receives better loan terms because you, a creditworthy borrower, have cosigned the loan.
Cosigning a loan can increase your debt-to-income ratio, reducing your chances of opening new lines of credit.
Your student begins to build their credit score and history.
Any late or missed payments will negatively impact your credit history and the student’s credit history.
Your student becomes financially responsible and builds the financial skills necessary in the real world.
Should I Cosign for My Student’s Private Loan?
You should only cosign your child’s private loan if you are in a financial place to do so. As a cosigner, you are equally responsible for the loan. So, in the event that your child fails to make a payment, you’ll need to be able to make it.
Before you cosign your student’s private loan, be sure to read the fine print of the loan terms. Consider the following questions: Are there cosigner release terms? What will happen to the loan if you go bankrupt or default on it?
You receive more favorable loan terms because you have a stronger credit score and history than your student.
Your student is not building their credit score and history from managing outstanding debt.
You protect your student’s credit history from having outstanding amounts of debt, which can help them when applying to open lines of credit in the future.
You are 100% responsible for paying the student loan debt (on paper).
What Parent Loan Options Do I Have?
As a parent borrower, you have two loan options:
Federal Parent PLUS Loan The federal Parent PLUS loan is designed for parent borrowers. While a credit check is required to be eligible, you can add an endorser if necessary.
If you are a creditworthy borrower, you may find that the interest rate for the Parent PLUS loan is higher than what you qualify for with a private lender. In that case, a Parent PLUS loan may not be the better loan option.
Private Loan Private loans are offered by private companies like banks and credit unions. To qualify for a private loan, you will need a relatively strong credit score and history. Depending on your qualifications as a borrower, you may receive competitive loan terms.
Is It Better to Get a Student Loan or a Parent Loan?
Between student loans and parent loans, the option ultimately depends on your family’s financial situation and what works best for you and your student. Therefore, it is important to explore your loan options to find the best one on the market.
The most important thing about this process is making sure that looking for a loan is a collaborative process between you and your child. You will want to reinforce the importance of student borrowing and the responsibility that comes with loans from the onset so that your child learns important financial skills that will last them a lifetime.
Closing Thoughts From the Nest
While comparing a student vs a parent loans may be a tedious process, it is an important decision that will affect either you or your child’s finances for the foreseeable future. Perform due diligence and use the situation as a learning opportunity for your child. If you are looking for private student loans, consider exploring your options with Sparrow. If you submit a free application with Sparrow, you can compare what private loans you qualify for across 15+ different lenders.
Now that you’ve been accepted into college, it’s time to figure out how you are going to pay for your education. As you sift through your financial aid packages, it may be confusing to differentiate between the different types of financial aid you were offered.
In this article, we’ll cover everything you need to know about the different types of financial aid and how you should go about accepting your financial aid package.
The 4 Types of Financial Aid
There are four key types of financial aid: scholarships, grants, work-study, and loans.
Scholarships
Scholarships are a form of financial aid that is awarded based on academic merit or other achievements. They do not need to be paid back (yay!).
Scholarships are a popular form of financial aid. In fact, 58% of families paid for some amount of their college tuition with scholarships in 2020.
Scholarships come in all shapes and sizes. Depending on the organization that is offering the scholarship, scholarships can range from $100 to the entirety of your four-year tuition.
Usually, you have to apply for scholarships by providing general information about yourself, writing an essay to a prompt, and demonstrating why you are the best candidate for the scholarship. However, there are also scholarships that you can apply to with a single click of a button or through other creative means.
Where Do Scholarships Come From?
Scholarships come from a variety of sources, including state governments, private organizations, non-profit organizations, academic institutions, and more.
What Can I Use Scholarships For?
This depends on the type of scholarship you receive. Some scholarships require students to use the money on specific expenses, such as textbooks and school supplies, tuition, or university housing costs. Other scholarships are more flexible and allow the student to use the money on an educational expense they deem fit.
How Do I Find Scholarships?
There are a variety of ways you can find and apply for scholarships. You can:
Reach out to your high school and/or college’s financial aid office and ask for assistance in finding scholarships.
Find organizations that specialize in your academic field of study. For example, if you are on a pre-dental track, find dental organizations and see if they offer any scholarships.
Grants
Like scholarships, grants do not need to be paid back. However, grants are only issued based on financial need, meaning you must meet a specified financial threshold to be an eligible recipient.
Most likely, federal grants, which are offered by the federal government, will be applied to your financial aid package. Non-federal grants are very similar in nature to scholarships, so this article will focus on the different types of federal grants.
Work-study is a federal program that allows undergraduate and graduate students to work on-campus and earn money to pay for their educational expenses. Any money earned from the federal work-study program does not need to be paid back or used towards tuition – the student can use the money how they deem fit.
Who Is Eligible for Work-Study?
To be eligible for work-study, you must meet the following requirements:
You must be enrolled as a full-time student at an accredited university.
There are two main types of loans: federal student loans and private student loans. Because loans are borrowed money, they must be paid back with interest.
Accepting loans is a large responsibility – you’ll want to know exactly what you are getting into before you take on any debt.
Federal Student Loans
Federal loans are a type of loan that is offered by the federal government. Generally, federal student loans are the best option for student borrowers because of their varied repayment plans, strong borrower protection, flexible eligibility requirements, and potential for federal loan forgiveness.
All federal student loans have a fixed interest ratethat is set by Congress, meaning the interest rate you receive when you originate the loan will remain the same throughout the life of the loan.
Offered to undergraduate and graduate students with no financial requirements.
Only offered to undergraduates who demonstrate financial need.
Accrue interest during the entire life of the loan, whether it is during the school year, grace period, or any deferment period.
Do not accrue interest if the student is enrolled at least half-time during the school period, during the grace period (six months after you graduate), and during any period of loan deferment.
Between unsubsidized and subsidized loans, subsidized loans are clearly the winner. However, you cannot pick and choose between these loans – you must meet a financial requirement to be eligible for subsidized loans.
Private Student Loans
Private student loans are offered by private entities like banks, financial institutions, and other private companies. Private student loan lenders are autonomous, meaning they set interest rates, repayment plans, and borrower protections as they please.
If you are a first-time borrower, it may be difficult to receive a private student loan that has a fair interest rate, or even receive a private student loan at all. You will most likely need to add a cosigner that has a strong credit history to your loan to receive better terms.
Generally, experts recommend that you accept federal loans before private loans because federal loans tend to have better interest rates, repayment terms, and borrower protection plans for the borrower.
Accept Financial Aid in This Order
If there is one thing to take away from this article, it is FEB — Free, Earned, Borrowed.
You’ll want to accept financial aid in this order, starting with any free money, then earned money, and then borrowed money. Accepting aid this way will help you minimize the amount of debt you incur.
Free Money: Scholarships and Grants
Scholarships and grants are essentially free money. They do not need to be paid back, so feel free to take as much as you can get. Any federal grants that you are eligible for will show up on your financial aid package, so you can accept them through your account portal.
On the other hand, you will have to apply for a majority of scholarships, so be sure to do that.
Earned Money: Work-Study
Next, you’ll want to accept any work-study that is offered on your financial aid award. While work-study money is earned and is not free, work-study still lowers the amount of money that you will need to borrow.
Borrowed Money
Borrowing money is a large responsibility, given that the amount you owe can spike immensely with interest accrual. You’ll want to accept any borrowed money in the following order so that you can graduate with the least amount of debt.
#1: Federal Subsidized Loans
Federal subsidized loans do not accrue any interest while you are enrolled at least half-time in school, during your grace period, as well as during loan deferment periods. Because interest does not capitalize on these loans, federal subsidized loans will be your cheapest loan option.
#2: Federal Unsubsidized Loans
Federal unsubsidized loans accrue interest for the entire life of the loan. However, because the loans are offered by the federal government, they come with a myriad of repayment options, borrower protection plans, potential loan forgiveness, and deferment plans.
#3: Private Student Loans
Private student loans should be accepted last. While you may be able to receive a more competitive interest rate if borrowing with a cosigner, private student loans have more limited repayment options and are not eligible for loan forgiveness.
Closing Thoughts From the Nest
As you navigate through your financial aid packages, remember to accept your financial aid in the following order: FEB (Free, Earned, Borrowed). It is a helpful guide for accepting financial aid to take on the least amount of debt possible.
If you are still exploring private student loan options, consider using Sparrow. We offer a quick, free application that allows you to see which student loans you qualify for across 15+ private lenders.
So, your kid is going to college? That’s great! Yet, as great as it is, you are a little worried. How are you going to afford the college tuition? Or the living expenses? You want to take out a loan. If you have bad credit, this process can be more difficult. However, there are many student loans for parents with bad credit.
Here is everything you need to know about student loans for parents with bad credit.
Look to Parent PLUS Loans First
The first thing you’ll want to look at is a Parent PLUS Loan. Since it’s a federal student loan, it’ll have greater benefits and be easier to qualify for. Also, the maximum loan amount you can get is the full cost of attendance minus financial aid. Federal loan interest rates also won’t change regardless of your credit score.
However, Parent PLUS Loans do tend to have higher interest rates than even some private loans. So, before you sign off on one, compare the loan with the pre-qualified offers you get through Sparrow. That way, you can figure out which loan option is really best for you.
If you decide to get a Parent PLUS Loan, then your next step is meeting the loan eligibility requirements. To qualify for a Parent PLUS Loan, you have to be a parent (biological or adoptive) of a dependent undergraduate student. The student must also be enrolled at least part-time in college.
Additionally, while there is no credit score requirement, you can’t have any adverse credit history. Adverse credit history includes having:
Delinquent or defaulted accounts
A foreclosure or repossession
Bankruptcy discharge
Wage garnishment
Tax lien
Write-off of federal student debt
If you have any of these on your credit report, you may not qualify for a Parent PLUS Loan on your own. However, you can add an endorser to the application to help you qualify. Endorsers work similarly to cosigners. As long as they don’t have any adverse credit history, they should help you qualify.
If you meet all the requirements, apply for the loan by filling out the application online.
Private Student Loan Options
If you do not qualify for a Parent PLUS Loan, you should look into private parent loans. Keep in mind, though, that these usually have stricter requirements. Qualified borrowers have, at least, a steady income and a good credit score. A good credit score means a score in the mid-600s or higher.
While it’s possible to get a loan with poor credit, you will receive much higher interest rates. If you do have a poor credit history, think about getting a cosigner. This will bring down the loan’s interest rate.
When shopping around for private loans, also make sure to prequalify for each lender. Pre-qualification is a way to see what rates lenders can offer you without doing a hard credit check. They do a soft credit check instead. Once you have done that, compare the rates from each lender to help decide which is right for you. You can do this on the Sparrow website.
The Arkansas Student Loan Authority (ASLA) is a state lender that offers educational funding for Arkansas residents. Through their Family Loan, they offer different repayment options, an autopay discount, and strong customer service.
Earnest is a well-known private student loan lender. They offer flexible repayment options and longer grace periods. Residents in Nevada do not qualify for a loan with Earnest.
Fixed APR range: rates start at 4.42%.* Variable APR range: rates start at 5.62%.* Minimum credit score: 650
INvestED is a student loan lender that offers educational funding for Indiana residents and students. They offer affordable financing options and have a variety of repayment plans.
Fixed interest rates range from 4.61% to 7.62%. Variable interest rates range from 7.88% to 12.34%. The minimum credit criteria is 670. See disclosures.
SoFi is a well-known private lender. If your child is enrolled less than half-time, however, you will not qualify.
Fixed interest rates range from 6.50% to 14.83%. Variable interest rates range from 6.32% to 14.83%. The minimum credit criteria is the mid-600s. See disclosures.
Other College Financing Options
If you are unable to qualify for a parent loan due to your credit score, there are other options to consider:
Consider Scholarships and Grants
One of the first options your child should look into before loans are scholarships and grants. These are great because they provide money to cover educational expenses and don’t have to be paid back. You can find these opportunities through the FAFSA, your child’s college, and looking on scholarship sites.
Another option you have is to cosign your child’s loan. If you are unable to take out a private loan yourself, you can have your child take out a loan with you as a cosigner. That way, you are still helping and contributing to their college costs, but you don’t have to take out a loan on your own.
Have Your Child Borrow the Loan By Themself
In cases where you can’t cosign a loan with them, talk to your child about borrowing the loan on their own. Let them know you’ll be there to guide them throughout this process so they still feel your support.
Work on Raising Your Credit Score
Of course, in the long run, raising your credit score is a move that will benefit you immensely. Start by checking your credit report to see what’s bringing it down and work on those weak points. You’ll also want to make payments on time, pay off old debt, and lower the amount of credit that you use. It takes time but, eventually, you’ll start to see a difference.
You have many options to help you cover your child’s education costs, even if you have bad credit. There are many great student loans for parents with bad credit.
Sparrow can help you find them. By filling out the Sparrow application, you’ll be matched to what parent loans you qualify for from our partnering lenders. You can even compare each student loan option side-by-side so you’re confident in your decision. Our goal is to help you find the best loan for you and your child to help maximize their college experience.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Interest rates shown in this article may include a 0.25% auto-debt interest rate reduction.
On August 24th, 2022, President Biden released his comprehensive, wide-scale plan for student loan forgiveness. This student loan relief package has nearly $4 billion dollars in aid and is the largest student loan forgiveness package to date.
The three-part package was designed to lift the financial burden of student loan debt for millions of Americans, primarily middle-class federal student loan borrowers.
From new changes within the Public Service Loan Forgiveness program, to loan payment refunds, to debt cancellation, there’s quite a lot of information you don’t want to miss.
Keep reading for a complete guide to Biden’s student loan relief.
To have a smooth transition back to loan repayment, the pause on federal student loan repayments has been extended to December 31st, 2022.
Key Takeaways:
Only federal borrowers who have an income less than $125,000 (or a joint income of less than $250,000) are eligible for student loan forgiveness.
Pell Grant recipients are eligible for $20,000 in loan forgiveness.
Non-Pell Grant recipients are eligible for $10,000 in loan forgiveness.
The pause on federal student loan repayment was extended to December 31st, 2022.
Revamping the Public Service Loan Forgiveness Program and Halving Monthly Undergraduate Loan Payments
Under Biden’s three-part student loan relief package, the administration is cutting some monthly undergraduate loan payments in half and also improving the Public Service Loan Forgiveness (PSLF) program.
Temporary Changes to Public Service Loan Forgiveness (PSLF)
If you are a federal borrower who has worked at a nonprofit, in the military, or at a federal, state, tribal, or local government, you may be eligible to receive loan forgiveness.
While Biden’s new plans for the Public Service Loan Forgiveness program are unclear as of now, there are previous, temporary changes that should be accounted for.
Time-limited changes have been made to the Public Service Loan Forgiveness (PSLF) program that will only apply until October 31st, 2022. These changes have temporarily made it easier for borrowers who have worked as public servants to receive loan forgiveness through PSLF.
Previous Rules
New Rules
Only federal Direct Loans qualify for PSLF.
Direct, FFEL, and Perkins Loans qualify for loan forgiveness. Federal loans that are not Direct loans must be consolidated to be eligible.
You must be under a 10-year Standard Plan or an income-driven repayment plan to qualify for PSLF.
Repayment under any repayment plan counts for loan forgiveness.
You must have made on-time payments to qualify for PSLF.
Late and partial payments can qualify for PSLF. Payments before consolidation also qualify.
You must have made 10-years worth of monthly payments to receive loan forgiveness.
You can still apply to PSLF even if you have not made 10-years worth of payments (or 120 monthly payments). You must have worked for a qualifying employer during your repayment period to earn credit for payments made. You will not receive loan forgiveness until you make 120 payments.
You must have worked for a qualifying employer at the time of your PSLF application.
You can still receive forgiveness if you were not employed by a qualifying employer at the time of your PSLF application.
The period of service that you received Teacher Loan Forgiveness for also counts for PSLF.
Despite the temporary changes to the PSLF program, the following still remain the same:
You must have made 10-years worth of monthly payments to qualify for loan forgiveness. While you can still apply to PSLF without having made 10-years worth of monthly payments, you will not receive credit until you meet the quota.
Periods of loan default and in-school deferment do not qualify for PSLF.
You must have been employed by a qualifying employer to be eligible for PSLF.
Note: Because these changes are only temporary, you must submit an application before October 31st to have your student loan canceled under these interim qualifications. While President Biden has proposed additional reform of this program, it is unclear what exactly will be done.
Robert is a full-time employee at an NGO that specializes in providing educational supplies to under-served elementary schools. He’s been working at this NGO for about five years. Robert had to take out federal Direct Loans during his undergraduate study and has been making payments throughout his career. Not all of his payments were on time or in full.
Wanda is an orthopedic surgeon who has been working at the North Carolina Orthopedic Clinic for seven years. She took out federal Perkins loans to pay for her undergraduate education and federal Direct loans to pay for medical school. Wanda has been making payments straight out of medical school and the entirety of her career, which has been roughly ten years of payments.
Should They Apply for PSLF?
Yes, Robert can and should apply for the Public Service Loan Forgiveness program. Under the time-limited changes to the program, Robert qualifies to receive forgiveness for any past payments, even if they were not on time or in full. Because Robert has been making payments for five years, he will need to make five years worth of monthly payments before he can receive loan cancellation.
Yes, Wanda can and should apply for the Public Service Loan Forgiveness program. First, she will have to consolidate her Perkins loans and Direct loans through the Direct consolidation loan program. Then, Wanda can count her ten years of payments for PSLF and receive loan forgiveness.
Halved Monthly Undergraduate Loan Payments
If you are a low-income federal borrower, you may qualify to have your monthly undergraduate loan payments cut in half.
The U.S. Department of Education is proposing a new income-driven repayment plan that caps monthly undergraduate loan payments at 5% of the borrower’s discretionary income. Your discretionary income is your income after any tax deductions or other mandatory charges. So, if you’re a low-income borrower whose discretionary income is $2,500, your monthly loan payment cannot exceed $125 (125 is 5% of $2,500).
Under this new income-driven repayment plan, undergraduate student loan payments will be lowered by more than $1,000 for current low-income borrowers and future borrowers.
Key Takeaways:
The U.S. Department of Education is creating a new, income-driven repayment plan that caps monthly undergraduate loan payments at 5% of the borrower’s discretionary income.
There are new, temporary changes to the Public Service Loan Forgiveness (PSLF) program that make it easier for public servants to receive loan forgiveness through PSLF.
Reducing the Cost of College and Keeping Institutions Accountable
President Biden has signed the American Rescue Plan, a legislation that increases the maximum Pell Grant and provides almost $40 billion to colleges and universities for emergency financial aid.
Furthermore, to keep college costs low and hold institutions accountable for hiking up tuition, the Department of Education has reinstated the enforcement unit in the Federal Student Aid office to do the following:
Publish an annual watch list of educational institutions with the worst debt levels
Propose a new rule that holds programs accountable for leaving their graduates with unpayable debt
Request institutional improvement plans from institutions with concerning student debt outcomes
Key Takeaways:
Biden has signed for the largest increase of Pell Grants in over a decade and for nearly $40 billion in financial aid for colleges and universities.
The U.S. Department of Education has reinstated their enforcement unit to hold colleges accountable for hiking up college costs.
Who is Eligible for Biden’s Student Loan Relief?
Federal borrowers whose individual income is less than $125,000 (for married couples, joint income should be less than $250,000) are eligible for Biden’s student loan cancellation.
→ For Pell Grant recipients: up to $20,000 in debt cancellation.
→ For non-Pell Grant recipients: up to $10,000 in debt cancellation.
Federal borrowers who work/worked as public servants and qualify for the Public Service Loan Forgiveness (PSLF) program are eligible for student loan relief.
How to Apply for Biden’s Student Loan Relief
For federal borrowers who are currently on an income-driven repayment plan, loan forgiveness may happen automatically. This is because the Department of Education already has your income on file.
Others will need to complete an application to certify their income. The U.S. Department of Education has not yet released an application for President Biden’s loan forgiveness program. However, Bharat Ramamurti, the deputy director of the White House National Economic Council, stated that the application will be released in early October. Once the application is made available to the public, it should be submitted by November 15th so that your debt is forgiven before the payment pause ends.
How to Request a Refund of Payments Made During the COVID-19 Pandemic Forbearance
Since March 2020, borrowers have not been required to make federal student loan payments, nor have their loans accrued any interest, due to the federal forbearance. During this time, many borrowers took advantage of these benefits, making substantial payments on their loans, some paying off their balances entirely. However, if borrowers knew their debt would be forgiven, many would have refrained from making such payments.
So, the U.S. Department of Education is allowing borrowers to request a refund for any payments made “during the payment pause (beginning March 13, 2020) [by contacting] your loan servicer to request that your payment be refunded.”
For example, let’s say you had $12,000 in federal student debt when the COVID-19 pandemic forbearance began in March 2020. You paid back $6,000 from that period of time up to now, leaving you with $6,000 in debt. If you contact your loan servicer for a refund, you will receive your $6,000 back. In turn, your student debt balance goes back up to $12,000.
→ If you are a Pell Grant recipient who makes less than $125,000 in a year, you are eligible to receive up to $20,000 in loan forgiveness. You apply for loan forgiveness and your $12,000 in student loan debt is wiped out, leaving you with no debt.
→ If you make less than $125,000 in a year but were/are not a Pell Grant recipient, you are eligible to receive up to $10,000 in loan forgiveness. You apply for loan forgiveness and your $12,000 is cleared by $10,000, leaving you with $2,000 in debt.
To receive a refund for any payments made during the forbearance, contact your loan servicer and request a refund.
When Will My Student Debt Be Forgiven?
Borrowers can expect to see their student loan debt forgiven within four to six weeks of submitting their application. For federal borrowers who are already on an income-driven repayment plan, loan forgiveness may happen automatically depending on the timeline of federal loan relief.
Is Biden’s Student Loan Forgiveness Taxable?
While the Biden administration stated that its loan forgiveness program won’t be considered federal taxable income, this provision does not apply at the state level. It is within the jurisdiction of individual states to decide whether loan forgiveness is taxable income.
In fact, the Tax Foundation identified 6 states that are predicted to count loan forgiveness as taxable income. While the list is updating frequently as states enact temporary tax exemptions, the following are currently said to be taxing it:
Arkansas
Indiana
Minnesota
Mississippi
North Carolina
Wisconsin
Closing Thoughts From the Nest
Biden’s student loan relief package is full of new updates for federal borrowers, primarily public service workers and low-income individuals.
Key Takeaways
Federal borrowers who earn less than $125,000 per year are eligible for student loan forgiveness. Individuals who have received Pell Grants can receive up to $20,000, while individuals who did not receive Pell Grants can receive up to $10,000.
The Department of Education is proposing a new income-driven repayment plan for low-income federal borrowers. The new income-driven repayment plan will cap monthly undergraduate loan payments at 5% of the borrower’s discretionary income.
President Biden has signed the American Rescue Plan, a legislation that increases the maximum Pell Grant and provides almost $40 billion to colleges and universities for emergency financial aid.
There are new changes to the Public Service Loan Forgiveness program that make receiving loan forgiveness easier for public servants.
You can receive a refund for any loan payments made from the beginning of forbearance (March 2020) until now by contacting your loan servicer.
Loan forgiveness may be taxable, depending on the state that you live in.
Applications for loan forgiveness will come out in early October for federal borrowers whose income is not on file. It is recommended that applications are submitted before November 15th, 2022.
Starting the conversation about paying for college isn’t always easy, especially if you anticipate being met with one big eye-roll. While tough to navigate, it’s an important discussion to have.
If you’re not quite sure where to start, here’s a quick guide on how to have the student loan conversation with your child.
Start the Conversation Early
It can be challenging for a teenager to conceptualize just how expensive college can be. So, it may take time for them to fully process and warm up to the idea.
If you can, start the conversation about student loans early. When your child begins to mention college is often an indicator that it’s an appropriate time to start the conversation. However, if you feel as though your child is ready earlier, lean on your own instincts. After all, you know your child best.
Make sure to ease into the topic, approaching it with empathy and understanding. While you may have gone through the college process before, it looks quite different today than it did in the past.
Cover the Important Topics
To prevent the conversation from becoming muddled with extraneous topics, create a mental list (or a physical one!) of what you want to cover. Here are a few of the most important points you may want to go over:
The Cost of College
The cost of attendance has grown rapidly, nearly 213 percent since 1988 to be exact. Knowing that wages haven’t grown at the same pace, affording college looks quite different today than it did in the past.
Allow your child to explore real data on the cost of college —CollegeScorecard is a great place to start. Know that it may be shocking to see such large numbers, so be open to answering questions if your child has any.
The Short-Term and Long-Term Implications of The College You Choose
It’s important to acknowledge that it may be challenging for your child to comprehend just how much some institutions cost. However, there are real implications of such, both in the short-term and the long-term, that they should be aware of.
For example, attending a more expensive institution may require your child to work a part-time job while in school or attend school part-time to afford tuition. If your child isn’t willing to do so, it may be better to explore a more affordable option.
While optimism about post-graduate employment is valuable, it’s important to be realistic about it as well. Before exploring college options, encourage your child to research the expected entry-level salary for the field they intend to pursue. While attending their dream school may sound affordable, comparing their future monthly income to their monthly student loan payment may say otherwise. Getting real about what their future income may look like can help your child make more educated decisions about the financial aid options they choose to pursue —and especially the student loans they borrow.
How Much You Can Contribute
If you plan to contribute toward your child’s education, be upfront and honest about how much you’re able to provide and on what timeline. For example, if you anticipate contributing $5,000 out-of-pocket per year, given in two $2,500 chunks, let your child know. This will provide them with a better understanding of how much they’ll need to obtain in scholarships, grants, and student loans.
Financing Options
83.8% of first-year undergraduate students receive some form of financial aid. So, it’s important that your child understands what each type of financial aid means.
Students should always accept aid in the following order: Scholarships and grants (free money) → Work-study (earned money) → Loans (borrowed money)
While some forms of aid, like student loans, can be explored close to the institution’s enrollment deadline, others will need to be pursued proactively. For example, many scholarship deadlines are well before the academic year.
Make sure your child understands the options available, so they can be proactive about submitting any necessary financial aid applications.
How Student Loans Work
A student loan will likely be the first loan your child borrows. It might even be the first line of credit they open. So, it may be challenging to understand how student loans work.
Ensure your child understands the difference between federal and private student loans. Then, break down the process of borrowing a loan and what paying it back may look like. Discuss topics such as:
Why interest rates matter
How interest may accrue while your child is in school
What repayment may look like
How much their monthly payment may be
What different repayment plans are available to them
How long it may take to repay
This is a good time to utilize a student loan calculator to demonstrate how different loan amounts and interest rates will impact how much your child pays for their education over time.
Make it an Ongoing Conversation
The entire college process is overwhelming. Between campus tours, applications, taking the SAT/ACT, and paying for it, there’s a lot for your child to absorb. So, rather than squishing everything into one conversation, make it an ongoing discussion.
There’s a good chance your child will have questions, but they might not come up all at once. Let your child know that you’re there to answer any questions they may have, at any time.
However, know that you don’t have to have all the answers. It’s perfectly okay to say, “You know, I’m not sure what the answer to that question is. Why don’t we look into it together?” Being honest about what you do and don’t understand can create a comfortable environment where your child feels open to learning about the process with you.
Final Thoughts from the Nest
Talking to your child about how to pay for college can be challenging to navigate –especially when it comes to the student loan side of things. However, starting the conversation early and covering a wide range of topics can help make it easier.
When it comes time to begin the student loan process, know that Sparrow has your back. Our one-stop application allows you to compare private student loan offers from 15+ lenders at one time.
If you’ve borrowed a student loan to fund your college education, you may be curious about the impact it could have on your credit score.
Like other installment loans, student loans can both help and hurt your credit. If you’re diligent about making payments on time, it may give your score a boost. If you’re missing payments left and right, however, your score could take a serious hit.
To prevent any unintended credit mishaps, you should understand how your credit score is calculated and how your score can shift when borrowing a student loan.
Here’s what you need to know about how student loans affect your credit score.
How Your Credit Score is Calculated
To understand how student loans affect your credit score, you should know how your credit score is calculated to begin with. While there are a variety of credit scoring models, FICO and VantageScore are the two most commonly used by lenders. Here’s how each are calculated:
FICO Score Calculations
Payment History (35%): Your payment history takes into account whether you’ve paid past credit accounts on time. If your track record is spotted with missed or late payments, your score will suffer in this category.
Amounts Owed (30%): Amounts owed, also commonly referred to as credit utilization, is the amount of debt you owe in comparison to the total line of credit you have. While having a high total line of available credit isn’t a bad thing, using a large portion of it may indicate to lenders that you’re overextending yourself financially.
Length of Credit History (15%): The longer you’ve been able to effectively manage lines of credit, the better. The length of your credit history is evaluated based on how long your credit accounts have been established, taking into account your oldest and most recent account, plus an average age of all of your accounts.
Credit Mix (10%): An ability to effectively manage a diverse set of credit accounts can be an indicator that you’re financially responsible. So, your FICO score will take into account the mix of installment loans (like student loans), credit cards, mortgage loans, and retail accounts you have.
New Credit (10%): Opening multiple credit accounts in a short period of time raises a red flag to creditors and lenders. In their eyes, it could be a sign of an inability to manage your finances properly, or a desperate need to put expenses on a line of credit. Minimizing the number of new credit accounts you open within any given period of time can help boost your score in this category.
VantageScore 4.0 Calculations
Payment History (41%): Like FICO scores, VantageScore 4.0 places high importance on your payment history, or whether you’ve been able to make on-time payments in the past.
Utilization (20%): Utilization represents how much of your overall available credit you are currently using. The lower this ratio, the better.
Age/Mix of Credit (20%): VantageScore’s “Age/Mix of Credit” category is essentially a mix of FICO’s “Length of Credit History” and “Credit Mix” categories. It evaluates how reliable you may be by using the age of your credit accounts and the mix of credit lines you use as determining factors.
New Credit (11%): VantageScore’s “New Credit” category is the same as FICO’s, except it represents a bit more of your overall score.
Balance (6%): Balance represents how much debt you have in total. In the VantageScore 4.0 model, the larger the balance, the more it will hurt your credit score.
Available Credit (2%): Available credit represents the amount of credit you have available on revolving accounts, such as credit cards. The more available credit you have, the higher you’re likely to score in this category.
Note that VantageScore updates its scoring model from time to time. VantageScore 4.0 is the latest version, released in 2017. However, you may find that previous versions, such as VantageScore 3.0, are still used by some creditors and lenders.
FICO Score
VantageScore 4.0
Payment History (35%)
Payment History (41%)
Amounts Owed (30%)
Utilization (20%)
Length of Credit History (15%)
Age/Mix of Credit (20%)
New Credit (10%)
New Credit (11%)
Credit Mix (10%)
Balance (6%)
Available Credit (2%)
How Student Loans Impact Your Credit Score
Student loans can both help and hurt your credit score. Here are a few ways this can happen:
How Student Loans Can Help Your Credit
Consistently Making Payments: Payment history accounts for a large portion of your credit score. So, consistently making on-time student loan payments can help your score quite a bit.
Adding to Your Credit Mix: Adding an installment loan, like a student loan, to your portfolio of credit accounts makes for a more diverse credit mix. While it isn’t essential to have one of each type of credit, it can give your score a small boost when adding a student loan to the mix.
How Student Loans Can Hurt Your Credit
Missing Payments: Again, payment history is the most important factor in determining your credit score. So, if your payment history is chock full of missed or late payments, your score is bound to take a hit.
Defaulting: Defaulting on any loan can have serious consequences, both for your credit score and your financial stability. In fact, with many student loans, defaulting could lead to wage garnishment, getting your debt sent to collections, or withholding future aid until the debt has been settled. Defaulting will take a serious toll on your payment history which, in turn, can drive your score down rapidly.
Does Paying Off Student Loans Help Your Credit Score?
While paying off student loans is certainly an accomplishment, it may not boost your score in the way you think.
In fact, when you make that final payment on your student loans, the account closes, taking the payment history and age of the account with it. If you’ve missed a few loan payments, this could be helpful. However, in most cases, paying off student loans will reduce the length of your credit history. This could cause you to lose a few points in that category.
While this may hurt your credit score temporarily, it will likely rebound soon after (if everything else remains the same, that is).
Final Thoughts from the Nest
Student loans can affect your credit score both positively and negatively. To maintain your score, make loan payments on time. If you’re unable to do so, reach out to your loan servicer immediately to explore options that may help you. You may be eligible to refinance with one of Sparrow’s 15+ lending partners, switch to a better repayment plan (such as an income-driven repayment plan), or apply for a temporary period of deferment.
College is expensive, but that doesn’t mean you should accept every last bit of financial aid. Now I know, that probably sounds counterintuitive. I mean, who wouldn’t use all the offered financial aid?!
However, there are many instances where financial aid can actually be detrimental rather than helpful, so knowing when to decline certain financial aid options is very important. The general rule is to borrow only what you need for direct educational expenses (things like rent, tuition, books, etc.). Avoid wasting financial aid on non-educational items, as that could lead to greater issues in the long run.
To know whether you should accept the aid offered to you, it’s important to understand the different types of financial aid available to you. Here’s what you should know.
Financial aid can be anything from grants, scholarships, work-study jobs, loans, and even aid from local or state sources. Essentially, financial aid is provided to students to help you focus on what’s important —your education. Using financial aid for other expenses can make for a sticky situation.
Do I Have to Accept All of My Financial Aid?
Absolutely not! In fact, many financial aid experts recommend that you only accept what you really need.
While accepting scholarships and grants is often harmless, you should be careful about how much you accept in student loans. While borrowing money is often necessary for many students, borrowing more than you need can wind up costing you a lot more in the long run. This happens as the cost of borrowing money is compounded by the interest rate of the loan.
Estimating your budget and expenses to determine the amount of money you will need to borrow is the best way to only borrow what is needed.
Accept Aid in This Order
As mentioned before, financial aid comes in various forms: grants, scholarships, work-study jobs, and loans. If you want to save money, however, you should accept aid intentionally and in this order:
Because scholarships and grants are practically free money, you should always try to use those first before looking at other options. One thing to note is that many scholarships and grants have conditions you must meet to either be eligible for or to continue receiving the funds over the course of your education. Thus, although there may not be financial terms like a loan, it is imperative that you understand the criteria for this financial aid option.
A work-study program is quite simple. You work for the money, so you don’t pay it back. This means you will have to spend time both working and studying. While it may be a bit more to juggle, there have been studies that show students who have a part-time job and study are better at managing their time.
Federal student loans and even private student loans should come last. With loans, you will have to pay the money back, plus interest. Depending on the type of student loans, you may receive a subsidized loan meaning interest won’t start accumulating until you leave school. So, if you have the option, choose a subsidized loan before an unsubsidized loan.
With the basics of financial aid covered, let’s look at specific instances where it is favorable to decline certain financial aid.
You Are Paying Out of Pocket
If you intend to pay out of pocket for school, you don’t actually need to accept the loans in your financial aid package. Instead, you should look for more “free money” options, like scholarships and grants.
You Can Find Aid With More Favorable Terms Elsewhere
If you do decide to borrow a loan, you should look for the best lender that is offering the most favorable terms. For example, Parent PLUS Loans often have higher interest rates. Therefore, you may actually be able to find lower interest rates with private loan lenders. In this case, you may want to consider all your options before accepting the PLUS loan.
Now that we’ve gone over when to decline certain financial aid and how to sort through all the different options, let’s go back to the original question. Do you have to accept all financial aid?
No, you don’t have to accept all of the financial aid offered to you. However, it is still very important to note that it is okay to accept all of it. If you believe the financial aid options are favorable to your circumstances, then it is totally fine to accept it. Just make sure you do your research and have all your questions answered before rushing into something.
Knowing when to accept and decline financial aid is very tricky. However, with the right guidance and due diligence, you can optimize your decisions and make the most out of your financial situation.
Don’t be afraid to say no to financial aid, and remember that although some aid may seem like free money, you should always research the terms of everything offered to you. Take your time to find the best options that will put you in a better position, both financially and mentally.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Congratulations on your child’s admission to college! The journey isn’t quite over yet – now, it’s time to explore the options you have for paying for the education.
Between federal student loans and private student loans, the decision can be difficult to make. Each loan type caters to different individuals, so it’s important to understand all your options.
So, in the debate of Parent PLUS loans vs. private student loans, which is the better option to finance your child’s education? In this article, we’ll cover everything that you need to know.
Have a decent credit history. (Unlike most federal student loans, Parent PLUS loans do require a credit check.)
How Much Can You Borrow in Parent PLUS Loans?
You can borrow up to the cost of attendance minus any financial aid that your student receives, such as scholarships, grants, etc. For example, if your child’s cost of attendance is $50,000 and they receive $30,000 in financial aid, you can borrow up to $20,000 ($50,000-$30,000).
Note: You do not need to accept the full amount of money that you are offered through the Parent PLUS loan; you can borrow only as much as you need. For example, in the instance described above, if you were offered the entire $20,000 but plan to contribute $5,000 out of pocket, you can choose to only accept $15,000 of the Parent PLUS loan.
What Credit Score Do You Need for a Parent PLUS Loan?
While there isn’t a minimum credit score requirement for a Parent PLUS loan, you cannot have an adverse credit history.
You will undergo a credit inquiry to assure that your credit score does not have the following reports within the past two years:
A collection or charge-off
One or more debts that are 90+ days overdue and total more than $2,085
You must not have any of the following on your credit report within the past five years:
A loan default
A discharge of debts via bankruptcy
A foreclosure
A repossession
A tax lien
Any wage garnishment
A write-off of federal student aid debt
If your credit score is not strong enough to qualify for a Parent PLUS loan, consider adding an endorser to the loan. An endorser is similar to a cosigner – an individual who agrees to take responsibility for the loan if you, the borrower, miss any payments or default on the loan.
If your endorser has a strong credit history/score, your chances of being approved for the Parent PLUS loan can be higher.
What is the Interest Rate on Parent PLUS Loans?
For Parent PLUS loans that are disbursed on or after July 1st, 2022 and before July 1st, 2023, the fixed interest rate is 7.54%.
Can Parent PLUS Loans Be Forgiven?
Parent PLUS loans can be forgiven if specific requirements are met. However, because student loan forgiveness policies are constantly being updated by the Biden administration, be sure to keep an eye out for any changes.
Here are three federal loan forgiveness plans that Parent PLUS loans may qualify for:
Income-Contingent Repayment Forgiveness
The Income-Contingent Repayment plan allows you to make monthly payments that are calculated based on your income. After a 25-year repayment term, or repaying the debt for 25 years, any remaining debt is forgiven.
Made those payments on a qualifying repayment plan;
Did so while working full-time for a qualifying employer.
Public service workers include teachers, firefighters, policemen, first-responders, doctors, and nurses.
Qualifying Employer Examples
Non-Qualifying Employer Examples
Federal, state, local, or tribal government organizationsU.S. military Non-profit organizations AmeriCorps or Peace Corps volunteers
Labor unionsPartisan political organizationsFor-profit organizations
Note: Even though Parent PLUS loans are used towards your student’s education, you (the borrower), and not the student, must work in public service to qualify for PSLF.
Federal Agency Employment Forgiveness Programs
If you are an employee of a federal agency, you may be eligible for Federal Agency Employment Forgiveness programs. You must be considered as a “highly-qualified” worker, and the federal agency that you are employed at determines whether or not you are eligible for this assistance.
Loan forgiveness is also contingent on a service agreement that contracts you to work three more years at the federal agency that you are employed at.
This can be extremely optimal for borrowers who are employed at federal agencies – you will be able to take out federal student loans for your child and have them forgiven if you meet the qualifications. Speak with your employer to see what federal forgiveness options you qualify for.
Note: Schedule C employees and members of Congress do not qualify for this program.
Private Student Loans
What is a Private Student Loan?
Private student loans are offered by private organizations, such as banks, online lenders, and credit unions. Because these organizations are autonomous, they set their own repayment terms, interest rates, and other lending logistics.
Who is Eligible for a Private Student Loan?
The general baseline requirements to acquire a private student loan are the following:
You must be a U.S. citizen or a qualifying non-citizen.
Your student must be enrolled in an eligible educational program.
However, with most private student loans, your eligibility to borrow is strongly contingent on your credit score and credit history. Private lenders are like investors: they want to make sure that you are a safe investment that will have returns (meaning that they will get their money back + any interest that accrues).
For this reason, a low credit score can harm your chances of qualifying for a competitive private student loan, or a private student loan at all. In this case, you may be able to strengthen your reliability as a borrower with a cosigner or by waiting until your credit score is stronger.
How Much Can You Borrow in Private Student Loans?
Unlike federal student loans, private student loans have limits on how much you can borrow. Loan amounts can range from $10,000 to upwards of $500,000. You will be required to submit documentation of your student’s cost of attendance, as you can’t borrow more than the amount it costs to attend.
What Credit Score Do You Need for a Private Student Loan?
You must have good to excellent credit to qualify for a competitive private student loan. Generally, the minimum credit score requirement is a FICO score of 670. However, there are lenders that work with borrowers who have low credit scores.
You must also have a clean track record of repaying your debt. This means having no late loan payments, loan defaults, foreclosures, discharge of debts, etc.
Keep in mind that when applying for loans, private lenders will conduct a hard credit check to verify your credit score and history. Hard inquiries will cause your credit score to decrease temporarily.
Note: Loan applications submitted within 30 days of each other are recognized by FICO as “rate shopping” and will be counted as one hard inquiry instead of several. So, if you plan to submit more than one loan application, make sure to do so within a 30-day period.
What to Do If You Have Bad Credit
If you do not have a strong credit score, and thus are unable to qualify, here are some options to consider:
Consider adding a cosigner to the loan to strengthen your eligibility as a borrower. A cosigner is an individual who agrees to be added to the loan, taking responsibility for it if you are unable to. Cosigners are contractually obligated to make up any missed payments, or the entire loan, if you fail to pay it.
Wait and apply to the private loan when your credit score is stronger. If you lower your debt-to-income ratio, you may be able to raise your credit score. You can lower your debt-to-income ratio by picking up a side hustle, making larger payments on other outstanding debt, or decreasing your expenses.
Look into outcome-based student loans. Outcome-based student loans do not verify your eligibility based on credit, but instead vouch for your future potential to pay back the loan.
Note: There are a variety of private lenders who work with parents with low credit scores.
If you want to check which private student loans you are eligible for without a hard inquiry and no minimum credit score, consider using Sparrow. Sparrow offers a free, two-minute application that allows you to compare loans across 15+ private lenders.
What is the Interest Rate on Private Student Loans?
The interest rate on private student loans are contingent on a variety of factors including the lender, your credit score, and your credit history. Interest rates for private student loans are generally higher than those for federal student loans.
The average interest rates for private student loans were between 2.95% – 13.95% for fixed interest rates, while interest rates varied between 1.13% – 12.99% for variable interest rates.
Can Private Student Loans Be Forgiven?
No, private student loans cannot be forgiven because they are issued by independent lenders. Only federal student loans are eligible for loan forgiveness.
Parent PLUS Loans vs. Private Loans: How Are They Different?
Now that we’ve discussed the nuances of Parent PLUS loans and private loans individually, let’s compare them side by side.
Yes, certain federal loans qualify for loan forgiveness.
No, private loans do not qualify for loan forgiveness.
Cosigner Options
Parent PLUS loans have the option to add an endorser to the loan.
Yes, most private loans allow cosigners to be added to the loan.
Credit Checks
Yes.
Yes.
Credit Score Requirements
You must not have an adverse credit score/history and must be in decent standing.
You must have a strong credit score to be eligible for competitive private loans.
Parent PLUS Loans vs. Private Loans: Which is Better?
Between Parent PLUS loans and private loans, one option is not necessarily “better” than the other. In terms of the better option for you, you’ll have to evaluate yourself as the borrower.
If you plan to pursue any loan forgiveness programs, you may prefer a Parent PLUS loan over a private parent loan. If you are more concerned with finding a competitive interest rate, you may find that a private student loan suits you better.
Questions to Ask Yourself for Parent PLUS Loans
Questions to Ask Yourself for Private Student Loans
Do you plan to pursue any student loan forgiveness programs (Public Service Loan Forgiveness, etc.)?
Are you confident in your ability to repay the maximum loan repayment amount?
Are flexible repayment terms a priority for you as a borrower?
Do you have a strong credit score? If not, do you know someone who has a strong credit score and is willing to be your cosigner?
Do you prefer fixed interest rates as opposed to variable interest rates?
Can you qualify for a competitive interest rate with your credit score?
If you answer more yeses to one column over the other, that option may be the most feasible one for you. Again, be sure to evaluate your priorities and circumstances as a borrower to determine which is better for you.
Closing Thoughts From the Nest
Before applying for a student loan, be sure to thoroughly do your research on each loan so that you are choosing the most optimal option for your circumstances. Both Parent PLUS loans and private loans have their individual benefits and drawbacks, so assessing your needs as a borrower is crucial.
If you opt for a private student loan, Sparrow is here to help. Submit a quick, free application with us today to compare your options across 15+ private lenders.
After being accepted into college, it’s important to see what options you have for financing the cost of your education. While scholarships, grants, and federal work-study aid should always be accepted first, you may wind up considering student loans as well. Though the process may seem daunting, we’ve simplified it for you with a step-by-step guide. Keep reading to learn how to apply for student loans.
There are two main types of student loans on the market: federal student loans and private student loans.
Federal student loans are offered by the federal government, while private student loans are offered by private organizations, businesses, and other autonomous entities.
Below is a list of some of the best student loan options. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Generally, it is recommended that you borrow federal student loans before private student loans. This is because federal student loans have lower interest rates, more flexible repayment options, loan forgiveness, and stronger borrower protection plans, as opposed to private student loans.
What to Do Before You Apply for Student Loans
Picking up debt is a large responsibility. Before applying for student loans, be sure to exhaust all other possible financial aid options for students.
Student loans need to be paid back in full, along with any interest that accumulates during the life of the loan. This means that you pay for more than what you’ve borrowed, and failure to do so can negatively affect your financial standing.
This is why it is crucial to acquire as much unborrowed money as you can to defray the cost of tuition. There are four ways that you can pay for your educational costs that do not require you to borrow money: scholarships, grants, and work-study.
Scholarships
Scholarships are a form of financial aid that is free and does not need to be paid back. They are offered based on, but not limited to, academic merit, financial need, athletics, your field of study, and any extracurricular achievements.
Scholarships are offered all year round by countless organizations, businesses, states, schools, counties, districts — you name it.
To apply for scholarships, you will generally need the following materials:
An essay answering a prompt that is decided by the organization offering the scholarship
Grants are another form of financial aid that is free and doesn’t need to be paid back. Unlike scholarships, grants are offered on a need-based basis only. This means that you must demonstrate financial need to qualify for a grant.
Generally, grants are offered by the federal government, state governments, institutions, businesses, organizations, etc.
You can find grants with an easy search of the web or through the following search engines:
Work-study is a federal student aid program that provides undergraduate and graduate students with the opportunity to have a part-time job on campus that helps fund their education. It’s important to note that receiving work-study does not guarantee you a job at your institution, but rather, it provides you with the opportunity to obtain one in which funding has been set aside to pay for.
You will see whether or not you received work-study aid on your financial aid package after submitting your FAFSA, along with the amount of aid you are eligible to receive. Unlike scholarships and grants, you will need to work in exchange for the work-study funds you are eligible for.
How to Apply for Federal Student Loans
As highlighted earlier, federal student loans should be your first option if you are looking to borrow student loans. Federal student loans typically have lower interest rates, stronger borrower protections, and more flexible repayment options.
Here’s how to apply for a federal student loan in three easy steps.
Step 1: Submit the FAFSA
The Free Application for Federal Student Aid (FAFSA) is an application that you must submit to receive financial aid from the federal government, your school, and in some cases, scholarships and grants.
The U.S. Department of Education uses your information on the FAFSA to calculate how much federal financial aid you are eligible for. In turn, colleges use this information to calculate your financial aid package. Some scholarships and grants require you to submit your FAFSA results to verify that you are in the eligible financial standing to be awarded.
The FAFSA opens on October 1st and closes on June 30th. It is strongly recommended that you submit your FAFSA as close to the opening date as possible because some financial aid is served on a first-come, first-served basis.
What Information Do I Need to Submit the FAFSA?
You need the following materials (most of which will need to come from your parents) before you submit the FAFSA:
Your Social Security Number (never go off memory!)
Your parent’s/parents’ Social Security Numbers
Tax Information
Tax Returns
IRS W-2
Parent(s) tax information
Family income
Records of untaxed income
Child support
Veteran benefits
Information on any financial assets you have
Cash in your checking and/or savings account
Investments like stocks and bonds
Business assets
Mortgages
If you are completing the FAFSA without the support of your parents, or as an independent, don’t worry. There are other ways to complete the form.
Step 2: Evaluate Your Financial Aid Offer
Your financial aid offers will start trickling in after you receive word from the schools you’ve been accepted to. It’s time to evaluate your financial aid offers and determine which is the best one for you.
Start by creating a spreadsheet with the following four columns:
School Name
Cost of Attendance → The total estimated cost of attending the school, including tuition, housing, meal plans, etc.
Free Aid → Any scholarships and grants you’ve received, whether from the institution itself or external sources/organizations.
Net Price Without Loans → The difference between the cost of attendance and the free aid you’ve received. This is how much you would need to pay out of pocket or borrow in student loans.
School
Cost of Attendance
Free Aid
Net Price without Loans
University A
$73,103
$46,051
$27,052
University B
$67,392
$23,249
$44,143
University C
$54,205
$18,674
$35,531
Creating a method to compare your aid offers is crucial as the actual cost to attend may be quite different from the initial cost of attendance after factoring in free aid. For example, in the above table, you can see how University A has the highest sticker price. Yet, with free aid, it winds up being the least expensive option.
Step 3: Accept the Loans
After identifying the school and financial aid offer that is best fit for you, go ahead and accept the financial aid package. Each school will have its own unique process for accepting financial aid. However, most will provide you with a login to an online portal in which you can click “accept” on the aid you’d like to receive.
Remember: Always accept your offer in the following order: scholarships/grants → work study → loans.
How to Apply for Private Student Loans
As a refresher, experts recommend that you exhaust your federal financial aid options before turning to private student loans. Generally, private student loans have higher interest rates, limited borrower protection plans, and less flexible repayment options.
Additionally, it’s often difficult for first-time borrowers (especially students) who have a limited credit history to qualify for a loan with good terms to begin with.
So, private loans should only be utilized to fill in the gaps that financial aid and federal loans do not cover. If you do opt to borrow one, here are the steps you should follow:
Step 1: Gather the Necessary Information
When applying for private loans, the information you will need will be similar to what is required for the FAFSA.
Your Social Security Number
The cosigner’s Social Security Number (You may not need this if you are not borrowing with a cosigner.)
Tax Information
Tax Returns
IRS W-2
Cosigner’s tax information
Family Income
Proof that you need additional aid (This is usually a form or a letter than can be obtained from your school’s financial aid office.)
Information on any financial assets you have, such as:
Cash in your checking and/or savings account
Investments like stocks and bonds
Business assets
Mortgages
A list of schools you are interested in attending
A list of any grants or scholarships you’ve received and their amounts
Step 2: Know How Much You Need to Borrow
It’s time to calculate how much money you need to borrow. Refer back to your financial aid package. If you did not receive any scholarships or grants, determine what you can contribute out of pocket. Subtract that, plus what you received in federal student loans, from the overall cost of attendance. Doing so will show you how much you need to borrow in private student loans to cover the cost.
Private student loans can cover the entire cost of your tuition, but it is recommended to minimize the amount of money you borrow so you can defray the amount of interest that you accrue.
If you need assistance calculating the exact amount of money that you need to pay, contact your school’s financial aid office for clarification. It’s better to be safe than sorry.
Step 3: Complete the Sparrow Application
Sparrow wants to help you find the perfect lender to finance your educational costs. Our platform helps borrowers just like you find and compare private student loans across 15+ premier student loan lenders. You can also compare how different cosigners affect the loan to determine which option is best for you.
The Sparrow application is free and will not affect your credit score. When you’re ready to begin the private student loan process, complete the Sparrow application.
You can also reach out to your school’s financial aid office for assistance with finding a private student loan lender. You can ask your institution for a list of preferred lenders or speak with a financial aid worker whose job is to assist you with any financial matters.
Step 4: Compare Student Loan Offers
When you’re comparing student loans, here are some key factors that you should look out for:
Cosigner
Do you need a cosigner to qualify for the loan with you? Do you have a cosigner who is willing to sign the loan with you?
Does the loan have a cosigner release policy, and if so, what is it?
Interest Rate
What is the interest rate of the loan?
Do you have a variable interest rate (an interest rate that changes based on the economy) or a fixed interest rate (a set interest rate that stays the same)?
Does the loan offer a grace period (a period of time where you do not need to make loan payments) after you leave school, or will you be making payments during the school year?
Loan Origination
Does the loan have an origination fee (a fee that you need to pay to “create” the loan?)
Borrower Protection
Does the loan offer loan forbearance and deferment?
Consider your loan priorities as you sift through options: do you prefer a loan with a short repayment plan and a low interest rate, or a loan with cosigner release terms? Is loan forbearance or deferment a must-have, or do you think you can manage without it?
Speak with your parents, your school’s financial aid office, and adults that you trust so you can make the best decision for yourself. You should be thoroughly aware of all the loan terms and have a plan for repaying the loan.
Think long-term and consider where you’ll be one year, five years, or ten years ahead with the loan.
Step 5: Select the One You Like the Best and Submit A Formal Application
After you’ve identified the private student loan that best fits your needs, submit a formal application for the loan.
If you are submitting multiple formal applications for private student loans, submit your applications within 30 days of each other. By doing this, you will not incur a hard inquiry for each loan that you apply for. Rather, it will be viewed as “rate shopping,” and you will only receive the impact of one hard inquiry.
If you are approved for the loan, the loan amount will be disbursed directly to your school.
Frequently Asked Questions About Applying for Student Loans
Do all students qualify for student loans?
No, not all students qualify for student loans. Both federal and private loans have a baseline of requirements that borrowers must meet to be eligible to apply for the loan, such as attending an accredited university, meeting the age requirement, being a U.S. citizen in certain cases, etc.
Even if you do meet the baseline requirements, this does not mean that you qualify for all federal and private loans. With private student loans, most students do not qualify on their own and usually require a cosigner to help strengthen their loan application for private student loans.
Be sure to use Sparrow to check whether you qualify before submitting a formal application and incurring a hard credit check.
How long does it take for a student loan to be approved?
It can take anywhere from a few weeks to a few months for a student loan to be approved. The time needed to approve a loan depends on the lender.
When do you need to apply for student loans?
The Free Application for Federal Student Loan (FAFSA) opens on October 1st and closes on June 30th. You must submit the FAFSA to be eligible for federal financial aid, including student loans, grants, work-study, and scholarships. Submit your FAFSA as close to the opening date as possible.
After accepting all federal financial aid, you should apply for private student loans as early as possible. It often takes several weeks for a loan to be approved. You will want to be approved for the loan and receive the loan amount before the funds are due on your school so that you don’t rack up any late payment fees.
Do student loans go to your bank account?
No. Once approved, the loan amount is disbursed directly to your institution. Student loans do not go to your bank account.
Can you be denied a student loan?
Yes, you can be denied both federal student loans and private student loans.
You can be denied for federal student loans based on financial eligibility requirements, having defaulted on a previous federal loan, incarceration, and other reasons. Address the reason why you were denied, and apply again the following year.
For private student loans, you usually are denied for a low credit score, a weak credit history, or an insufficient cosigner. Consider applying again after raising your credit score and/or with a cosigner with a stronger credit score.
Closing Thoughts From the Nest
Applying for student loans can be a long process, so get started as early as you can. Remember to maximize scholarships, grants, work-study, and federal financial aid as much as you can before applying for any private student loans.
If you need any assistance finding private student loans, consider using Sparrow’s online search tool to compare loan offers from 15+ lenders.
If you’re a student loan borrower, you’ve probably heard the term “student loan servicer” before. But what exactly is a student loan servicer, and why does it matter?
In this blog post, we’ll dive deeper into everything you need to know about student loan servicers, including how to find out who your servicer is, what services they offer, and how to navigate the sometimes-complicated world of loan repayment. Whether you’re a recent grad or a seasoned borrower, understanding your student loan servicer is a key step toward financial freedom.
What is a Student Loan Servicer?
In short, a student loan servicer is the middleman between you and the lender that you borrowed from. Servicers collect your loan payments, keep track of your account, and offer support for a range of repayment options, including loan forgiveness and payment postponement.
Over 92.7% of all student debt is originated by the federal government, making the US government the largest student loan lender. Regardless of the type of loan, all federal student loans are serviced by loan servicers. Loan servicers are also responsible for publicizing and ensuring all borrowers know of the possible programs and services they are eligible for. This includes items like different repayment plans, forbearance and deferment, or even forgiveness completely.
Although lenders do have the duty to make sure you are aware of the potential programs that could save you thousands of dollars, they do not have power to alter your payment structure nor your terms. As intermediaries, they act on your behalf to convey and prove your case to the lender in hopes of qualifying for certain relief programs.
How to Find Your Student Loan Servicer
Before finding who your student loan servicer is, you will need to find out if you have a federal or private student loan. Once you figure that out, you can use certain databases like the National Student Loan Data System (NSLDS) andlog in with your FSA ID. This system searches for federal student loan servicers. Once you’re in, you’ll see a comprehensive summary of all your federal student loans, including the types of loans you have, the amounts and outstanding balances of each loan, your interest rates, and who your loan servicer is.
Although, there have been some changes in the private student loan servicing industry, meaning your existing servicer may be transferred. For example, if your previous loan servicer was Navient, they are now transferring all loans toAidvantage, a new servicer that is part ofMaximus.
If you haveprivate student loans, you can take a look at your credit reports or loan statements to find your loan servicer.
How to Contact Your Student Loan Servicer
There are many different loan servicers, some of which only deal with private and/or federal loans. In most cases your loan servicer will be one of the following:
Most of the time, federal loan servicers can’t be changed, and if they are changed, it’s not because of a request but rather something to do with the loan itself. However, there are a couple ways you could have your loan servicer changed. The most common way this is done is through refinancing your existing loans. To learn more about refinancing, what it is, and if you should potentially refinance, read our in-depth explanation of student loan refinancing.
What Should I Do if My Student Loan Servicer Isn’t Helping?
Unfortunately, there have been many legal battles where loan servicers have been found guilty of purposely being detrimental to students. Navient, in this specific case, was found guilty of purposely not recommending or even making certain income-driven repayment plans known to borrowers, but rather advising them into forbearance. Fortunately, after this huge legal battle, Navient was forced to settle over $1.7 Billion in student loans. This lawsuit forced other servicers, mostly private, to change their guidelines and actually ensure that they were working for the borrowers, in their best interest.
To summarize, student loan servicing is a completely different entity than student loan lenders. Operating as a middleman between the lender and the borrower, they manage and perform administrative duties surrounding the loan. Depending on your loan status, whether it is private or federally originated, you will find different servicers that are there to help you.
According to an Education Data report, the average student loan debt is around $39,351 per borrower. As a result, it can be hard to make the average student loan monthly payment. If you’re currently experiencing this and are trying to figure out how you can cut costs, you’re in the right place.
Lucky for you, you can lower your monthly payments. How? Here is everything you need to know about monthly payments and how to lower them.
What is the Average Student Loan Monthly Payment?
According to the above report, the overall average student loan monthly payment is $460. This can change, however, depending on a variety of factors, such as degree type. Typically, the higher the degree, the more money you’ll owe. Yet, even within a degree, the average monthly payment can vary. Take a look at the table below to better understand.
Low Payment
Average Payment
High Payment
Associate’s Degree
$281
$333
$384
Bachelor’s Degree
$354
$448
$541
Master’s Degree
$350
$695
$1,039
Graduate Degree
$575
$1,210
$1,844
Professional Degree
$521
$1,537
$2,553
The reason these numbers vary is due to additional factors like salary and debt owed. Typically, people with larger salaries can afford to pay more. Similarly, the more debt you owe, the higher your repayment cost will be.
That’s why it’s important to understand these numbers. You can better understand how your financial situation influences your monthly payments. However, these factors (such as your degree type, salary, and debt owed) aren’t the only things impacting your payments.
How Your Interest Rate Impacts Your Monthly Payments
Interest rates determine the overall cost of borrowing a loan. They’re usually described as a percentage of the loan principal.
Interest rates can be pretty impactful. Education Data reports that about 67% of borrowers’ total cost of repayment is interest. It’s important, then, to get as low an interest rate as you can to keep those costs down.
For example, let’s say you took out a $30,000 loan with a 5% interest rate. You’re on a payment plan with a repayment period of 20 years. If you make only minimum monthly payments for the entire life of the loan, you’ll pay $47,517 with monthly payments of $198. But, look at what happens if we lower that interest rate to 4% and keep all other factors the same. Now, you’d pay $43,631 with a monthly payment of $182.
Loan 1
Loan 2
Balance
$30,000
$30,000
Interest Rate
5%
4%
Repayment Period
20 years
20 years
Monthly Payment
$198
$182
Total Cost
$45,517
$43,631
Notice how much money the lower interest rate saves you despite having the same repayment period and payment plan. Just that one percent decrease would save you $16/month, $192/ year, and around $2,000 over the course of the loan. As you can see, understanding your interest rate is extremely important. Especially on larger loan balances, or with higher interest rates, it can be the key to lowering your monthly payment significantly.
How to Lower Your Monthly Payment
Now that we better understand your monthly payments, let’s get into how you can lower them.
Refinance
By refinancing your student loan, you’re letting a private lender pay off your current loans. They’ll then give you a new private loan to cover what you owe them. You can get better terms on this new loan such as a lower interest rate. Thus, securing these new terms can lower your monthly payment and help you save money.
To qualify for refinancing, you’ll need to have a good credit score and steady income. Individual lenders may also have additional requirements you need to meet. Be sure to ask them about those before applying.
Rather than searching for refinance lenders one-by-one, we recommend starting the process with an automated student loan refinance search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Here is a list of the top refinance rates:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
If you have multiple federal student loans, consolidating them can be a good idea. You’ll do this through a Direct Consolidation Loan. When you get a Direct Consolidation Loan, you’re combining all your federal loans into one. You’ll then only have one monthly payment to make as opposed to a few payments a month. Additionally, consolidating certain loans, like the Perkins Loan, makes them eligible for loan forgiveness.
It’s important to note that consolidating may not get you better terms like a lower interest rate. Still, it can simplify your monthly payments which, in turn, lowers how much you’ll pay per month.
To qualify, you must have loans in repayment or the 6-month grace period. If you’re currently still attending college, you cannot consolidate your loans yet.
Switch Repayment Plans
A more budget-friendly plan can lower your monthly payments. Federal borrowers, for example, have access to income-driven repayment (IDR) plans. These plans base your payments on your discretionary income. The idea is that by basing the payments on your annual income, it’ll help keep them more affordable for you.
Meanwhile, private loan borrowers can talk to their lenders to see if they offer similar plans. While these plans may not have as many benefits as an IDR plan, they can still save you money each month. Reach out to your lender if you have questions.
Pursue a Job with Debt Payoff Benefits
Imagine working for a company that offers to pay you extra money to put toward your student loans. It sounds like a dream, but it isn’t. Companies are already starting to offer debt payoff benefits, and many more are planning to add them in the future. That extra money they pay you means less money that you’ll have to pay for your monthly payments out of pocket.
Final Thoughts from the Nest
Your monthly student loan payment might be one of your biggest expenses. So, it’s worth knowing this information to help you better understand it and, hopefully, lower it. If you decide to lower your payment through refinancing, look no further than Sparrow.
Sparrow offers an application that will match you to what you best qualify for from our 15+ partnering lenders, many of which provide competitive refinancing offers. From there, you can compare the different lenders you’re interested in before making a final decision. Fill out the Sparrow application today to get one step closer to lowering your monthly payments.
Making student loan payments with a credit card may be tempting, especially if you don’t have the cash to do so — or if you want to earn extra rewards on your card. That said, it isn’t always possible, nor is it recommended in most cases.
Before attempting to pay your student loans with a credit card, carefully consider the pros and cons. In many instances, other options will likely be a safer route.
Can You Pay Your Student Loans with a Credit Card?
Simply put, lenders incur a fee when a borrower pays via credit card, so it isn’t ideal to offer it as an option. While federal loan servicers do not accept credit card payments, some private lenders do. However, it’s typically only allowed in special circumstances, such as when a borrower has been unable to make payments.
Can You Transfer Student Loans to a Credit Card?
Some credit card companies offer 0% APR balance transfers. With this offer, borrowers can transfer their remaining student loan loan balance to a credit card and receive 0% APR for a period of time.
While it may seem appealing, you’ll likely incur a fee on the transferred balance. Interest will also begin to accrue once the offer period expires, which could lead to intense interest charges.
Pros and Cons to Paying Your Student Loans with a Credit Card
Before opting to make a payment with, or transfer a balance to, your credit card, consider the pros and cons of each.
Making Payments with a Credit Card
If your lender allows it, making payments on a credit card could save you from missing a payment. However, you should consider the downsides of doing so as well.
Pros
Cons
It could prevent you from missing a payment.
Credit card interest rates are often far higher than student loan interest rates. So, while you may avoid a missed payment, interest that accrues on your new credit card balance will likely cost you more than if you incurred a late fee on your student loan.
If you are using a third-party service, such as Plastiq, to facilitate the loan payment, you will likely incur a transaction fee.
Transferring Your Loan Balance to a Credit Card
A 0% APR offer may sound enticing, but there are downsides to this method as well.
Pros
Cons
You may be able to save on interest costs during the 0% APR period.
The interest-free period will be short-lived. After the offer ends, your balance will begin to accrue interest at the normal interest rate of the card. Knowing that the average student loan interest rate is 5.8%, and the average credit card interest rate is 17.98%, it makes significantly more sense to not transfer your loans to a credit card, unless you believe you can pay them off entirely during the 0% APR offer period.
Student loans have more protections, such as deferment and forbearance, than credit cards. If you transfer your loan balance to a credit card, you will lose access to those benefits.
Other Ways to Get Assistance With Loan Payments
If you are unable to keep up with your student loan payments, but using a credit card isn’t an option, consider these alternatives:
Opt In to an Income-Driven Repayment Plan
If you have federal loans, consider opting in to an income-driven repayment (IDR) plan. IDR plans base your monthly payments on your discretionary income, or what you earn after taxes and necessary expenses. Depending on your income, this may reduce your monthly payment amount significantly.
There are a variety of IDR plans available for federal student loan borrowers, each basing your monthly payment on a different percentage of your discretionary income.
Income-Based Repayment (IBR)
10-15% of your discretionary income
Pay As You Earn (PAYE)
10% of your discretionary income
Revised Pay as You Earn (REPAYE)
10% of your discretionary income
Income-Contingent Repayment (ICR)
20% of your discretionary income OR what you would pay monthly on a 12-year fixed repayment plan, whichever is lesser
Each IDR plan has its own eligibility criteria. To see which plans you qualify for, reach out to your federal loan servicer directly.
Apply for Deferment or Forbearance
Both federal and private student loans offer generous protections for borrowers experiencing financial hardship, such as deferment and forbearance. Both options will allow you to temporarily pause payments, which can give you a break to get your finances in order.
To see which options your lender provides, reach out to them directly.
Refinancing
Student loan refinancing, in a simple sense, is the process of swapping your current loan for one with a better interest rate or terms. In this instance, refinancing to secure a longer repayment term will be most optimal as it will likely reduce your monthly payments.
That said, a longer repayment term will typically cost you more over the life of the loan. Plus, if you opt to refinance federal student loans, you will lose access to certain benefits such as income-driven repayment plans and student loan forgiveness opportunities.
If you do choose to refinance, consider some of these top lenders:
If you’d like to combine your federal student loans, but don’t want to lose their protections and benefits by going through a private lender, consider consolidation. While similar to refinancing in that you can combine multiple loans into one, consolidation won’t score you a lower interest rate. However, it will lead to an extended repayment term, which will reduce your monthly payment.
Consolidating will allow you to maintain access to federal loan benefits, however, a longer repayment period will likely cost you more over the life of the loan.
Final Thoughts from the Nest
While making student loan payments on a credit card may be tempting, it often isn’t an advantageous decision. A stronger course of action includes contacting your loan servicer for support, considering income-driven repayment options, or refinancing your debt.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
In the United States, 48 million borrowers owe a cumulative total of $1.75 trillion in student loan debt. As we can see, while student loans can cover a significant portion of educational costs, it means that you’ll owe a significant portion as well.
If you plan to take out student loans to pay for the cost of education, you’ll want to prepare for the new responsibilities you’ll have as a borrower.
Here’s what you need to know about how student loans work.
Student loans are a type of loan that specifically covers educational costs like tuition, school books, supplies, as well as room and board. There are two types of student loans that you can borrow: federal student loans and private student loans. Undergraduate students, graduate students, professional students, and even parents of students can take out student loans.
To qualify, however, you must enroll in an accredited institution.
Types of Student Loans
It is recommended that students give preference to federal loans over private student loans because they are generally more affordable and borrower-friendly. However, most students need to take out a blend of both to cover the entire cost of tuition.
Federal student loans and private student loans have many differences that borrowers should be mindful of.
Federal Student Loans
Federal student loans are offered by the federal government. There are three types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
Direct Subsidized Loan
The Direct Subsidized Loan is for undergraduate students who demonstrate financial need.
The federal government pays the interest on the loan while you are in school, during your grace period, and also during any deferment periods.
Direct Unsubsidized Loan
The Direct Unsubsidized Loan is available for undergraduate, graduate, and professional students from all financial standings.
Unlike the Direct Subsidized Loan, the federal government does not pay for the interest during school, your grace period, or any deferment periods. Interest accrues throughout the entire life of the loan.
Direct PLUS Loan
Within the Direct PLUS Loan exists the Parent PLUS Loan and the Grad PLUS Loan.
The Parent PLUS Loan is available to parents of undergraduate students, and the Grad PLUS Loan is available to graduate and professional students. Interest accrues throughout the entire life of all Direct PLUS Loans.
To borrow a federal student loan, you must submit your Free Application for Federal Student Aid (FAFSA). The FAFSA opens every year on October 1st and closes on June 30th.
You do not need a cosigner or a minimum credit score for federal student loans, except for the Direct PLUS Loan.
Federal student loans also come with a handful of borrower protections, such as:
Loan deferment: pausing payments on your loan without any interest accrual
Loan forbearance: pausing payments on your loan with interest accrual
Loan forgiveness: forgiving your loan balance so that you no longer are in debt
Private Student Loans
Unlike federal student loans, which are provided by one entity, private student loans come from an array of lenders. Thus, each lender will set their own loan terms, interest rates, borrower qualifications, and everything in between.
Private student lenders are more selective with who they lend and offer competitive loan terms to. Because college students usually do not have sufficient enough credit histories and scores to be deemed trustworthy borrowers, private student lenders usually do one of the following:
Require a cosigner, or someone who agrees to take responsibility for the loan if the borrower fails to.
Give out less favorable loan terms, such as higher interest rates or shorter repayment plans to raise the stakes to keep students from defaulting.
Generally, private student loans do not offer any borrower protection plans like loan forbearance, deferment, or forgiveness unless you have special circumstances like disability, military service, etc. Additionally, seeking any needed assistance is the responsibility of the borrower.
Federal Student Loans vs Private Student Loans
Loan Type
Federal Student Loans
Private Student Loans
Borrower Requirements
The Direct Subsidized Loan is only for undergraduates with financial need; Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds.
No financial need is required; anyone can apply.
Cosigner Needed?
No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans.
In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all.
Interest Rates
Interest rates tend to be lower than the interest rates of private student loans and are always fixed, meaning that they do not change.
Interest rates tend to be higher for students because of their lack of a strong credit history; may vary with a cosigner. Interest rates can be fixed (meaning that they do not change) or variable (meaning that they change based on the economic market).
Borrower Protection Plans
The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans.
Depends on the lender, but selections are often limited.
Credit Score Requirements
Typically, federal loans do not look at credit scores except the Direct PLUS Loans.
Most private lenders will be looking for students & cosigners with strong credit histories and scores.
Borrowing Limits
For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year.
For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan. For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.
Direct Subsidized Loans and Direct Unsubsidized Loans have a six-month grace period where you do not pay to make regular loan payments after graduation, after dropping out, or enrolling less than half-time. Interest accrues during the grace period for the Direct Unsubsidized Loans and not for the Direct Subsidized Loans.
The federal government offers eight different types of repayment options: the Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, Pay As You Earn Repayment Plan (PAYE), Revised Pay As You Earn Repayment Plan (REPAYE), Income-Based Repayment Plan (IBR), Income-Sensitive Repayment Plan (ISR), and the Income-Contingent Repayment Plan (ICRP).
Private student loans tend to have fewer repayment options in comparison to federal student loans.
How Much Can You Borrow in Student Loans?
Your borrowing limit depends on the type of student loan that you take out.
Federal Student Loans
For federal loans, your borrowing limit depends on your year in school, dependency status, and your Estimated Family Contribution (EFC), which is calculated through your FAFSA application. The maximum borrowing limits, however, are as follows:
Direct Subsidized Loan
Dependent Undergraduate: $3,500 – $7,500 per year ($31,000 aggregate loan limit)
Independent Undergraduate: $3,500 – $12,500 per year ($57,500 aggregate loan limit)
Direct Unsubsidized Loan
Dependent Undergraduate: $5,500 – $7,500 per year ($31,000 in total)
Independent Undergraduate: $9,500 – $12,500 per year ($57,500 in total)
Graduate/Professional Student Limit: $20,500 per year ($138,500 in total)
Direct PLUS Loan
Covers the difference between the cost of attendance and any received financial assistance.
Private Student Loans
For private loans, the lender you work with determines how much you can borrow. Most private lenders cover the entire cost of attendance, though others have a cap of up to $500,000.
When You Borrow a Student Loan, Where Does the Money Actually Go?
When you borrow a student loan, the money is disbursed to your school directly. The lender handles the process of getting the money to your school, and any remaining funds are distributed to you based on your school’s policy.
When Do I Need to Pay Back My Student Loans?
When you begin paying back your student loans depends on the type of student loan you borrowed and the repayment plan that you choose.
Federal Student Loan Repayment
For all federal student loans, you will have a grace period where you do not have to make payments on your student loan. The grace period begins after leaving school or graduating and ends after six months.
It’s important to note that interest accrues during the grace period for Direct PLUS Loans and Direct Unsubsidized Loans, however, but not for Direct Subsidized Loans.
After this grace period is over, your loan payments will start. Depending on loan type, you may have a choice between one of the eight repayment options offered for federal student loans:
Standard Repayment Plan
Payments are made at a fixed amount for up to 10 years.
All federal student loan borrowers are eligible for this plan.
Graduated Repayment Plan
Payments are lower at first and increase every two years so that the loan is paid off within 10 years.
All federal student loan borrowers are eligible for this plan.
Extended Repayment Plan
Payments can be fixed (set amount) or graduated (increasing amounts per every two years) and are made for up to 25 years.
Only Direct Loan borrowers with more than $30,000 in debt are eligible for this plan.
Pay As You Earn Repayment Plan (PAYE)
Payments will be 10% of your discretionary income and will be recalculated based on annually updated family and income information.
To qualify for a PAYE repayment plan, borrowers must have borrowed a loan after October 1st, 2007 and received a disbursement on or after October 1st, 2011.
Revised Pay As You Earn Repayment Plan (REPAYE)
Payments will be 10% of your discretionary income and will be recalculated based on annually updated family and income information. Any amount that has not been paid off 20 years after your undergraduate study or 25 years after your graduate or professional study will be forgiven.
Any Direct Loan borrowers with certain loans are eligible for this plan.
Income-Based Repayment Plan (IBR)
Payments will be 10-15% of your discretionary income and will be recalculated based on annually updated family and income information. Any amount that has not been paid off after 20 years or 25 years will be forgiven.
Borrowers must have high debt in comparison to their income.
Income-Sensitive Repayment Plan (ISR)
Your monthly payment will be based off of your annual income and will remain as such for up to 15 years.
Borrowers must have FFEL Program loans to qualify for an ISR repayment plan.
Income-Contingent Repayment Plan (ICRP)
Your monthly payment will be either 20% of your discretionary income or the amount that you pay on a 12-year repayment plan adjusted to your income.
Any Direct Loan borrower with specific loans are eligible for this plan.
Private Student Loan Repayment
With private student loans, there are four common repayment plans across the industry:
Immediate Repayment
You begin making loan payments as soon as the loan is disbursed, meaning you begin making payments while you are in school.
Interest-Only Repayment
You begin making interest loan payments, or paying for only the interest of the loan, as soon as the loan is disbursed.
Partial Repayment
You begin making partial loan payments, or paying for only a portion of the interest that is accrued for the loan, as soon as the loan is disbursed.
Deferred Repayment
Similar to the grace period that is offered by federal student loans, you do not start making loan payments until six months after leaving school.
Closing Thoughts From the Nest
Student loans may not be the world’s most fascinating or enjoyable topic in the world, so we commend you for taking the time to do your research. Informing yourself as a borrower is key to managing your finances without being bogged down by student loan debt.
If you want to see which private student loans you qualify for, consider using Sparrow’s free online tool. If you submit an application with us today, you can compare all of your private loan options across 15+ lenders.
Cosigning is a popular practice in the world of private student loans. Most students do not have sufficient enough credit histories to qualify for competitive private loans on their own, which is why a cosigner steps in to help. However, at this point you may be wondering, “does cosigning a student loan affect my credit?”
If your child, relative, or close friend ask you to cosign for a private student loan, be informed before making a decision. Cosigning a private student loan is a hefty decision to make, and there are ways it could hurt your credit.
What is a Private Student Loan Cosigner?
A private student loan cosigner is an individual who agrees to sign onto a private student loan alongside the borrower, often in cases where the borrower can’t qualify for the loan or receive favorable terms on their own.
Because cosigners are equally responsible for repaying the loan, any missed payments by the primary borrower ultimately become the cosigner’s responsibility. Likewise, if the primary borrower causes the loan to go into default, you are responsible for the loan as the cosigner.
In the 2019-2020 academic year, 92% of private undergraduate student loans and 63% of private graduate student loans were cosigned.
In many cases, students are unable to qualify for private loans or receive favorable loan terms without a cosigner. In short, private lenders want to know that they will be getting their money back when lending to people. So, due to students’ limited credit history, often due to their age, students can be risky investments for lenders. By tacking on a cosigner with a strong credit history to a student loan, lenders can be more confident that their money will be returned in full over time.
A student with a cosigner is more likely to repay their loan on time and in full as opposed to a student without one. So, with a cosigner, the chance of receiving the best possible private loan is significantly higher.
Unlike private student loans, federal student loans do not require a cosigner. Students are able to borrow loans that they qualify for based on their Free Application for Federal Student Aid (FAFSA) application.
However, if a student is looking to take out a private student loan, a cosigner will almost always be necessary.
Cosigning a student loan can affect your credit both positively and negatively. Consider the advantages and drawbacks before making the decision to cosign.
How It Hurts Your Credit
#1: A Hard Inquiry
When you cosign a private student loan, most private lenders will request for a hard inquiry, or access to review your credit report. Hard inquiries can hurt your credit score by up to 10 points, though the damage is only temporary.
While a hard inquiry will only lower your credit score temporarily, it is important not to open too many credit lines at once. Having multiple hard inquiries can lower your credit score significantly and may seem like you are overextending yourself financially, which isn’t appealing to lenders.
#2:Potential Default
If the primary borrower defaults on the student loan, the default will appear on both of your credit histories. Furthermore, your credit score and chances of opening new credit lines will be severely harmed.
Your loan contract (also known as a promissory note) specifies how many missed payments you can have before your loan enters into default. Before cosigning a student loan, be sure to thoroughly read the loan terms and have a serious conversation with the primary borrower.
#3: Potential for Late Payments
As a cosigner, you are legally responsible for the loan, just like the primary borrower. If the primary borrower misses a payment or makes late payments, these actions can hurt your credit. Keep this in mind before shouldering this financial responsibility.
How It Can Help Your Credit
#1:Diversified Credit Mix
10% of your FICO score is made up by your credit mix. If you have multiple lines of credit, this can actually boost your credit score. Make sure to make all your payments on time and in full to remain in good credit standing.
#2: New Credit Line
Adding a new credit line to your credit history can minimally boost your score. However, it is crucial for the primary borrower to make payments on time and in full so that there are no negative implications for the both of you.
What Are the Other Risks of Being a Cosigner?
Change in Debt-To-Income Ratio
Private student loan lenders measure a borrower’s credit reliability with the debt-to-income ratio. Your debt-to-income ratio (DTI) is measured by comparing the amount of debt you have to your pre-tax income.
For example, let’s say that you earn $1,500 every month before taxes. Your car payment, mortgage, and credit card payments total up to $750. 750 divided by 1,500 is .5, making your debt-to-income ratio 50%.
There are two types of debt-to-income ratios that may be impacted – your back-end ratio and your front-end ratio. Your back-end ratio (all your monthly debt payments divided by your pre-tax income) is considered healthy when lower than 36%. Your front-end ratio, or only your housing expenses divided by your pre-tax income, should be no more than 28%. In general, though, the lower your debt-to-income ratio is, the better it looks to lenders.
If your back-end DTI is higher than 36%, it’s not recommended for you to cosign for a private student loan. If the student loan is approved, your DTI will only get higher and look more unfavorable to lenders.
Varying Cosigner Release Terms
Some private student lenders offer cosigner release options. This option allows for cosigners to remove themselves from the loan and no longer be liable for it. Generally, a cosigner can be released from the loan if the primary borrower has made a certain number of payments on time and in full.
If the private student loan you are cosigning does not offer a cosigner release option, you may be locked into the loan until it is fully paid off. The only way around that is if the primary borrower chooses to refinance the loan and does not have you cosign the new loan.
Commonly Asked Questions About Cosigning a Student Loan
What credit score does a cosigner need for a student loan?
This varies from lender to lender. As a general rule of thumb, a “good” credit score is at least 670. However, the better your credit score is, the more likely the borrower is to qualify for the student loan. Along with qualifying, the borrower will be more likely to receive a better interest rate if they have a creditworthy cosigner.
Do I need to cosign if the student already has a good credit score?
Only 8% of students get approved for private student loans without a cosigner.
If the student has a strong credit score, you may not necessarily have to cosign for the student loan. However, if the student lacks the credit history needed to originate a loan, they may not qualify for the loan on their own.
Furthermore, even if the student has a satisfactory credit score, having a cosigner who also has a good credit score and solid credit history will help the student acquire a lower interest rate and other favorable loan terms.
Does being a cosigner show up on my credit report?
Yes, being a cosigner will show up on your credit report because you are technically opening up a new credit line. Any late payments, defaults, and missed payments will also show up on your credit report. Therefore, make sure that the primary borrower is making their payments on time and in full.
Can cosigning a student loan affect me buying a house?
Yes, it is possible that being a cosigner on a student loan will affect your chances of buying a house. Whether you’re looking for a new mortgage or refinancing your current mortgage, it may be difficult to be approved or qualify for competitive terms if you have cosigned a student loan. This is because while the student loan isn’t technically yours, you are still legally responsible for it. Your debt-to-income ratio is also higher with the cosigned loan than without. Accordingly, it can make you a less attractive borrower to mortgage lenders.
Can both parents cosign a student loan?
No, only one person can cosign a student loan. If you’re having trouble deciding who should cosign a student loan, use Sparrow’s free online tool to compare cosigners and make the decision. If you fill out a free application with us, you can see which private student loans you qualify for across all of Sparrow’s partners. In addition to that, you can input the information of potential cosigners and see how they individually impact the loan and its terms.
In short, cosigning a student loan CAN affect your credit. It is a serious decision that can impact both you and the primary borrower’s finances, for better or for worse. Before you sign anything, do your research. Assess whether or not your finances are at an adequate state to be responsible for a private student loan.
Many people don’t talk about the different pathways that you can take after high school graduation, except the traditional four-year college route. Going to trade school is a viable option to consider if attending college is not for you. You may be wondering, ‘what is trade school’ and ‘is trade school free?‘
Trade school has a shorter time commitment, is less expensive, and teaches you specialized skills for direct entry into the career field of your choice after graduation.
Because going to trade school is a lesser-known option, many students have no idea what trade school is, how they can apply, and what they can do with it.
What is Trade School?
Trade school, also known as career, technical, or vocational school, is a specialized institution that provides students the skills, hands-on training, and education necessary to work in a specific “trade” or occupation right after graduation.
These occupations are typically hands-on careers, like cosmetology, plumbing, welding, carpentry, and automobile repair.
For most trade schools, a high school diploma or GED is necessary to attend.
Trade School vs. College
Factors
Trade School
College
Time Commitment
Anywhere from eight months to two years
Four years
Type of Education
Specialized education; will only take courses necessary to their specified field
Generalized education; must take General Education courses like math, science, and English along with any major requirements
$38,185 for private schools, $22,698 for public, out-of-state schools, and $10,338 for public, in-state schools for the 2021-22 school year
Post-Graduation Salary
Depends on specialization and location
High-paying jobs after college generally make more in salary than high-paying trade jobs
Job Security
Very strong; skilled labor workers are in high demand and have slimmer chances of being replaced by job automation
Depends on the situation; job security can fluctuate based on economic crises, demand for work, etc.
Career Flexibility
Rarely flexible; you are specializing in one trade
Very flexible; students learn flexible skills that are applicable outside of their major
Pros and Cons of Trade School
Consider the pros and cons of attending trade school carefully before making your decision.
Pros of Trade School
Time: Trade school only takes a maximum of two years, which is half the time you spend at a traditional four-year college. Once you’ve graduated, you can find employment almost immediately. If you’re looking for a relatively short time commitment and quick employment, trade school might be the best option for you.
Money: On average, trade school is less expensive than a four-year college. Because trade schools are anywhere between eight months and two years, you’ll be paying for a shorter period of time as opposed to if you went to a four-year institution. Plus, if you’re eligible for financial aid or employer-paid tuition reimbursement, you might even attend for little-to-no cost.
Specialized Education: You don’t need to take any general education courses, like math, English, or science, at trade school. All your education will be centered around the field that you are specializing in, and you’ll receive focused, hands-on training.
Career Assistance: Most trade schools help their graduating students secure jobs within their specialized industries. Generally, trade schools offer skilled trades-focused career fairs, early employment assistance, and a wide network of employers.
Cons of Trade School
Varying Reputability and Quality: When you’re researching prospective trade schools, be sure to dive deep into the student assistance programs, completion rates, and job placement statistics of the school. Trade schools vary in reputability and quality, and you don’t want to attend a trade school that won’t provide you with the necessary skills and assistance to earn your trade certificate and be employed after graduation.
Accreditation: Not all trade schools are properly accredited, meaning that these schools do not qualify for federal financial aid. If you do not attend an accredited trade school, you will most likely have to pay out of pocket or turn to private lenders.
Limited Career Selection/Flexibility: Because you’ll be learning the technical skills necessary for one specific industry, it will be difficult to secure jobs outside of your specialized field. For example, if you attend a trade school for HVAC (Heating, Ventilation, and Air Conditioning), it will be near impossible to obtain a job in plumbing or cosmetology without going back to school.
Is Trade School the Right Choice for Me?
Here are some questions you should ask yourself when deciding whether or not trade school is the right choice for you:
Do I know what I would specialize in? Do I want to specialize in it? Why?
Do I want to start working right after graduation?
Can I see myself dedicating time and effort to this career, or will I get sick of it quickly?
Is there a demand for this job in the market?
Will this career allow me to be financially stable?
How to Pay for Trade School
While the cost of trade school is relatively cheaper than a four-year college, you’ll want to be informed of the options you have for financing your education. While trade school can cost just a few thousand dollars, pricier trade schools can cost up to $17,000 per year.
Public trade schools are usually cheaper than private trade schools, so be sure to compare tuition and additional fees between schools to avoid paying more than you need to.
Scholarships and grants are both forms of gift aid, meaning they do not need to be repaid. They are great ways to defray the cost of tuition, and there are many options available for trade school students.
You can find more scholarships and grants for trade school students by using scholarship search engines.
Federal Student Loans
The federal government offers student loans for students pursuing postsecondary education. To find out which loans you qualify for, you will have to submit the Free Application for Federal Student Aid (FAFSA).
The FAFSA opens on October 1st and closes on June 30th every year. Be sure to take note of these dates, and submit your FAFSA as soon as possible to qualify for as much aid as you can get.
You should prioritize federal student loans over private student loans, as federal student loans generally have lower interest rates, flexible repayment options, and borrower protection plans.
If scholarships, grants, and federal financial aid don’t cover the cost of tuition for you, consider getting a private student loan.
Private student loans are offered by private organizations that set their own interest rates, repayment options, and borrower protection terms.
Because private student loans operate individually and are not all partnered with the same trade schools, it can be challenging to find what private loans you qualify for with different trade schools.
Sparrow can help. If you submit a free application with us, you can see what private student loan options you have with the trade school of your choice. Here are a few of our top picks for student loans for trade school:
Sallie Mae is one of Sparrow’s lending partners that offers competitive interest rates, multiple repayment options, and no origination fee or prepayment penalty. Sallie Mae is one of the largest private student loan companies that lend to undergraduate, graduate, MBA, law, medical, dental, and career training program students.
College Ave is an online student lender that aims to simplify, clarify, and personalize the student loan borrowing experience. College Ave is known for its competitive interest rates, strong customer experience, and for allowing its customers to choose their own loan terms.
Ascent is a private student loan lender that does not require cosigners or have any application fees. They offer both outcomes-based and credit-based loans, making Ascent an extremely attractive lender for first-time borrowers and students with no credit history.
Closing Thoughts From the Nest
With the skilled labor shortage, going to trade school is a great option if you’re looking for an affordable education and to be employed quickly.
Be sure to thoroughly research trade school programs before making a selection; many trade schools differ in reputability, curriculum, student support services, accreditation, and cost. Remember that if a trade school is not accredited, you will be unable to receive federal financial aid.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Once the summer wraps up, it’s the busiest time of the year for high school seniors: college application season.
From juggling deadlines, to standardized tests, to finalizing your college list, the process of applying for college can become quite tumultuous and hectic.
If you need a breakdown on how to apply for college, here’s seven easy steps you can follow to guide you through the process.
Step One: Visit Colleges
Many students fixate on the academic fit, student culture, or prestige of colleges when forming their college list, often without considering where they will be living for the next four years of their life.
Visiting prospective colleges in-person is an important step to take when figuring out what you’re looking for in a college geographically, spatially, and climate-wise.
For example, if you’re from a big city and the college you’re visiting is in a tiny, suburban town, consider how adaptable you might be with the change. If you’ve grown up in sunny weather your entire life, consider how altered climates might impact you.
Visiting colleges is also a great way to get a feel for campuses, interact with students, and attempt to envision your four years there. After all, seeing pictures of a college campus on the Internet versus being there in person are incomparable.
If visiting colleges is not an option for you, opt-in for virtual tours that the college offers, and contact the admissions office to connect you with current students who can share their experiences with you.
Step Two: Take the ACT or SAT
Due to the COVID-19 pandemic, many universities became test-optional for the application cycle, and some even became test-optional permanently.
Test-optional is when the student is allowed to submit their college application sans standardized testing scores, without any disadvantage to their strength as an applicant.
The UC System has gone test-optional permanently, Harvard extended their test-optional policy to 2026, and now MIT has gone back to requiring standardized test scores.
Because the test-optional policy varies from school to school, be sure to determine which schools require standardized test scores so you’ll know whether or not you will need to take the ACT or SAT.
Despite the test-optional policy, students are highly encouraged to take the ACT or SAT if their circumstances allow it. A strong standardized testing score is a beneficial addition to your application, and if the schools you are applying to do not require test scores, a weak score can’t hurt your application.
When deciding between the SAT and ACT, take a timed, “real-life” attempt at a practice test for both the SAT and the ACT and see which test you do better on.
Here’s a breakdown of the structural differences between the ACT and the SAT.
Once you’ve attended both in-person and virtual college tours, spoken with students who are attending potential college options, and made a list of prospective schools, it’s time to narrow down your list.
Group your schools into safety schools, target schools, and reach schools.
Safety Schools
Target Schools
Reach Schools
A school that you’re guaranteed to get into. This can mean that:You are well above the 75th percentile for average student statistics (GPA, SAT or ACT score, etc.)
Acceptance rate is around 30%.
A school that you are a competitive applicant for, but admission is not guaranteed. This can mean that:Your GPA, class rank, and test scores are within the 50th percentile.
Acceptance rate is around 15-20%.
A competitive school that is extremely selective and admission is unlikely. This can mean that:Your GPA, class rank and test scores are lower than average.
Acceptance rate less than ~15%.
Make note of the application fees and deadlines that are specific to each school. Submitting applications can cost from $35-$90, but if you qualify for financial aid, application fees may be subsidized.
Step Four: Complete the FAFSA
The Free Application for Federal Student Aid (FAFSA) opens on October 1st and closes on June 30th. You must submit the FAFSA to be eligible to be considered for federal financial aid, such as grants, loans, and scholarships.
Financial aid is disbursed on a first-come, first-serve basis, so be sure to submit your FAFSA as soon as possible after the October 1st open date the year prior to when you plan to enroll.
Step Five: Make Note of Application Deadlines
Colleges have individual application deadlines that you should stay on top of. Create a Google sheet with the schools you are applying to, how you are applying, and which deadline to meet.
Generally, there are three ways to apply to a college: early action, early decision, and regular decision. You should note that individual research must be conducted to familiarize yourself with a school’s application processes.
Early action: You submit your application earlier than the regular deadline (usually due in the fall of your senior year) and hear whether you’ve been accepted or not from the schools earlier in the year. Early action is not binding and may increase the chances of being admitted.
Early decision: You submit your application earlier than the regular deadline and must commit to the school if you are accepted. Students generally apply early decision if they are set on attending a specific school. Students cannot apply early decision to multiple schools since it is a binding agreement.
Regular decision: You submit your application by the regular deadline (usually in the winter) and hear back from schools within the regular time frame.
Sample Way to Organize Application Deadlines:
College
Type of Application
Deadline
Yale University
Early Decision
November 1st
University of Chicago
Early Action
November 2nd
Wellesley College
Regular Decision
January 8th
University of Southern California
Regular Decision
January 15th
Step Six: Get Your Application Materials Ready
Here’s a handy list of application materials you will need when applying for college:
High school transcripts: You can access your transcripts from your high school. Schools will usually ask for either an unofficial or official transcript. An unofficial transcript is usually available online and can be easily accessed by you. An official transcript is sent from your high school to the requesting institution directly.
Letters of recommendations (usually two): Colleges will usually ask for two recommendation letters. It is encouraged that students submit one letter of recommendation from a STEM (Science, Technology, Engineering, or Math) teacher and the other from a Humanities/Social Sciences teacher. If there is the option to submit additional letters of recommendation, take advantage of this. When asking teachers for recommendation letters, be sure to ask early so that they have ample time to write a stellar letter.
Personal statement essay: Your personal statement essay is the main college essay that you will apply to every college with. It should describe an important aspect of yourself that you wish to highlight.
List of extracurriculars with descriptions: Keep your resume handy for the extracurriculars section of your college application. You will be asked to detail your extracurricular activities, highlight any awards or leadership positions, and describe your roles.
Test scores: AP Test score(s), SAT/ACT score
Be sure to check with individual schools for specific application requirements.
Step Seven: Submit Your Application
You can submit all of your college applications online through common applications, which allow you to send your application to multiple schools from one portal.
The most popular common application is the Common App, which is used by 900+ colleges.
The Coalition for College is another common application that is partnered with 150+ colleges.
Bonus Steps
While not necessarily part of the college application process, these last few steps are important in actually getting to college.
Step 8: Review Your Financial Aid Awards
Congratulations! You’ve been accepted into college and have received multiple financial aid awards to consider and compare.
You’ll want to find the net price that you’ll have to pay for the school year and compare your aid offers. The net price is the total that you pay for the school year once all scholarships, grants, and loans have been factored in.
First, create a spreadsheet with a column for each of the schools that you were accepted to.
You’ll want to record the cost of attendance, the amount of free aid that you’ve received, the amount you’ll have to borrow, and the cost of attendance when subtracted from the free aid. For an example of what this can look like, check out this table.
Take note of the following considerations: Which school offered the most financial aid? What is my family’s financial budget? Which financial aid offers are reasonable to accept, and which are not?
If you have any questions about your financial aid offer, contact the school’s financial aid office for assistance.
Step Nine: Accept the Admissions Offer and Put in Your Deposit
After much consideration, you’ve finally decided which school you want to attend from the extensive list of schools you were offered admission from.
Though it may differ from school to school, the standard acceptance deadline is May 1st, which is National College Decision Day.
When you do decide which offer to accept, you will likely be required to put a deposit down to secure your spot. Your school should instruct you on how to pay your deposit, so keep a lookout in your email for the information.
Step Ten: Explore College Financing Options
Scholarships, grants, and student loans are the three main ways that students cover the cost of tuition.
Scholarships
Scholarships are a form of gift aid that is awarded based on merit and personal achievements. You do not need to pay back any scholarships that you receive.
All students can apply for scholarships and win free money for school. Here are some of our favorite scholarship search engines:
Be sure to look into the scholarships that your school offers; the applications for these scholarships are usually due by the start of the school year.
Grants
Grants are another form of gift aid that are awarded based on financial need. Your financial aid package should include grants that you are eligible for, and you should accept all the grants that you receive because they do not have to be paid back.
Outside of the grants that you’ve received from your financial aid offer, you can apply to grants that are offered by the federal government, your state, private organizations, and your school.
Federal Student Loans
Federal student loan offers should show up in your financial aid package. These are loans offered by the federal government and generally offer better terms for undergraduate borrowers as opposed to private student loans.
Federal student loans are usually unsubsidized or subsidized. With subsidized loans, the federal government will pay the interest that accrues while you are in school. So, when you graduate, the balance on your subsidized loan will be the exact amount you borrowed. With unsubsidized loans, the government will not cover the interest that accrues. So, when you graduate, the unsubsidized loan balance will be the amount you originally borrowed plus the interest that accrued while you were in school.
If given the choice between an unsubsidized and a subsidized loan, go with the subsidized loan.
Be sure to give priority to your federal student loans and turn to private student loans as the last resort.
Private student loans are offered by private organizations, like banks and financial institutions.
These should be your last resort options, as interest rates are usually higher for private student loans and repayment plans tend to be less flexible.
When you’re looking for private student loans, Sparrow can help. Sparrow offers a free application that once submitted, matches you with private student loans you qualify for. Sign up today.
Closing Thoughts From the Nest
We hope that this step-by-step guide helps you along your college application journey. We’ve all been there before, and we know you can do it!
If you need any assistance regarding how to apply for college, reach out to your high school’s college counselor, speak with upperclassmen, and use your resources. Best of luck!
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Navigating the student loan process can be overwhelming. With so many student lenders to choose from, deciding which one you’d like to work with can be quite the challenge.
Ultimately, the best student lender for you will be the one that suits you best. That said, it’s helpful to know a bit about each of your options to make an informed decision.
The following are our picks for the best private lenders for student loans.
Best Private Student Lenders of 2022
Arkansas Student Loan Authority
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students attending higher education institutions.
College Ave is an online student lender with the mission to make the student loan process more simple, clear, and personal.
College Ave offers both private student loans and student loan refinancing for undergraduates, graduate students, professional school students, career school students, and parents of students.
Best Features:
Strong customer experience
Competitive interest rates
Ability to choose your own loan term
Drawbacks:
Strict cosigner release policy
College Ave is the best private lender for borrowers who want a more flexible repayment term that allows them to find a loan that matches their budget.
The Custom Choice Loan® is funded by Citizens. The loan option is designed to provide borrowers with greater flexibility and control when it comes to funding their college education.
The Custom Choice Loan is available for undergraduate and graduate students.
Best Features:
Competitive interest rates
Flexible repayment options
Strong customer service
Drawbacks:
Some Custom Choice Loans® are not accessible to students enrolled less than half-time.
No repayment plan shorter than 7 years or longer than 15 years
The Custom Choice Loan® is the best private lender for borrowers that want competitive interest rates, are seeking a flexible repayment term, and want strong borrower benefits.
No cosigner release option on traditional student loans; no option to add a cosigner on refinance loans
Loan products are unavailable in certain states
Earnest is the best private lender for borrowers who want competitive interest rates, unique borrower perks, and flexible repayment options that allow them to find a loan that matches their budget.
Edly offers Income-Based Repayment (IBR) loans through FinWise Bank, an FDIC-insured bank. IBR loans create an alternative loan option for students by setting post-graduation payments based on income.
Students who borrow an IBR loan from Edly will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income.
Best Features:
Loan payments are based on income.
Repayment begins when the borrower has an income of at least $30,000.
No cosigner required
Drawbacks:
The borrowing limit is capped at $25,000 per semester, which may not cover all programs.
Only available for a select group of schools
Offers a 4-month grace period, which is shorter than the typical 6-month grace period offered by other private student lenders.
Edly is the best private lender for borrowers who want a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at the borrower’s credit score or income, Funding U looks at non-traditional metrics such as GPA and estimated future income to assess creditworthiness.
Best Features:
No cosigner required
No credit history required
Variety of repayment options
Available to DACA students with a work-eligible Social Security card
Drawbacks:
Unavailable in 13 states
Maximum funding amount is $20,000, which is less than most other private lenders.
Unavailable to students enrolled less than half-time
Loan payments are required while in school.
Funding U is the best private lender for borrowers who are high-achieving undergraduate students with limited credit history and no access to a creditworthy cosigner.
INvestED is the best private lender for borrowers who are residents of or students in Indiana and want competitive interest rates and a variety of repayment options.
ISL Education Lending is a nonprofit student lender established in 1979 with the mission of supporting students and families who have exhausted other sources of aid.
LendKey is an institution that connects borrowers with a network of 100+ lesser-known credit unions and community banks, allowing borrowers to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions.
MPOWER is an online lender that works with international and DACA students to provide affordable college financing.
MPOWER offers non-cosigned undergraduate and graduate student loans for international, domestic, and DACA students.
Best Features:
Available to international, domestic, and DACA students
Provides additional assistance such as scholarship opportunities
Borrowers can receive up to 1-1.5% in rate discounts depending on the loan type.
Drawbacks:
Only one repayment term of 10 years
Higher interest rates and fees than other lenders
MPOWER is the best student loan company for borrowers who are international or DACA students, don’t have a credit history, and can’t access a qualified cosigner.
Unavailable to international students or student visas
No biweekly payment via autopay
Nelnet Bank is the best private lender for borrowers who want competitive interest rates, a variety of repayment options, and a flexible forbearance policy.
Prodigy Finance is an online student lender founded in 2007 to help international students in master’s degree programs find affordable college financing.
Best Features:
No cosigner required
No collateral required
No credit history required
Variety of repayment options
Drawbacks:
Not available in all 50 U.S. states
Limited interest and repayment options
Higher interest rates and fees than other online lenders
Prodigy Finance is the best private lender for international student borrowers with no credit history.
SoFi is an online student lender founded in 2019 and now one of the largest student loan companies in the industry.
SoFi offers both private student loans and student loan refinancing. SoFi’s student loan offering is available for undergraduates, graduates, law and MBA students, as well as parents of students.
Best Features:
Competitive interest rates
Variety of repayment options
Fast online application, flexible repayment options, and no fees
Drawbacks:
Unclear credit requirements
High loan minimum
SoFi is the best private lender for borrowers who have a high credit score and want competitive interest rates.
How to Pick the Best Private Lender for Student Loans
The best student lender will always be the one that suits you best. That said, you should look for the following qualities in a student lender:
Offers Competitive Interest Rates
The interest rate on your student loan is essentially the cost to borrow with a lender. Generally speaking, the lower the interest rate, the better. Look for a lender that offers competitive interest rates.
Strong Customer Service
The lender you select will be the lender you work with for the entire duration of your repayment term (if you don’t refinance with another lender, that is), which can be up to 15-20 years. Make sure the lender has a record of strong customer service before you agree to work with them.
Offers Flexible Repayment Options
Each private student lender will offer a different set of repayment options. While you may initially prefer one, life changes such as a different job can quickly change your repayment preferences. Make sure the lender you select has an array of repayment options so that if you need to change in the future, you have the option to do so.
Where to Find the Best Private Lender for Student Loans
To find the best private student lender for you, complete the Sparrow form. Rather than searching for student lenders one-by-one, the Sparrow form will show you what rates you pre-qualify for at over 15 different student lenders. Then, you can compare the offers side-by-side to make sure you’re selecting the best lender for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Earnest offers both private student loans and student loan refinancing.1 Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Fixed APR Range: 4.42% to 15.90%* (undergrad; includes 0.25% auto pay discount); 4.42% to 14.30%* (grad; includes 0.25% auto pay discount) Variable APR Range: 5.62% to 16.20%* (undergrad; includes 0.25% auto pay discount); 5.89% to 14.97%* (grad; includes 0.25% auto pay discount)
Loan Amounts: $1,000 up to the total cost of attendance
• Competitive interest rates • Flexible repayment options • Wide range of loan terms to match your budget • Nine-month grace period3 • Option to skip 1 monthly payment per year4 • Allows biweekly payments via autopay5
• Loans aren’t available to borrowers in Nevada • Students enrolled less than half-time are not eligible • No cosigner release
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for an Earnest student loan, you’ll have access to some of the best rates in the industry. Earnest’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate, MBA, Law and Medical Students
Fixed APR*
4.42% to 15.90%*
4.42% to 14.30%*
Variable APR*
5.62% to 16.20%*
5.89% to 15.97%*
*Rates as of November 1, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of in-school repayment options
Earnest offers you four repayment options for your student loans.6
If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students are limited to interest only and immediate repayment options.
Wide range of loan terms to match your budget
Earnest offers a wide range of loan terms to reduce the burden of your student debt. If you have a cosigner, you can choose a loan term of 5, 7, 10, 12, or 15 years. If you don’t have a cosigner, you’ll have to choose between a 10, 12 or 15-year loan term, unless you are a graduate student. In that case, you may be considered for 5, 7, 10, 12, and 15 year loan terms.6
Offers a nine-month grace period3
After you are no longer in school at least halftime – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. While most lenders offer a six-month grace period, some require immediate repayment.
Earnest, on the other hand, offers a nine-month grace period on its student loans. This can be a massive benefit if you need some extra time to find a job and stabilize your income.
Be careful though – interest starts to accrue as soon as the loan is disbursed so delaying your payments means you’ll be paying more interest over the lifetime of your loan.
Option to skip one monthly payment every year4
Earnest is the only lender that allows you to skip one monthly payment on your student loan every year. This can be incredibly helpful if you lose your job or face an unexpected expense.
In order to qualify, you must:
Make the request at least five business days before the payment is due.
Make the request after six months of timely payments of both interest and principal.
While this feature can be extremely helpful when life hits a bump in the road, do note that the principal and interest from that payment will be spread out across your remaining payments, resulting in increased monthly payments.
Allows biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, Earnest gives you the option to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
In addition to offering biweekly payments via autopay, Earnest gives you the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Earnest, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Drawbacks of Earnest Student Loans
Loans aren’t available to borrowers in Nevada
If you live in Nevada, you’ll have to consider other lenders for your private student loan. A variety of lenders offer private student loans to borrowers in Nevada, such as College Ave, Ascent, and more.
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through Earnest. If you’re studying less than half-time, you may want to consider another lender for your private student loan.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky. Unfortunately, Earnest does not offer any form of cosigner release. Instead, you will have to apply to refinance your student loan, which is only available once you’ve graduated.
Earnest: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.42% to 15.90%* (undergrad); 4.42% to 14.30%* (grad)
Variable APR Range
5.62% to 16.20%* (undergrad); 5.89% to 15.97%* (grad)
Loan Terms
For cosigned loans: 5, 7, 10, 12 or 15 years.6 For solo borrowers: 10, 12 or 15 years.6 For graduate students with non-cosigned loans, you may be considered for 5, 7, 10, 12, and 15-year loan terms.6
Loan Amounts
$1,000 up to cost of attendance.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
$35,000 for cosigned loans.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
65%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Primary borrower must have a Social Security number. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident.
Location
Not available to borrowers in Nevada.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Fixed repayment: Pay $25 a month during school.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
9 months.
In-school Deferment
Yes.
Military Deferment
Yes.
Internship, Residency, or Fellowship Deferment
Borrowers can defer payments for up to 48 months during a medical residency, internship, or fellowship program.
Forbearance
Up to 12 months available.
Cosigner Release
No. Borrowers may refinance with Earnest and release their cosigner.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Earnest.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Online application: a few minutes. Approval: Varies by applicant.
Before you take out a loan from Earnest…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Earnest7 a legitimate lender?
Yes, Earnest is a legitimate lender that was founded in 2013 and has been providing private student loans since 2019.
Is Earnest available in all 50 states?
Earnest is available in all 50 states except Nevada.
How long does it take to get an Earnest student loan?
Submitting an application through Earnest takes a few minutes. Once you’ve submitted your loan application, Earnest will return a decision about your eligibility, but the exact timeline of this response varies by applicant. If you qualify, you will receive the rate and terms of your loan.
What happens if I don’t qualify for an Earnest student loan?
If you don’t qualify for an Earnest student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Earnest student loans federal or private?
Earnest loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.8
Does applying for a loan through Earnest hurt my credit score?
Applying for a loan through Earnest could hurt your credit score. Earnest has both eligibility check (hard credit check that may temporarily impact your credit score) and rate check (soft credit check, which will not impact your credit score).
Earnest Disclosures
1 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for total cost of your refinanced loan.
2 Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.67% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 16.35% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
3 Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.
4 Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
5 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
6 Earnest’s Loan Cost Examples: These examples provide estimates based on principal and Interest payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $118.28) and a 11.69% APR would result in a total estimated payment amount of $21,290.40. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $126.82) and a 13.03% APR would result in a total estimated payment amount of $22,827.79.
These examples provide estimates based on interest only payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $145.41) and a 11.69% APR would result in a total estimated payment amount of $26,173.03. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $156.59) and a 13.03% APR would result in a total estimated payment amount of $28,186.67. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on fixed $25 payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $169.92) and a 11.69% APR would result in a total estimated payment amount of $30,584.74. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $188.42) and a 13.03% APR would result in a total estimated payment amount of $33,915.55. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on deferred payments. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $174.79) and a 11.69% APR would result in a total estimated payment amount of $31,462.16. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $193.75) and a 13.03% APR would result in a total estimated payment amount of $34,874.28. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
7 Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.
Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant and work-study opportunities. 2) Next, fill out a FAFSA® form to apply for federal student loans. Federal student loans do not require a credit check or cosigner, and offer various protections if you’re struggling with payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.
Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
Earnest offers both private student loans and student loan refinancing.1 With competitive interest rates, customizable repayment plans, and a forward-looking eligibility criteria, Earnest is a good fit for borrowers who don’t have a cosigner but have a strong credit score.1
Fixed APR Range: 4.96% to 9.79%* (includes 0.25% auto pay discount)
Variable APR Range: 5.49 % to 9.74%* (includes 0.25% auto pay discount)
Loan Amounts: $5,000 ($10,000 for California residents) to $500,000
• Competitive interest rates • Customizable payments and loan terms • Merit-based rates • Option to skip one monthly payment every year3 • Allows biweekly payments via autopay4
• Refinancing is unavailable in Kentucky and Nevada • Variable interest rates aren’t available for borrowers in all states • You can’t apply with a cosigner • Student borrowers cannot take over parent PLUS loans that parents took out on their behalf
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan refinance search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Competitive interest rates and zero fees for qualified borrowers
When looking to refinance your student loan, finding a low interest rate is typically a top priority. If you qualify to refinance through Earnest, you’ll have access to some of the best rates in the industry. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Earnest Student Loan Refinancing
Fixed APR*
4.96% to 9.79%*
Variable APR*
5.49 % to 9.74%*
*Rates as of September 28, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Customizable payments and loan terms
Earnest offers expansive repayment options that allow you to customize your terms before locking in your loan. Unlike most lenders, Earnest allows you to set the exact payment amount you want without being restricted to standardized options that are not right for you. In addition, you can even specify the exact number of months in which you want to pay off your loan.
If you are looking for a lender that offers flexibility to match your monthly payments to your budget, Earnest is an excellent option for you.
Earnest offers a unique merit-based underwriting process that allows you to get approved with even a short or nonexistent credit history. Earnest’s underwriting approach looks at traditional financial data (credit score) as well as alternative financial data (bank account information) to provide personalized loan offers.
This can save you thousands, or even or tens of thousands, of dollars over other lending options that only look at your credit score to determine your rates.
Option to skip one monthly payment every year3
Earnest is the only lender that allows you to skip one monthly payment on your student loan every year. Therefore, this can be incredibly helpful if you lose your job or face an unexpected expense.
In order to qualify, you must:
Make the request at least five business days before the payment is due.
Make the request after six months of timely payments of both interest and principal.
While this feature can be extremely helpful when life hits a bump in the road, do note that the principal and interest from that payment will be spread out across your remaining payments, resulting in increased monthly payments.
Allows biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, Earnest gives you the option to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
In addition to offering biweekly payments via autopay,4 Earnest gives you the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Earnest, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Earnest also allows borrowers to make same-day payments and schedule multiple extra payments at once.
Refinancing isn’t available to borrowers in Kentucky and Nevada
If you live in Kentucky or Nevada, you’ll have to consider other lenders to refinance your private student loan. Complete the Sparrow application to compare real rates from more than 17 different lenders to make sure you’re getting the best rate possible.
Variable interest rates aren’t available to borrowers in all states
Variable interest rates are not available to borrowers in Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas. So if you’re a borrower from one of these states and set on a variable interest rate, you’ll want to explore other lenders.
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can typically help you qualify for better loan terms. However, Earnest does not allow you to apply for refinancing with a cosigner.
Student borrowers cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). However, Earnest does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through Earnest — it will just be in your name, not the student’s name.
Choose a term between 5 and 20 years.5 Choose a precise loan term, down to the month.
Loan Amounts
$5,000 ($10,000 for California residents) to $500,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
No minimum. Applicants must have a written job offer for employment starting within six months or have consistent income.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
$135,000.
Maximum Debt-to-Income Ratio
65%.
Ability to qualify if you’ve filed for bankruptcy
Yes, if you don’t have accounts recently in collection and after the bankruptcy drops off your credit report. This happens after seven years for Chapter 13 bankruptcy and after 10 years for Chapter 7.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or possess a 10-year, non-conditional green card.
Location
Not available to borrowers in Kentucky and Nevada. Variable rates aren’t available to borrowers in Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas.
Must have graduated
Yes, but you may be able to refinance in your last semester before graduating if you have an income or job offer.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
Borrowers cannot apply with a cosigner.
Repayment Options
In-school Deferment
Yes.
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Up to 12 months available, in 3-month increments, if you have: • An involuntary decrease in income, such as a reduction in hours, unpaid leave, or a change from full-time to part-time employment. • An involuntary loss of employment at no fault of your own. • A significant increase in essential costs such as medical expenses, emergency home repairs, or child care.
Cosigner Release
There’s no option to add a cosigner, but refinancing removes the original cosigner.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No option for a cosigner.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Earnest.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
No.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff/application to approval
Timeline varies by applicant, but generally, 2-5 business days.
Before you take out a loan from Earnest…
Complete the Sparrow application to compare real rates from more than 17 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Earnest a legitimate lender?
Yes, Earnest is a legitimate lender that was founded in 2013. The online lender has helped over 164,000 borrowers refinance $14.5 billion in student loans.
Are Earnest student loans federal or private?
Earnest loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.6
No. Earnest is not available to borrowers in Kentucky and Nevada. In addition, variable rates aren’t available to borrowers in Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas.
How long does it take to refinance my student loan through Earnest?
Submitting an application through Earnest takes a few minutes. Once you’ve submitted your loan application, Earnest will return a decision as soon as possible, typically within 2-5 business days. Then, if you qualify, you will receive the rate and terms of your loan.
Does applying for a loan through Earnest7 hurt my credit score?
Earnest has both eligibility check (hard credit check that may temporarily impact your credit score) and rate check (soft credit check, which will not impact your credit score).
What happens if I don’t qualify for student loan refinancing through Earnest?
If you don’t qualify for refinancing through Earnest, the company will inform you why. Then, depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you get the best rate.
1 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.
2 Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.21% APR to 10.04% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.74% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 9.13% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.21%. For loan terms over 15 years, the interest rate will never exceed 9.24%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
3 Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
4 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
5 Earnest’s Loan Cost Examples: These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.
6 You may lose benefits associated with your underlying federal and/or private loans if you refinance such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options. If you file for bankruptcy, you may still be required to pay back this loan.
7 Loan Eligibility criteria: Your debt is from paying for education at a Title IV accredited school. The debt is from your education or your child’s. The debt you’re refinancing is for a completed degree or one that will be completed at the end of this semester. You are currently the primary borrower on the student loans you would like to refinance, and you will remain the primary borrower after refinancing. You must reside in the District of Columbia or one of the 47 states Earnest Operations LLC is authorized to lend in (all but Delaware, Kentucky, and Nevada). This is strictly a student loan refinance product. There is no opportunity to borrow more than your outstanding qualifying student loan amount. You must be the age of majority in your state or older at the time you apply, as well as be a United States citizen or Permanent Resident Alien without conditions. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX.
Earnest Loans are made by Earnest Operations LLC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit www.earnest.com/licenses for a full list of licensed states. For California residents: Loans will be arranged or made pursuant to a California Financing Law License.
Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
The best student loan will always be the one that meets your needs best. That said, it’s helpful to start the process with a list of strong options to make navigating the process easier.
Here are our top picks for the best places for private student loans.
The loan options shared are in no particular order. Interest rates reflected in this article were last updated on 03/06/23. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EdvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 7.00% to 10.57% Variable Interest Rate: 8.12% to 11.02% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44 to 13.80% (undergrad); 4.99% to 13.60% (grad) Variable Interest Rate: 5.99% to 14.30% (undergrad); 5.99% to 14.10% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Private student loans are provided by private entities such as banks, credit unions, and other financial institutions. Because each lender is its own unique entity, their eligibility requirements will vary. There are a couple of requirements, however, that are fairly standard:
Be Enrolled in an Eligible Program
Private student loans can only be used for educational purposes. So, in order to be considered for a private student loan, you’ll need to be enrolled in an eligible program.
Be a U.S. Citizen, Permanent Resident, or Eligible International Student
Most private student lenders will require you to meet certain residency requirements. If you are a U.S. citizen or permanent resident, you will be eligible with most student lenders.
If you are an international student, certain student lenders may require you to apply with an eligible U.S. citizen or permanent resident cosigner. If you do not have a cosigner available, you can explore loan options with companies such as MPOWER and Prodigy Finance, who work specifically with international students with no Social Security Number or cosigner.
How to Pick the Best Place for Private Student Loans
The Annual Percentage Rate (APR) of a student loan is the annual interest rate you will incur, plus any additional fees or costs the lender tacks on. APR is typically one of the most important elements of a student loan because it’s essentially what you’ll be “charged” each year to borrow the loan.
The Type of Interest Rate You Prefer
Student loan interest rates are either fixed or variable. Fixed interest rates will remain the same throughout the life of the loan. Variable interest rates are subject to change in response to the market. If you prefer one over the other, make sure the loan you borrow has that type of interest rate.
A Repayment Plan That Suits You
Each student lender will offer a different set of repayment plans. Like other loan features, the best repayment plan will be the one that suits you best. For example, if you know you prefer a standard repayment plan, make sure the lender you choose offers it.
A Monthly Payment You Can Afford
Once the loan enters repayment, you will be responsible for making a minimum monthly payment. Your exact monthly payment will depend on your interest rate, repayment plan, and repayment term. Before agreeing to a loan, estimate your future monthly payment to make sure it’s affordable given your predicted post-graduate salary.
A Flexible Cosigner Release Policy
To borrow a student loan, you may need a cosigner to qualify. While some cosigners are comfortable remaining on the loan until it’s paid off in its entirety, others may prefer to be released from their responsibility. If you or your cosigner would like the option to release your cosigner later on, look for a lender with a flexible cosigner release policy.
What is the Best Place for Private Student Loans?
There is no one-size-fits-all approach to student loans. The best student lender for you will be the one that offers you the best interest rate and loan terms.
To find the student lender that suits you best, complete the Sparrow form. In as little as 3 minutes, we’ll show you what rates you pre-qualify for at our 15+ partner lenders. Then, you can compare the loan rates side-by-side to be sure you’re picking the best option for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
College is on the horizon and you’ve never felt more excited. You’ve already got plans for what you’ll do to your dorm and what classes you’re going to take. But there’s just one little problem: student loans. You know you might need to take out some student loans for college, but you just don’t know if you should. And if you did decide to get student loans, you wouldn’t know where to start. Sound familiar?
If you’ve ever thought “what is a student loan?,” here’s what you need to know.
What Is a Student Loan?
A student loan is a form of financial aid where you borrow money for college from a lender with the expectation that it’s going to be paid back. There are two main types of student loans you need to know about — federal and private.
Federal Student Loans
Federal student loans are issued by the federal government. There are four basic types of federal loans that you can get.
Direct Subsidized Loans are for eligible undergraduate students who have financial need.
Direct Unsubsidized Loans are available for undergraduate, graduate, and professional students.
Direct PLUS Loans are available to graduate or professional students and parents of students.
Because these are all part of a federal student aid program, you can find the applications on the Federal Student Aid website. To apply for Direct Subsidized and Unsubsidized Loans, fill out the FAFSA. This application will also determine if you have any financial need based on factors like your annual income or your income level. To apply for Direct PLUS and Direct Consolidationloans, complete their individual applications.
Private Student Loans
Private student loans are issued by private lenders such as banks, credit unions, and financial institutions. To be eligible for private student loans, you must have at least a strong credit score and a steady income. Additionally, each lender will also have their own set of requirements that you’ll have to meet. Be sure to talk to lenders about their qualifications. You’ll also want to ask them about their application since each private loan will have its own application process.
How Do Student Loans Work?
The basic idea of student loans is that, unlike with scholarships and grants, you are borrowing the money which will have to be paid back over time with interest. Calculated as a percentage of your loan amount, student loan interest is essentially the cost of borrowing student loans. It’s what lenders will get for letting you borrow their money.
The amount you pay in interest will depend on a variety of factors such as your interest rate, your loan amount, and the length of your loan term. Generally speaking, the higher your interest rate and the longer your loan term, the more you will pay over the life of the loan. Take a look at the table below to get a better idea of this.
Loan #1
Loan #2
Loan #3
Loan Amount
$10,000
$10,000
$10,000
Interest Rate
5%
3%
5%
Loan Term
10 years
10 years
5 years
Total Interest
$2,727.86
$1,587.29
$1,322.74
Notice how although all the loans have the same loan amount, the differences in their interest rates and loan terms impact how much total interest is paid. Both Loan #1 and Loan #2 have a loan term of 10 years but two different interest rates. The difference in those interest rates results in saving nearly $1,200 with Loan #2. Similarly, Loan #1 and Loan #3 have the same interest rates but different loan terms. This time the difference results in about $1,400 in savings.
Even the smallest changes to your loan term or interest rate can have an impact on how much you’ll pay over the life of the loan.
Why Do Students Get Student Loans?
Student loans are a great resource to help fill in the gaps in paying for college. Because the cost of college is getting so high, students often don’t have the money to pay for it out of pocket. So, they’ll resort to financial aid like scholarships, grants, and loans.
Do You Have to Pay Back Loans?
Yes. The money is borrowed, which means it has to be paid back. You’ll do this by making monthly loan payments over a period of time. There are different repayment plans available to federal and private student loans. The exact repayment plan you should get will depend on your financial situation and what you think is best for you.
Monthly payment is 10-20% of your discretionary income
Repayment period is between 20-25 years
Graduated Repayment Plan
Monthly payments start out low and gradually increase over repayment term
Repayment period is 10 years
Can be difficult if your future income doesn’t grow as expected
Extended Repayment Plan
Lower monthly payment compared to other plans
Repayment period is extended to 25 years
Pay more interest over time
Private Student Loan Repayment Options
The private student loan repayment options available to you will depend on what your private lender offers. That said, there are four standard plans that you’ll typically hear about:
Immediate Repayment
Start repayment as soon as the loan is disbursed
Must make full payments even while in school (monthly loan payment + monthly interest payment)
Interest-Only Repayment
Start repayment as soon as the loan is disbursed
Only make full interest payments while in school
Partial Repayment
Start repayment as soon as the loan is disbursed
Only make partial interest payments while in school
Deferred Repayment
Start repayment after grace period ends, usually 6 months after graduation
Must make full payments (monthly loan payment + monthly interest payment)
Is a Student Loan a Good Idea?
Student loans are a great form of aid that can help college students afford an education that would otherwise be challenging to pay for. But, it’s important to be realistic. Keep in mind that you’re borrowing money you will pay back with interest, so only take out what you need, and have an idea of how you’ll pay it back. Also, do your research on loans and how they work to help you stay ahead. As long as you do these things, you can keep your loans from becoming the ghost that haunts you at night.
Final Thoughts from the Nest
Student loans are a great resource to help pay for college as long as you are mindful about how you use them. Think about what kind of loan you want, how much money you need, and how you’ll start repayment. Don’t forget that Sparrow is here to help. The Sparrow application can match you with what private student loans you qualify for with any of our 15+ partnering lenders. Sign up to get started now.
According to Education Data, American parents save $5,143 annually for their kid’s college, on average. Without this parental support, paying for college can feel out of reach. However, each year, thousands of students pay for college on their own, successfully utilizing a variety of resources to support them.
Here’s how you can pay for college without your parents’ help.
#1: Start Saving Early
While there are a variety of recommendations regarding how much to save, the approaches may not be feasible if you are paying for college on your own. So, rather than focusing on saving a certain amount, focus on saving as much as you can. Consider picking up a side hustle or part-time job prior to college to provide you with an additional income.
If you are in a position where you are unable to direct any income towards saving for college, don’t worry — you aren’t out of luck. While helpful to have some cash to put towards college, it isn’t a make-it-or-break-it factor.
#2: Utilize AP Classes
As a high school student, you may be offered the opportunity to take AP courses. While these courses require additional labor, they can save you thousands of dollars if counted for college credit.
What are AP Credits?
The Advanced Placement (AP) program was created by the College Board to provide high school students the opportunity to take college-level courses and earn college credit for doing so. The program offers a wide variety of courses, from AP English Language and Composition, to AP US History, to AP Psychology.
At the culmination of each course, AP students are offered the option to take the AP exam. If you score sufficiently on it, you could gain college credit and skip the equivalent course in college. Skipping the equivalent college course could allow you to graduate early, which in turn could save you thousands of dollars in tuition and fees.
How Much Can AP Credits Save You in College?
The amount of money AP credits can save you varies greatly depending on the courses you take, the school you choose to attend, and the major you decide to enroll in.
Each school will have its own unique AP credit policy. So, while some schools may only accept 5s on the AP exam (the highest you can score), other schools may accept 3s and up. Likewise, some programs may require you to take all of the major courses at the school itself, which could discount your AP credit. Let’s break this down with an example.
Let’s say you apply to the University of Connecticut.
If you take the AP English Language and Composition exam, you will only be eligible for the equivalent UConn course credit if you score a 4 or 5. However, if you took the AP Calculus BC exam, you would only need to score a 3 to be eligible for the equivalent UConn course credit.
If you do earn a qualifying score, though, you would earn anywhere from 3 to 6 credits on average. At UConn, 15 credits is the average semester course load. So, if you took 5 AP courses throughout your high school career and earned qualifying scores on all exams, you may be able to knock an entire semester off of your college career at UConn.
At UConn, out-of-state tuition is around $20,000 per semester. So, in theory, the AP credits could save you nearly $20,000.
While this will change from school to school, the same idea applies. Depending on the courses you take, the school you attend, and your AP score, you could save a decent chunk of money.
How to Find Out Where Your AP Score Counts
If you applied to multiple schools, check to see which school(s) will accept your AP scores for credit. Simply search for “[school name] AP credit policies” to find each school’s policy.
If you already have your AP test scores in hand, check to see which scores will qualify for the equivalent course credit at each school. If you don’t have your test scores yet, see which school takes lower scores. The lower the accepted score, the more likely you are to score high enough for it to count for credit.
If you have specific questions regarding how your AP credits could help you graduate early, reach out to your intended college’s program directly. They will be able to provide you with a more accurate assessment of how your AP credits may be applied to your degree to save you money in the long run.
#3: Be Strategic About Which School You Choose to Apply To
The cost of college will differ greatly depending on the type of school you choose to attend. For example, while the average cost of a 4-year in-state public institution is $25,487 per year, the average cost of a full-time in-district community college program is $3,730 per year.
When paying for college without your parents’ help, you may find more affordable college options more appealing. Consider the average cost of each college program when deciding where to apply.
Likewise, consider the application fees of each school. To avoid paying hundreds of dollars in application fees, narrow down your list of schools to the ones you could truly see yourself attending. For the ones you do apply to, contact the school directly to ask about an application fee waiver. Many schools waive application fees for students like yourself who are navigating the college process without parents.
#4: Apply for Scholarships
Scholarships are essentially free money. (Yup, money you don’t have to pay back.) So, it’s recommended that you exhaust all scholarship options before considering student loans.
Throughout the search process, you will encounter a variety of scholarship opportunities, such as academic scholarships, private scholarships, institutional scholarships, and need-based scholarships.
To find scholarships to apply to, consider the following sites:
Sallie Mae’s Scholarship Search Tool: While Sallie Mae is one of the most well-known private student loan companies, they also offer a robust scholarship search engine. After registering, the engine will send you customized scholarship recommendations based on your profile.
Scholarships.com: As one of the most established scholarship websites, Scholarships.com has reported nearly $19 billion in scholarships, making it a great place to search for and apply to scholarships.
Chegg.com: Chegg is well-known for its textbook rental service and homework help, but it’s also a great resource for scholarships. Chegg offers over 25,000 scholarships and tutors to help review your scholarship essays before you submit them.
Fastweb.com: Fastweb has over 1.5 million scholarships in its database and will send you personalized application recommendations based on your profile. The platform will even email you when deadlines are approaching so you don’t miss any opportunities.
Niche.com: Niche.com is known for providing insight on colleges and universities from over 140 million real reviews and ratings. However, the site also offers a wide variety of scholarships, using a similar matching process as other platforms.
Cappex.com: Cappex database holds over $11 billion in scholarship opportunities and allows you to narrow your search based on a variety of factors.
#5: Apply for Financial Aid
If you are an independent student, you do not need your parents’ information to apply for federal student aid through the FAFSA. If you are a dependent student, however, you will need your parents’ information to complete the form.
Dependent vs Independent Student
For financial aid purposes, you are considered an independent student if you are at least one of the following:
At least 24 years old
A graduate/professional student
An orphan or ward of the court
An emancipated minor
Married
Someone who is homeless or at risk of being homeless
Have legal dependents (children)
Have a dependency override from a financial aid administrator with proper documentation
If you are at least one of the above, you are considered an independent student. To see what federal financial aid you qualify for, complete the FAFSA.
If you do not identify with any of the above, you are considered a dependent student. If able, you should complete the FAFSA with your parents’ information. You will need information such as:
Social Security Numbers
Tax information
Family income information
Records of untaxed income
Information on any financial assets you or your parents may have
If you are considered a dependent but obtaining that information from your parents is not possible for whatever reason, you should consider filing for a dependency override. A dependency override allows you to file as an independent despite being considered a dependent by the above criteria. You can file a dependency override for the following reasons:
An abusive family environment (ie. sexual, mental, physical, or other forms of domestic violence)
Abandonment by parents
Incarceration or institutionalization of both parents
Parents lacking the mental or physical capacity to raise a child
Parents cannot be located
Unsuitable household (ie. child is removed from the home and placed in foster care)
A married student’s spouse dies or gets divorced
Filling out the FAFSA can provide you with access to thousands of dollars in financial aid. Make sure to complete the form as soon as you can after the October 1st open date.
#6: Compare Aid Offers Carefully
Without financial support from your parents, finding an affordable school will likely be a top priority. So, when you receive financial aid packages from each school, be sure to compare the aid offers carefully.
Start by writing down the following information for each school:
The cost of attendance
The free aid you won’t have to pay back (ie. scholarships, grants, etc.)
The cost to attend after subtracting the free aid
The aid you would have to pay back (ie. any federal student loans you were offered and any private student loans you would need to take out)
For example, let’s say you applied to the University of Connecticut, Eastern Connecticut State University, and the University of Bridgeport as an in-state student. You also won $6,000 total in private scholarships — one $5,000 scholarship and one $1,000 scholarship. Comparing aid offers may may look like:
$5,000 in federal student loans Remaining balance: $14,760
*For the sake of this example, the cost of attendance metrics used are for an in-state, on-campus student. The other metrics are random numbers just used to illustrate the concept.
Comparing the offers side-by-side will allow you to see which school is most affordable. In this example, you can see that while the University of Bridgeport offered more scholarship money than Eastern Connecticut State University, the difference in tuition still makes ESCU more affordable. Make sure to compare your aid offers carefully to determine which school is best for you financially.
#7: Don’t Be Afraid to Ask For More
It never hurts to ask for more financial aid, especially if your parents are claiming you as a dependent student but not helping you pay for college.
To appeal your financial aid, simply submit a financial aid appeal letter to the school’s financial aid office. Make sure to address the financial aid director by name, be polite, and provide appropriate documentation. You can use a financial aid appeal letter template to craft your letter.
#8: Use Savings First
When it comes time to actually confront the bill, dip into your savings first only if you have an emergency savings set up.
Most financial professionals recommend an emergency savings that is at least 3 months of your typical expenses. So, if you know you typically spend around $1,500 per month, you’ll want to have an emergency savings of $4,500.
While putting some of your savings towards your college education is helpful, you should not do so at the expense of putting yourself in an unstable financial situation. If you do have savings, however, consider putting what you can towards your tuition bill.
#9: Consider Student Loans
While helpful, student loans should be somewhat of a last resort as you will have to pay them back with interest.
First, look at the federal student loans offered to you in your financial aid package. Federal student loans will typically have lower interest rates than private student loans as well as more flexible repayment terms.
If you were not offered federal student loans, or if federal student loans do not cover your remaining balance, consider private student loans. If you are applying without a cosigner, you will likely need a strong credit score to qualify on your own. If you don’t have a strong credit score, consider non-cosigned loan options.
The most efficient way to find a student loan option that you qualify for is to use Sparrow. Sparrow allows you to compare loan options from 15+ premier student lenders in one place. This allows you to rest assured knowing you found the best loan option available to you.
#10: Get a Part-Time Job or Side Hustle During School
Picking up a part-time job or side hustle can help you pay for college expenses such as books and other course supplies during the school year. Depending on how much you’re able to bring in, you may be able to pocket some of the money to pay for the following year’s tuition. Reach out to your school’s office of student employment to inquire about on-campus positions, or consider off-campus positions that may pay more.
#11: Ask for Help
Paying for college without your parents’ help may be overwhelming, but know that there are resources available to help. If at any point you feel confused about the next step or how to handle a certain aspect, ask for help.
Undergraduate students have a wide range of student loan options to choose from, making the selection process that much more important.
Before agreeing to any one loan, it’s important to understand your options, the pros and cons of each, and how your student loan decision impacts your future.
The following are our top picks for the best private student loans for undergraduates.
The loan options shared are in alphabetical order. Interest rates reflected in this article were last updated on 03/06/23. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700
Fixed Interest Rate: 5.05% to 16.99% Variable Interest Rate: 5.49% to 16.99% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans
Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90%* Variable Interest Rate: 5.62% to 16.20%* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A
Best for: Borrowers who don’t have a strong credit score and want an income-based repayment (IBR) loan.
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670
Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660
Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% maximum (14.75% APR) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Fixed Interest Rate: 4.49% to 15.47% Variable Interest Rate: 6.29% to 15.51% Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner
Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44% to 14.70% Variable Interest Rate: 5.99% to 13.97% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose
Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Before selecting a student loan, you should consider a variety of factors to ensure it’s a good fit for you:
Does the loan require a cosigner? Some private student loans will require you to have a cosigner if you do not meet the minimum credit requirements. As an undergraduate, you may not have enough credit history to have a qualifying credit score, and thus, you may need a cosigner. If you do not have access to a creditworthy cosigner, you will want to consider student loan options that do not require a cosigner or have a flexible minimum credit score requirement.
What is the interest rate? One of the most important factors of a student loan is the interest rate. The interest rate will determine the cost of borrowing the loan and can drastically change how much you pay over time. The general rule of thumb when it comes to interest rates is the lower the better. Before agreeing to borrow a student loan, make sure to calculate the total cost using a student loan payoff calculator.
Are payments required while in school? While most private student lenders will allow you to defer payments until after graduation, some may require you to make payments while in school. If this won’t be feasible for you, make sure the lender you choose has a deferred repayment option.
What Type of Loan is Best for Undergraduate Students?
Federal student loans will typically have lower interest rates and more flexible repayment options than private student loans. So, you should start the student loan process for undergrad by submitting the FAFSA. The information you provide on the FAFSA will determine your eligibility for federal student loans.
However, if you do not receive federal student loans in your financial aid package, you should consider your private student loan options. Unlike federal student loans, private student loans typically require you to meet certain credit requirements. To see which private student loan options you qualify for without hurting your credit, complete the Sparrow application.
With that said, the best student loan option will always be the one that works best for you. You should start by considering federal student loan options, then utilize private student loans to fill in any remaining gaps.
How Your Student Loan Choice Impacts Your Future
The student loan you choose as an undergraduate can impact your future quite a bit. Both the interest rate and the loan terms will impact how much you pay over the life of your loan as well as the monthly payment you are responsible for post-graduation.
For example, a $30,000 student loan with a 6% interest rate will cost you $45,568 over a 15-year repayment term. This will break down to a monthly payment of around $253.
By comparing your loan options side-by-side, you may discover another private student loan at a 4% interest rate. This loan option would only cost you $39,943 over a 15-year repayment term, with monthly payments of $222.
The difference in interest would save you nearly $6,000 over the life of the loan and around $30 on your monthly payments. This is why it is crucial to compare your student loan options carefully as an undergraduate student. Your post-grad self will thank you.
Final Thoughts from the Nest
There is no single best private student loan for undergraduates. The best student loan option will always be the one that works best for you. So, be sure to compare your options carefully and select the loan you feel suits you best.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
ISL Education Lending is a nonprofit student loan lender offering both private student loans and student loan refinancing. ISL Education Lending refinance loans are best for borrowers who want to work with a nonprofit lender, want competitive interest rates, on-site loan servicing, or want to refinance without having a degree.
Fixed APR Range: 6.94% to 11.83%
Variable APR Range: N/A
Loan Amounts: $5,000 ($10,000 for California residents) to $300,000
• Competitive interest rates and zero fees • You can refinance without a degree • Cosigner release option after 24 months
• Only one loan repayment term for in-school refinancing • Students cannot take over parent PLUS loans that parents took out on their behalf • No biweekly payment via autopay
Best Features of Refinancing with ISL Education Lending
Competitive interest rates and zero fees
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for an ISL refinance loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, or prepayment penalties.
You can refinance while in school and without a degree
While most lenders require you to have graduated in order to refinance, ISL allows you to refinance in school or without a degree.
Cosigner release option after 24 months
If you need a cosigner for your refinance loan, ISL might be a good option for you. Unlike several other lenders, ISL allows you to release your cosigner after the first 24 months of consecutive timely payments and meeting the underwriting and credit criteria at the time the cosigner release is requested. This can be helpful if you want to build credit in your own name.
Drawbacks of Refinancing with ISL Education Lending
Only one loan repayment term for in-school refinancing
While very few lenders offer refinancing while still enrolled, if you refinance with ISL while still in school, you will only have a 15-year repayment term.
Students cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). Unfortunately, ISL does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through ISL — it will just be in your name, not the student’s name. However, you can request your student to be a cosigner on the loan.
If you’re looking for a lender that does allow you to transfer parent PLUS loans to the student, you may want to consider another lender.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you refinance through ISL, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With ISL, you can set this up automatically so that the desired monthly payment is drawn from your bank account each month.
ISL Education Lending: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
6.94% to 11.83%
Variable APR Range
N/A
Loan Terms
5, 7, 10, 15, or 20 years.
Loan Amounts
$5,000 ($10,000 for California residents) up to $300,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
670.
Minimum Income
N/A – No income requirement.
Typical Credit Score of Approved Borrowers or Cosigners
750; 760 for cosigners.
Typical Income of Approved Borrower
N/A – No income requirement.
Maximum Debt-to-Income Ratio
40%. Can be 45% for those with a mortgage making a combined income of >$100,000, or 25% if no mortgage or rent is included.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers in all 50 states except Maine and Oregon.
Must have graduated
No.
Must have attended a school authorized to receive federal aid
No.
Percentage of borrowers who have a cosigner
Around 37%.
Repayment Options
Academic Deferment
Yes, borrowers are eligible for up to 24 months of general deferment which can be used for academic purposes. There is no specific academic deferment.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
No.
Cosigner Release
Yes, after the first 24 months of consecutive on-time payments if underwriting and credit criteria is met.
Death or Disability Discharge
Yes, the loan will be forgiven if the borrower dies or becomes permanently disabled, even if the loan is cosigned.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Aspire Servicing Center.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
5-7 days.
Before you take out a loan from ISL Education Lending…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is ISL Education Lending a legitimate lender?
Yes, ISL is a nonprofit student lender that offers both student loan refinancing and private student loans.
Is ISL Education Lending available in all 50 states?
No, ISL is not available in Maine or Oregon.
How long does it take to get an ISL Education Lending refinance loan?
Submitting an application through ISL takes a few minutes. Once you’ve submitted your loan application and submitted documents for underwriting purposes, ISL will review and return a decision, typically in one day. If you qualify, you will receive the rate and terms of your loan as soon as ISL pulls your credit. You will not need to wait until after documentation has been submitted to receive your rate.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for an ISL Education Lending refinance loan?
If you don’t qualify for an ISL Education Lending refinance loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are ISL Education Lending refinance loans federal or private?
ISL loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options. If you are refinancing federal student loans, you may be forfeiting important benefits. Be sure to understand what federal loan benefits you may lose before you choose to refinance federal student loans.
Does applying for a loan through ISL Education Lending hurt my credit score?
In order to estimate what rate you qualify for, ISL conducts a soft credit check, which does not affect your credit score. If you choose to move forward and apply for the ISL loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
INvestED offers private student loans, parent loans, and student loan refinancing. INvestED’s student loan refinance offering is best if you are a resident of Indiana or student who attended school in Indiana seeking competitive interest rates and a variety of repayment options.
• Competitive interest rates • You can refinance without a degree • Offers up to 36 months of academic deferment
• Only available to students that are residents of or attended school in Indiana • No biweekly payment via autopay • You can’t refinance parent PLUS loans in your name • Cosigner release option after 48 months of timely payments
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify to refinance your student loans through INvestED, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, or prepayment penalties.
INvestED Student Loan Refinance
Fixed APR*
5.85% – 9.48%
Variable APR*
8.63% – 12.27%
*Rates as of November 1, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
You can refinance without a degree
While most lenders require you to have graduated in order to refinance, INvestED allows you to refinance in school and without a degree.
Offers up to 36 months of academic deferment
After refinancing your loan with INvestED, borrowers are eligible for up to 36 months of academic deferment if you decide to enroll in a graduate program at least half-time. This allows you to postpone making payments for 36 months while you pursue another degree.
Drawbacks of Refinancing with INvestED
Only available to students that are residents of or attended school in Indiana
While INvestED offers a high-quality student loan refinancing option, it is unfortunately only available to borrowers who are residents of Indiana or attended school in Indiana. If you are neither, you will need to apply with a different lender.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through INvestED, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With INvestED, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
You can’t refinance parent PLUS loans in your name
If your parent has taken out a Parent PLUS loan or a private student loan in their name, your parent will not have the option to refinance that loan or transfer the loan to your name when refinancing with INvestED.
Cosigner release option after 48 months
While INvestED offers the option to add a cosigner, their cosigner release policy does require 48 months of on-time payments, which is longer than some other lenders. INvestED could improve by offering a lower payment requirement for cosigner release.
INvestED: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
5.85% to 9.48%
Variable APR Range
8.63% to 12.27%
Loan Terms
5, 10, or 15 years; 15-year term is only available for in-school refinancing.
Loan Amounts
$5,000 to $250,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the unpaid past due amount or $10, whichever is less.
Eligibility Requirements – Financial
Minimum Credit Score
670.
Minimum Income
$36,000.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
50%.
Ability to qualify if you’ve filed for bankruptcy
Yes, but only after 5 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Must be a resident of Indiana or have attended a school in Indiana.
Must have graduated
No.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
35%.
Repayment Options
Academic Deferment
Yes, up to 36 months of deferment for borrowers who enroll at least half-time at an eligible institution for a graduate degree.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes, up to 24 months of forbearance across the lifetime of the loan. Forbearance is available in increments of 1-3 months, and borrowers can only receive 2 forbearance periods in a 12-month period.
Cosigner Release
Yes, after 48 months of on-time payments.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
American Education Services.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
Around 18 days.
Before you take out a loan from INvestED…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is INvestED a legitimate lender?
Yes, INvestED is a legitimate lender that has been working with students for over 40 years.
Is INvestED available in all 50 states?
No, INvestED is only available to borrowers who are studying in or residents of Indiana.
How long does it take to get an INvestED student loan?
Submitting an application through INvestED takes a few minutes. Once you’ve submitted your loan application, INvestED will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an INvestED student loan?
If you don’t qualify for an INvestED student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are INvestED student loans federal or private?
INvestED offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through INvestED hurt my credit score?
In order to see what rate you qualify for, INvestED conducts a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
INvestED offers private student loans, parent loans, and student loan refinancing. INvestED’s student loan offering is best if you are a resident of or student in Indiana seeking competitive interest rates, a variety of repayment options, and a flexible repayment option.
Fixed APR Range: 4.61% to 8.67%
Variable APR Range: 7.88% to 12.34%
Loan Amounts: $1,001 up to the total cost of attendance minus other aid received
• Competitive interest rates • Variety of repayment options • Offers a six-month grace period • Allows up to 24 months of forbearance • Offers a Parent Loan option
• Only available to students that are residents of or attending school in Indiana • Not accessible to students enrolled less than half-time • No biweekly payment via autopay
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for an INvestED student loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, or prepayment penalties.
Undergraduate
Parent Loan
Fixed APR*
4.61% – 8.61%
4.61% – 7.62%
Variable APR*
7.88% – 12.34%
6.10% – 9.51%
*Rates as of October 01, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of repayment options
While still in school, INvestED offers you three repayment options for your student loans, with terms ranging from 5, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Repayment
Don’t make any payments while you’re in school for up to 78 months. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Offers a six-month grace period
Similar to federal student loans, INvestED offers a six-month grace period before you are required to begin making full principal and interest monthly payments. The grace period is available if you are no longer in school at least half-time – because you’ve graduated, left school, or dropped below half-time enrollment.
Allows up to 24 months of forbearance
INvestED offers up to 24 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability). INvestED’s forbearance is offered in increments of 3 months, with a maximum of 24 months available over the life of the loan. Borrowers are eligible for up to two 3-month increments of forbearance within a 12-month period.
Offers a parent loan option
Unlike several other private student lenders, INvestED offers a parent loan option. Parent loans are a good option for parents or guardians who would like to borrow on behalf of a dependent child.
Drawbacks of INvestED Student Loans
Only available to students that are residents of or attending school in Indiana
While INvestED offers a high-quality student loan, it is unfortunately only available to borrowers who are residents of or attending school in Indiana. If you are neither, you will need to apply with a different lender.
Not accessible to students enrolled less than half-time
If you are not enrolled in school at least half-time, you are ineligible for an INvestED student loan. If you’re studying less than half-time, you will need to consider another lender.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through INvestED, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With INvestED, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
INvestED: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.61% to 8.61%
Variable APR Range
7.88% to 12.34%
Loan Terms
5, 10, or 15 years.
Loan Amounts
$1,001 up to the total cost of attendance minus other aid received.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the unpaid past-due amount or $10, whichever is less.
Eligibility Requirements – Financial
Minimum Credit Score
670.
Minimum Income
$39,996.
Typical Credit Score of Approved Borrowers or Cosigners
710.
Typical Income of Approved Borrower
$31,671.
Maximum Debt-to-Income Ratio
30%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 5 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident. DACA borrowers are not eligible.
Location
Borrowers must attend an eligible school in Indiana or be a resident of Indiana. Indiana residents attending schools in Colorado, Oklahoma, South Carolina, and Wisconsin are ineligible.
Must be enrolled half-time or more
Yes.
School requirements
Must be enrolled at an eligible Title IV, four-year institution in the U.S.
Percentage of borrowers who have a cosigner
88%.
Repayment Options
In-school Repayment Options
Immediate repayment: Make payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Pay only the interest every month while you’re in school and during the grace period.
Deferred repayment: Don’t make any payments while in school.
Grace Period
6 months.
In-school Deferment
Yes.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes. INvestED offers borrowers up to 24 months’ forbearance over the life of the loan. Forbearance is given in 3-month increments. Borrowers can receive up to 2 forbearances in a 12-month period.
Cosigner Release
Yes, after 48 months of eligible, on-time payments.
Death or Disability Discharge
Yes. INvestED loans are forgiven if the borrower dies or becomes permanently disabled.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
American Education Services.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Did not disclose.
Before you take out a loan from INvestED…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is INvestED a legitimate lender?
Yes, INvestED is a legitimate lender that has been working with students for over 40 years.
Is INvestED available in all 50 states?
No, INvestED is only available to borrowers who are studying in or residents of Indiana.
How long does it take to get a INvestED student loan?
Submitting an application through INvestED takes a few minutes. Once you’ve submitted your loan application, INvestED will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an INvestED student loan?
If you don’t qualify for an INvestED student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are INvestED student loans federal or private?
INvestED offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through INvestED hurt my credit score?
In order to see what rate you qualify for, INvestED conducts a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Sallie Mae is one of the largest online private student lenders, offering borrowers competitive interest rates, a variety of repayment options, and a strong customer experience. Sallie Mae’s loan offering is available for a variety of programs such as undergraduate, graduate, MBA, law, medical, dental, and career training programs. Sallie Mae is best if you are seeking a more flexible repayment plan and competitive interest rates.
Fixed APR Range: 3.75% to 13.72%
Variable APR Range: 4.00% to 14.34%
Loan Amounts: $1,000 up to school-certified cost of attendance
• Strong customer experience • Competitive interest rates • Various repayment options • Allows a six-month grace period on undergraduate loans • Available to international, DACA, and part-time students • Cosigner release option after 12 months
• No biweekly student loan payments via autopay • Not able to see what you qualify for before formally applying
From loan application to disbursement (and beyond), Sallie Mae offers excellent customer service that is available through chat and phone.
Competitive interest rates
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for a Sallie Mae student loan, you’ll have access to some of the best rates in the industry. In addition, you won’t have to pay any origination, application, or prepayment fees.
Undergraduate
Graduate
MBA
Law
Medical
Dental
Career Training
Fixed1
3.75% – 13.72%
4.25% – 12.92%
4.25% – 12.92%
4.25% – 12.85%
4.25% – 12.84%
4.25% – 12.85%
3.75% – 14.08%
Variable1
4.00% – 14.34%
4.50% – 14.10%
4.50% – 14.10%
4.50% – 14.10%
4.50% – 14.09%
4.50% – 14.09%
4.00% – 14.65%
*Rates as of November 1, 2022.
Various repayment options
Sallie Mae offers you four repayment options for your student loans, with terms ranging from 10-20 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school. You will also get a 1% interest rate deduction for opting in to interest-only repayment.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Fixed Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid. You will also get a 0.5% interest rate deduction for opting in to fixed repayment.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after your grace period ends.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Allows a six-month grace period
After you are no longer in school at least half-time – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. The grace period is six months for Sallie Mae student loans.
Available to international, DACA, and part-time students
Sallie Mae offers student loans for a variety of academic programs, such as undergraduate, graduate, and career school programs. Unlike several other lenders, Sallie Mae student loans are also available for international students, DACA students, and part-time students.
International students: As long as you have a Social Security number and a U.S. citizen or permanent resident cosigner, you’re eligible to apply for a student loan through Sallie Mae.
DACA students: Unlike some other private lenders, Sallie Mae offers student loans to DACA borrowers with a citizen or resident cosigner.
Part-time students: While most private lenders require borrowers to be enrolled at least half-time, Sallie Mae makes its loans available to part-time (i.e. less than half-time) students seeking a degree at eligible schools.
Cosigner release option after 12 months
If you need a cosigner for your student loan, Sallie Mae might be a good option for you. Unlike several other lenders, Sallie Mae allows you to release your cosigner after 12 months of timely payments. This can be helpful if you want to build credit in your own name.
Drawbacks of Sallie Mae Student Loans
No biweekly student loan payments via autopay
When you repay your student loan, your payments are due monthly by default. Many borrowers use biweekly autopay, where you automatically pay half your monthly amount once every two weeks, in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan. Sallie Mae unfortunately does not offer biweekly autopay.
Not able to see what you qualify for before formally applying
When you submit a formal student loan application, you will undergo a hard credit inquiry, which can temporarily hurt your credit score. Because of this, many student lenders offer a prequalification process, which allows borrowers to see what rate they’d qualify for without hurting their credit. Unfortunately, Sallie Mae does not offer loan prequalification, which means that in order to see what you’d qualify for with Sallie Mae, you would have to submit a formal application and undergo a hard inquiry. If you’d like to see what rates you qualify for at 15+ student lenders, without hurting your credit score, submit the Sparrow Application.
Sallie Mae: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
3.75% to 13.72%
Variable APR Range
4.00% to 14.34%
Loan Terms
10 to 20 years.
Loan Amounts
$1,000 up to the school-certified cost of attendance.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the past due amount if a payment has not been received within 15 days, however, the fee will not exceed $25.
Eligibility Requirements – Financial
Minimum Credit Score
Mid 600s.
Minimum Income
No income minimum.
Typical Credit Score of Approved Borrowers or Cosigners
749.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident, or a non-U.S. citizen with a creditworthy cosigner who is a U.S. citizen or permanent resident. DACA borrowers are eligible with a citizen or resident cosigner.
Location
Available to borrowers in all 50 states and Puerto Rico.
Must be enrolled half-time or more
No. Sallie Mae student loans are available to part-time students (ie. less than half-time) as well.
School requirements
Borrowers must be enrolled in a degree-granting program at an eligible school.
Percentage of borrowers who have a cosigner
80%.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Make interest-only payments while in school and during the grace period. If you select interest-only repayment, your interest rate will be 1% lower than the deferred repayment option.
Fixed repayment: Pay $25 a month during school and the grace period. If you select fixed repayment, your interest rate will be 0.5% lower than the deferred repayment option.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
6 months.
In-school Deferment
Yes. Borrowers can request to defer payments if returning to school or going to graduate school, for up to 48 months.
Military Deferment
Yes. The borrower must contact the military customer service representative team for more information. Interest rates will be capped at 6% during eligible periods of military service.
Disability Deferment
Did not disclose.
Forbearance
Up to 12 months available, in 3-month increments. Borrowers must pay $50 per loan, with a maximum of $150 per account, to get forbearance.
Cosigner Release
Yes, after 12 months of on-time payments.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability, Sallie Mae will waive all remaining payments on the loan.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Sallie Mae.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
15 minutes.
Before you take out a loan from Sallie Mae…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Sallie Mae a legitimate lender?
Yes, Sallie Mae is a legitimate lender that has been providing student loans since the late 90s.
Is Sallie Mae available in all 50 states?
Yes.
How long does it take to get a Sallie Mae student loan?
Submitting an application through Sallie Mae takes a few minutes. Once you’ve submitted your loan application, Sallie Mae will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan. It may take some time to actually receive your loan. First, you must go through Sallie Mae’s loan certification process. Then, your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Sallie Mae student loan?
If you don’t qualify for a Sallie Mae student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Sallie Mae student loans federal or private?
Sallie Mae loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through Sallie Mae hurt my credit score?
Sallie Mae does not have a custom prequalification process. Typically, prequalifying for a student loan includes a soft credit check, which does not affect your credit score. Thus, if you apply for a loan with Sallie Mae, a hard credit check will be done, which could temporarily hurt your credit score.
*All rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a valid bank account.
SoFi is one of the largest student loan refinance companies in the industry. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with an associate’s degree or higher or borrowers with a high income and strong credit score.
Fixed APR Range: 4.49% to 8.99%
Variable APR Range: 4.49% to 8.99%
Loan Amounts: $5,000 up to your total outstanding balance
• Competitive interest rates • Students can refinance parent PLUS loans in their own name • Comes with borrower protections (forbearance and deferment) • Includes perks like member events, wealth management, and other personal finance services
• Unclear about credit requirements • No cosigner release • Refinancing is unavailable to borrowers without a degree • No spousal consolidation loans
Competitive interest rates and zero fees for qualified borrowers
Although SoFi has strict qualification requirements, the borrowers who do qualify for refinancing have access to some of the most competitive rates in the industry. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
SoFi Student Loan Refinance
Fixed APR*
4.49% to 8.99%
Variable APR*
4.49% to 8.99%
*Rates as of December 05, 2022. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Students can refinance parent PLUS loans in their own name
If your parent has taken out a Parent PLUS loan or a private student loan in their name, SoFi gives your parent the option to refinance that loan or transfer the loan to your name (so long as you are the primary applicant). In addition, SoFi gives parents access to refinancing services to help make debt management easy.
Comes with borrower protections
While borrowers who refinance their federal student loans with a private lender lose access to federal protections (income-driven repayment, loan forgiveness, and loan forbearance), SoFi offers generous borrower protections such as deferment and forbearance. Borrowers who lose their job through no fault of their own are eligible to postpone their payments for three months at a time, for up to 12 months total. Check out the table below to see if you qualify for any of SoFi’s borrower protections:
Deferment
Forbearance
• Returning to school • Rehabilitation treat for a disability • Unemployment • Economic hardship/job loss • Military service
• Unemployment • Economic hardship/job loss • Military mobilization • Natural disaster • National emergency
Note: During deferment and forbearance, interest will still accrue, but the loan will be re-amortized.
Includes perks like member events, wealth management, and other personal finance services
SoFi offers its borrowers a variety of perks that help you take control of your financial future.
Member events: SoFi organizes workshops, speaker series and social events to help you build a strong community.
No-fee wealth management: SoFi offers a no-fee wealth management and investing platform to help you get your money right.
Referral bonus: You can send a link to your friends to use SoFi student loan, investment, or credit card service and deduct up to $75 in student loans. The rules can be found here.
Discount on other SoFi loans: SoFi offers its members a 0.125% discount on additional loans taken out through SoFi, including mortgages and personal loans.
Drawbacks of Refinancing with SoFi
Unclear about credit requirements
While SoFi used to have a minimum credit score requirement of 650, the company no longer shares an explicit minimum credit score. SoFi only shares that “good or excellent” credit scores will be approved, and for refinancing, this usually means those around or above 670. If you do not have a strong credit score, a cosigner with a good credit score will likely be necessary.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky.
Unfortunately, SoFi does not offer any form of cosigner release on its refinance loans.
Refinancing is unavailable to borrowers without a degree
In order to refinance through SoFi, you must have earned an associate’s degree or higher. If you attended school but did not complete your degree, you are ineligible for refinancing your student loan through SoFi.
No spousal consolidation loans
SoFi does not provide people who are married with the opportunity to combine student loan debt which many see as a simpler route to paying off their debt.
SoFi: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.49% to 8.99%
Variable APR Range
4.49% to 8.99%
Loan Terms
5, 7, 10, 15 or 20 years.
Loan Amounts
$5,000 up to your total outstanding balance.
Ability to transfer a parent loan to the student
Yes.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, $5 late fee if your loan is 15 days past due.
Eligibility Requirements – Financial
Minimum Credit Score
Did not disclose.
Minimum Income
No minimum. SoFi looks at the amount you have leftover after paying your monthly expenses.
Typical Credit Score of Approved Borrowers or Cosigners
700+.
Typical Income of Approved Borrower
$100,000+.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, once the bankruptcy drops off your credit report. This happens after seven years for Chapter 13 bankruptcy and after 10 years for Chapter 7 bankruptcy.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen, permanent resident or have a qualifying visa (E-2, E-3, H-1B, J-1, L-1, or O-1). Non-permanent residents, DACA recipients and those without a qualifying visa need a cosigner who is a citizen or permanent resident.
Location
Available to borrowers in all 50 states.
Must have graduated
Yes, with an associate degree or higher.
Must have attended a school authorized to receive federal aid
Yes.
Must be employed
Yes. If not, the borrower must have enough income from other sources or have proof of a job that starts within 90 days.
Percentage of borrowers who have a cosigner
Around 15%.
Repayment Options
Academic Deferment
Yes, you can postpone payment if you return to school.
Military Deferment
Yes, you can postpone payment while on active military duty.
Disability Deferment
Determined on a case-by-case basis and after specific requirements are verified.
Reduced payments for medical and dental residents
Yes, physicians and dentists can pay $100/month during residency for up to four years.
Forbearance
Cases for hardship forbearance are evaluated on an individual basis so that SoFi can determine the best option.
Cosigner Release
No.
Death or Disability Discharge
Yes. Contact SoFi’s customer service.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
MOHELA.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
One week.
Before you take out a loan from SoFi…
Complete the Sparrow application to compare pre-qualified rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See pre-qualified rates, not rate ranges: Sparrow enables you to compare student loan products you pre-qualify for from multiple lenders side-by-side based on all of the criteria that are important to you, like total repayment amount, APR, repayment options, and monthly payment.
No impact on your credit score: Checking your pre-qualified rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is SoFi a legitimate lender?
Yes, SoFi is one of the largest online lenders in the industry with millions of customers. The company offers student loans and student loan refinancing, along with other financial services such as mortgages, personal loans, insurance, and investment accounts. Since it began offering student loan refinancing in 2012, SoFi has helped nearly 400,000 borrowers refinance $30 billion in student loans.
Is SoFi available in all 50 states?
Yes.
How long does it take to get a SoFi refinance loan?
Submitting an application through SoFi takes a few minutes. Once you’ve submitted your loan application, SoFi will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a SoFi refinance loan?
If you don’t qualify for a SoFi refinance loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive pre-qualified rates from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are SoFi refinance loans federal or private?
SoFi’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through SoFi hurt my credit score?
In order to estimate what rate you qualify for, SoFi conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the SoFi loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
As a college student, you’ll no doubt hear about the massive rise in the average student loan debt. Rightfully so, you might get scared and overwhelmed at the idea of incurring a lot of debt. However, the amount of debt you’ll incur is based on factors like the type of loan you take out, the program you’re in, the type of school you go to, and more. Let’s explore these factors further and take a look at the debt averages.
Average Student Loan Debt Overall
First off, let’s get a quick overview of the average student loan debt here in the U.S. On average, according to a report done by the Education Data Initiative, graduates with student loans have a debt of about $37k. And, collectively, that adds up to trillions of dollars in student debt.
Average Student Debt
$37,693
Average Student Monthly Payment
$393
Total Student Loan Debt
$1.75 trillion
Number of Student Loan Borrowers
45.3 million borrowers
Average Student Loan Monthly Payment
Next, let’s talk about monthly payments. Your monthly student loan payment is where you’ll feel the weight of your debt the most. But, there are different factors that go into calculating your payment, such as the length of the loan term, the principal amount, and your repayment plan. To give you an idea of how much money you’re looking at, here is the data on monthly payments.
Average Monthly Student Loan Payment
$393
Median Monthly Student Loan Payment
$250
Average Student Loan Debt: Federal vs Private
Now, let’s get more into it. Your student debt will be affected by the types of loans you take out. The two biggest loan types are federal student loans and private student loans. Recently, private student loan debt has grown much faster than federal loan debt. The data here shows a difference of about $18,000 between the two.
Average Federal Student Loan Debt
$36,510
Average Private Student Loan Debt
$54,921
Average Student Loan Debt by State
You’ll also want to think about where you’ll go to school. Most states’ student debt average falls in the $30,000-40,000 range. There are a few outliers, however. The District of Columbia, Georgia, and Maryland all have average debts higher than $40,000. Meanwhile, North Dakota and Puerto Rico have averages under $30,000.
Alabama
$36,826
Alaska
$33,083
Arizona
$35,047
Arkansas
$33,113
California
$36,351
Colorado
$36,610
Connecticut
$34,677
Delaware
$37,221
District of Columbia
$54,983
Florida
$38,160
Georgia
$41,256
Hawaii
$35,803
Idaho
$32,425
Illinois
$37,460
Iowa
$30,381
Kansas
$32,352
Kentucky
$32,622
Louisiana
$34,165
Maine
$32,543
Maryland
$42,592
Massachusetts
$34,075
Michigan
$34,819
Minnesota
$33,252
Mississippi
$36,508
Missouri
$35,260
Montana
$32,626
Nebraska
$31,726
Nevada
$33,573
New Hampshire
$33,459
New Jersey
$35,095
New Mexico
$33,632
New York
$37,639
North Carolina
$37,217
North Dakota
$28,402
Ohio
$34,496
Oklahoma
$31,376
Oregon
$36,988
Pennsylvania
$35,205
Puerto Rico
$26,918
Rhode Island
$31,954
South Carolina
$38,063
South Dakota
$30,946
Tennessee
$36,035
Texas
$32,671
Utah
$32,150
Vermont
$37,284
Virginia
$38,903
Washington
$35,117
West Virginia
$31,532
Wisconsin
$31,766
Wyoming
$30,476
Average Student Loan Debt by School Type
The type of school you attend will also contribute to how much debt you’ll have. Usually, public colleges are cheaper than private ones. Similarly, for-profit colleges are cheaper than non-profit schools.
Public Institution
$26,382
Private, Non-Profit Institution
$37,971
Private, For-Profit Institution
$21,244
Foreign Institution
$90,500
Average Student Loan Debt by Degree
Different college degrees are going to cost you different amounts of money. Generally, the longer you have to be in school to get that degree, the more it’ll cost you. As you can see in the table below, the higher you go in your degree, the more money you’ll need.
Bachelor’s Degree
$28,400
Master’s Degree
$71,318
Doctorate, Research
$117,198
Law Degree
$157,315
Doctorate, Professional
$210,736
Medical Degree
$265,996
Final Thoughts from the Nest
While a college education can get expensive and leave you with a lot of debt, many factors go into it. Knowing these factors will help you make a good decision about where you should go to school.
Either way, debt can be hard to manage. So, you want to get good loans right off the bat. Sparrow can help with that. Sparrow partners with 15+ lenders that offer great private student loans. Fill out our Sparrow application to get matched with what you qualify for at each of these lenders. Let us take some of the weight so you can focus on getting your school diploma.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students, as well as student loan refinancing. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
• Available to international, domestic, and DACA students • Allows borrowers to refinance a parent’s loan in your name • You can get up to 0.25% in rate discounts
• Offers only one repayment term of 10 years • Higher interest rates and fees than other online lenders • Does not allow for biweekly payments via autopay
Available to international, domestic, and DACA students
MPOWER offers non-cosigned refinance loans to international, domestic, and DACA students. MPOWER considers dozens of data points, such as future income potential, to determine creditworthiness and make a lending decision. The company reviews credit history, but credit scores are not a factor in its decision since most international students do not have U.S. credit scores.
Allows borrowers to refinance a parent’s loan in your name
If your parent has taken out a Parent PLUS loan or a private student loan in your name, MPOWER gives your parent the option to refinance that loan or transfer the loan to your name (so long as you are the primary applicant).
You can get 0.25% in rate discounts
MPOWER rewards you for borrowing responsibly by offering up to a 0.25% rate discount on refinance loans. You can qualify for these rate discounts by enrolling in autopay.
Autopay will automatically debit your loan payment each month. When you enroll, MPOWER gives you a 0.25% deduction on your interest rate for as long as you remain enrolled.
Your discount will remain if you make on-time payments via autopay. An invalid payment, hardship (i.e., forbearance) request, or entering into a modified payment plan may reset your discount, so you may need to enroll again to earn your interest rate discount.
If you take advantage of the autopay discounts, you could save yourself hundreds, and maybe even thousands, of dollars throughout the lifetime of your loan.
Drawbacks of Refinancing with MPOWER
Offers only one repayment term of 10 years
Unlike other lenders that offer a wide variety of repayment options, MPOWER only offers one 10-year repayment term. MPOWER could improve by expanding their repayment options.
Higher interest rates and fees than other online lenders
MPOWER is unique in that it does not require a cosigner, collateral, or credit history. With that said, its rates are quite high compared to other lenders.
MPOWER also charges a 2% origination fee that is added to your loan balance. You can spread the origination fee across the lifetime of the loan. So for example, if you borrow $10,000, you will have to pay a $200 fee as part of your monthly loan payments after graduation.
Does not allow for biweekly payments via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan. It is an effective strategy if you want to “set it and forget it” — essentially allowing you to automatically make payments without having to manually do it at the end of each month.
Unfortunately, when you borrow through MPOWER, you don’t have the option to make biweekly payments via autopay.
MPOWER: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
up to 11.74% (12.69% APR)
Variable APR Range
N/A
Loan Terms
10 years.
Loan Amounts
$2,001 to $100,000.
Ability to transfer a parent loan to the student
Yes.
Application or Origination Fee
Yes, 2% of the total loan amount.
Prepayment Penalty
No.
Late Fees
Yes, $5.00 or 4% of the late amount, whichever is lesser.
Eligibility Requirements – Financial
Minimum Credit Score
N/A.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
N/A.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
15%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
International students must be from one of the 180 countries MPOWER works with. DACA students do not need a Social Security number to qualify.
Location
Available to international borrowers in all 50 states, Washington, D.C., and Puerto Rico. Borrowers are able to refinance loans originated in 190 countries.
Must have graduated
Yes, with at least a bachelor’s degree.
Must have attended a school authorized to receive federal aid
No.
Percentage of borrowers who have a cosigner
Borrowers cannot apply with a cosigner.
Repayment Options
Academic Deferment
Yes, borrowers can postpone payment if they return to school.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes, up to 24 months.
Cosigner Release
N/A. There is no option to add a cosigner.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
N/A. There is no option to add a cosigner.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Launch.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
Yes.
Average time from approval to payoff
10 days.
Before you take out a loan from MPOWER…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is MPOWER a legitimate lender?
Yes, MPOWER is a legitimate lender that offers private student loans and student loan refinancing to international and DACA students.
Is MPOWER available in all 50 states?
Yes, MPOWER is available in all 50 states.
How long does it take to get an MPOWER refinance loan?
Submitting an application through MPOWER takes a few minutes. Once you’ve submitted your loan application, MPOWER will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for an MPOWER loan?
If you don’t qualify for an MPOWER refinance loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are MPOWER student loans federal or private?
MPOWER’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through MPOWER hurt my credit score?
It is unclear whether it will hurt your credit score. MPOWER conducts a soft credit check to determine your eligibility. While soft credit checks typically don’t hurt your credit score, MPOWER has stated that “Any potential lender pulling your credit may slightly lower your overall credit score temporarily.” Therefore, it isn’t totally clear whether or not applying for a loan with MPOWER will hurt your credit score or not.
EdvestinU is a student loan program from the nonprofit New Hampshire Higher Education Loan Corp that offers private student loans and student loan refinancing to students across the country. EdvestinU private student loans are available nationwide to undergraduate and graduate students, as well as international students with an eligible cosigner. It is best if you are looking to borrow from a non-profit lender that provides competitive interest rates, flexible repayment plans, and extended deferment/forbearance.
Fixed APR Range: 4.52% to 9.04%
Variable APR Range: 8.12% to 11.02%
Loan Amounts: $1,000 up to the total cost of attendance
• Work with a non-profit, rather than a traditional lender • Variety of repayment options • Exclusive benefits for New Hampshire residents
• You can’t see if you’ll qualify and what rate you’ll get without a hard credit check • Not accessible to students enrolled less than half-time • Strict cosigner release policy
Work with a non-profit, rather than a traditional lender
EdvestinU has been helping families across the country finance the cost of their college education for nearly 60 years. EdvestinU is not affiliated with any school, and as a non-profit, its goal is to save you money by offering the most competitive rates possible. While EdvestinU doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
Variety of repayment options
EdvestinU offers you three repayment options for your student loans, with terms ranging from 7, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Exclusive benefits for New Hampshire residents
EdvestinU, as well as many other private student lenders, offers a 0.25% discount if you enable automatic payments. This is the lender’s way of incentivizing you to turn on autopay so that you don’t miss a payment.
EdvestinU has taken this to another level by offering New Hampshire residents a 1% rate reduction on fixed rate loans and a 0.25% rate reduction on variable loans.
EdvestinU also offers in-person support and counseling to borrowers from New Hampshire.
If you’re a New Hampshire resident, EdvestinU might be the best option for you.
Drawbacks of EdvestinU Student Loans
You can’t see if you’ll qualify and at what rate without a hard credit check
Unlike many other online lenders, EdvestinU does not allow you to qualify and receive rate estimates without undergoing a hard credit check. This means you will have to undergo a hard credit check, which temporarily hurts your credit, in order to see if you qualify and at what rate. If you want to see if you qualify and at what rate with over 15 different lenders, try our 2-minute form. It’s quick, easy, and does not impact your credit score.
Not accessible to students enrolled less than half-time
If you are not enrolled in school at least half-time, you are ineligible for EdvestinU student loans. If you’re studying less than half-time, you may want to consider College Ave.
Strict cosigner release policy
Given that most private student loans require a cosigner, it would be nice to see EdvestinU offer more flexibility with cosigner release (i.e. taking the cosigner’s name off the loan and removing the cosigner’s responsibility to pay). As of now, EdvestinU has a strict cosigner release policy that is only available for borrowers who meet the following criteria:
The borrower has a credit score greater than 749
The borrower has a minimum gross income of $30,000
The borrower has made 36 months of consecutive & on-time payments
EdvestinU Student Loans: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.52% to 9.04%
Variable APR Range
8.12% to 11.02%
Loan Terms
7, 10, or 15 years
Loan Amounts
$1,000 up to the cost of attendance
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, five percent of your monthly payment.
Eligibility Requirements – Financial
Minimum Credit Score
750
Minimum Income
$30,000.
Typical Credit Score of Approved Borrowers or Cosigners
781
Typical Credit Score of Approved Cosigners
787
Typical Income of Approved Borrower
$59,000+
Typical Income of Approved Cosigners
$106,000+
Maximum Debt-to-Income Ratio
Not considered.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 10 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or a permanent resident.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes.
School requirements
Borrowers must be attending an eligible Title IV or nonprofit school.
Percentage of borrowers who have a cosigner
90%+.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Deferred repayment: EdvestinU does not offer full in-school deferment.
In-school Deferment
EdvestinU does not offer full in-school deferment.
Military Deferment
Yes.
Economic Hardship Deferment
Yes, borrowers are eligible for up to 12 months of economic hardship deferment over the life of the loan, given in 3 month increments.
Forbearance
Discretionary forbearance is available for twelve months.
Cosigner Release
Yes (after 36 consecutive on time payments). Borrowers must also have a credit score greater than 749 and a minimum gross income of $30,000.
Death or Disability Discharge
Yes. The loan will be forgiven if the borrower dies, but not in instances of total and permanent disability.
Loan discharge if cosigner dies or becomes disabled
Did not disclose.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No, but in-person one-on-one assistance is available.
Average time from application to approval
One week.
Before you take out a loan from EdvestinU…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is EdvestinU a legitimate lender?
Yes, EdvestinU is a legitimate lender that has nearly 60 years of experience lending and refinancing in higher education.
Is EdvestinU available in all 50 states?
Yes, EdvestinU is available in all 50 states. While the nonprofit is based out of New Hampshire, it will lend to students nationwide. EdvestinU also lends to international students with an eligible cosigner.
How long does it take to get an EdvestinU student loan?
Submitting an application through EdvestinU takes a few minutes. Once you’ve submitted your loan application, EdvestinU will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an EdvestinU student loan?
If you don’t qualify for an EdvestinU student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are EdvestinU student loans federal or private?
EdvestinU loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through EdvestinU hurt my credit score?
Yes. In order to check your eligibility and receive your rate, EdvestinU will conduct a hard credit check. A hard credit check may temporarily impact your credit score.
Edly IBR Student Loan, funded by FinWise Bank, Member FDIC Snapshot
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s lending bank FinWise Bank, Member FDIC, provide an alternative loan option for students. Degree-seeking students at an Edly-supported school currently have two loan options: the Edly IBR No Cosigner Student Loan (for university students without a cosigner) and the Edly IBR Cosigned Student Loan (for university students with a cosigner).
Students who are approved for an IBR No Cosigner Student Loan will not have to make payments while in school (borrowers with the IBR Cosigned Student Loan make modest in-school payments). After graduation, borrowers with either loan make payments based on their income. Due to the structure of IBR student loans, borrowers have a variety of benefits when it comes to repayment. An IBR Student Loan is best if you are seeking a loan option with no cosigner (the IBR No Cosigner Student Loan) and want competitive repayment terms and flexible repayment options.
APR: Borrowers will never pay more than 2.25x their borrowed amount (with the IBR No Cosigner Student Loan) or 2.5x their borrowed amount (with the IBR Cosigned Student Loan), which translates to a maximum 23% APR.
Loan Amounts: $5,000 to $15,000 per academic year, $ 25,000-lifetime maximum.
Minimum Credit Score: Yes, student borrowers without a credit score may also be considered and student borrowers must meet credit and underwriting requirements upon release of the cosigner
• Competitive repayment terms and few fees • Cap on how much you must repay • Hardship forbearance is available if you don’t meet the $30,000 annual gross income minimum threshold following graduation (interest will continue to accrue during the forbearance period) • Two product types available depending upon the borrower’s needs (a No-Cosigner IBR Loan and a Cosigner IBR loan) • No minimum credit score for student borrowers applying for the Cosigned product. Credit and underwriting requirements apply for both products
• Doesn’t offer a repayment term longer than 12 years • Hard to predict upfront how much you’ll owe over the life of the loan • Fewer schools are eligible for an Edly IBR Student Loan than traditional student loans
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Competitive effective annual percentage rates and few fees
The effective APR on an IBR student loan is based on your income after graduation. Depending on your income, you can score a pretty competitive effective annual percentage rate. Additionally, you won’t have to pay any origination, application, or prepayment fees. IBR student loans do have late fees, however.
Cap on how much you must repay
While IBR student loans can vary in terms of effective APR, you can rest assured knowing that there is a cap on how much you can owe. You will never have to pay back more than 2.25x what you borrowed (with an IBR No Cosigner Student Loan) or 2.5x (with an IBR Cosigned Student Loan) what you borrowed.
Hardship forbearance is available if you don’t earn above a minimum income threshold
While Edly’s 34-month post-graduation grace period (for the No Cosigner Student Loan) is shorter than the standard 6-month grace period on traditional student loans, you won’t actually have to start post-graduation repayment of your loan unless you meet their minimum income threshold. If you are in this circumstance, you may apply for hardship forbearance and defer repayment, although interest on the loan will continue to accrue. Note that with the IBR Cosigned Student Loan, however, borrowers will make modest in-school payments in addition to the post-graduation payments noted above.
No cosigner required for IBR No Cosigner Student Loan
Edly’s flagship product, the Edly IBR No Cosigner Student Loan, is a great option if you do not have a cosigner available to you. While the approval rate for students without a cosigner is typically around 8.84%, according to a LendEDU study, if you apply for an IBR No Cosigner Student Loan, your chances of approval are significantly higher. For borrowers who don’t qualify on their own or who want the flexibility of an IBR loan with the comfort of a cosigner, they may apply for the IBR Cosigned Student Loan.
Minimum credit score for student borrowers
IBR Student Loans do require the student borrower to have a minimum credit score to qualify for the IBR No Cosigner Student Loan but student borrowers without a credit score may still be considered. This makes the Edly IBR No Cosigner Student Loan a great option if you have no credit or no access to a creditworthy cosigner. If the student borrower does have a credit score, a minimum requirement will apply. Note that if you choose to apply with a cosigner for the Edly IBR Cosigned Student Loan, your cosigner will need to meet credit and underwriting requirements (credit is not run on student borrowers for the Edly IBR Cosigned Student Loan until they apply for the cosigner to be released).
Drawbacks ofIBR Student Loans
Doesn’t offer a maximum repayment term longer than 12 years
Unlike several other lenders, Edly does not offer a maximum repayment term longer than 12 years. While their 7-12 year repayment term offerings provide a decent variety of options, longer terms would be beneficial to borrowers looking to pay their loans off a longer period of time.
Hard to predict upfront how much you’ll owe over the life of the loan
Due to the nature of an income-based repayment loan, it’s hard to predict what your payments will be, and thus, how much you’ll pay by the end of your repayment term. When taking out a traditional student loan with a fixed interest rate, you can easily calculate how much you’ll end up paying overall. With an IBR loan, however, you cannot predict this in the same way.
Fewer schools are eligible for an Edly IBR Student Loan than traditional student loans
While most traditional student lenders work with a wide array of schools, Edly is much more selective about who they work with. Edly only works with schools and programs that they believe will give students the best chance for future success. Edly uses a variety of factors when determining which programs are eligible, such as performance statistics like graduation rates, placement rates, and certification exam pass rates. Due to Edly’s strict program eligibility criteria, your school may not be eligible to receive an Edly IBR Student Loan. Currently, Edly supports over 1,700 schools and programs. To see if your school is eligible, complete Sparrow’s 2-minute application.
Edly IBR Student Loans: The Nuts and Bolts
Interest Rates, Fees, and Terms
Effective APR
Variable based on borrowers’ projected income and IBR rate, but typically 9.4-23%.
Loan Terms
7-12 years (12-year maximum repayment window).
Loan Amounts
$5,000 to $15,000 per academic year, $25,000 lifetime.
Application or Origination Fee
None.
Prepayment Penalty
None.
Late Fees
The lesser of $25 or 6% of the past due amount.
Eligibility Requirements – Financial
Minimum Credit Score
580 or no score for student borrowers on the IBR Non-Cosigned Student Loan. No minimum for student borrower on the IBR Cosigned Student Loan.
Minimum Income
No set minumum.
Minimum Credit Score of Approved Cosigners
600
Typical Income of Approved Student to Release the Cosigner
$30,000
Maximum Debt-to-Income Ratio
25%
Ability to qualify if you’ve filed for bankruptcy
No
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Not available to residents of Colorado, Maine, Vermont, Iowa, and West Virginia.
Must be enrolled half-time or more
Yes.
School requirements
Must meet Satisfactory Academic Progress (SAP) requirements.
Percentage of borrowers who have a cosigner
Undisclosed.
Repayment Options
In-school repayment options
No in-school repayment for an IBR No Cosigner Student Loan; borrowers with an Edly IBR Cosigned Student Loan make modest, monthly in-school payments.
Grace period
Post-graduation repayment begins 4 months after graduation for an IBR No Cosigner Student Loan.
In-school Deferment
Yes (for an IBR No Cosigner Student Loan).
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Borrowers may apply for hardship forbearance.
Cosigner Release
After six successive in-full, on-time post- graduation payments, student borrowers will need to submit an application to release the cosigner; meet minimum credit requirement, and is subject to credit evaluation and worthiness.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
N/A.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark/Nelnet.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
3 minutes.
Before you take out an IBR Student Loan…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Are IBR Student Loans legitimate?
Yes, IBR Student Loans are legitimate. Edly IBR Student Loans are offered through FinWise Bank, an FDIC-insured bank. Since its founding in 2019, Edly has provided an alternative method of college funding to students.
Are IBR Student Loans available in all 50 states?
IBR Student Loans are not available to residents of Colorado, Maine, Vermont, Iowa, and West Virginia.
How long does it take to get an IBR Student Loan?
Submitting an application through Edly takes a few minutes. Once you’ve submitted your loan application, Edly will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time for your educational institution to receive your tuition. Your school must approve the loan which may take between four to six weeks. Upon certification, the funds are sent directly to your school.
What happens if I don’t qualify for an IBR Student Loan?
If you don’t qualify for an IBR student loan, the company will inform you why and may offer you the option to add a cosigner. Depending on the reason, you may also consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all ready to support you.
Is an IBR Student Loan federal or private?
IBR Student Loans are private student loans. Before you take on a private loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Edly hurt my credit score?
In order to estimate what rate you qualify for, Edly conducts a soft credit check — this does not affect your credit score. If you choose to accept the terms offered by Edly, the company will conduct a hard credit check to verify your information. A hard credit check may impact your credit score.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan.
The traditional cosigned loan is best for students who have a qualified cosigner and want to pay off their debt fast. The non-cosigned loan is best for borrowers with a strong credit score and stable income. Ascent’s non-cosigned outcomes-based loan is best for upperclassmen with limited credit and income and no access to a cosigner.
Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Ascent was named Best Private Student Loan for 2021 by Forbes Advisor, NerdWallet, and Money.com.
• Accessible to students who don’t have a cosigner or credit history • Competitive rates • Variety of repayment options • Accessible to international and DACA students • Offers 1% cash back after graduation • Cosigner release option after 12 months • Over $80,000 in scholarship opportunities • Provides engaging financial wellness courses
• Students enrolled less than half-time are not eligible • Cosigner release not available to international students
Accessible to students who don’t have a cosigner or credit history
Ascent distinguishes itself from other lenders by offering a traditional cosigned credit-based loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. In order to qualify for private student loans through Ascent, you must meet the following criteria:
Cosigned Credit-Based Loan
Non-Cosigned Credit-Based Loan
Non-Cosigned Outcomes-Based Loan
Citizenship
Must be a U.S citizen, permanent resident, or DACA recipient. Students who are not U.S. citizens, U.S. permanent residents, or DACA recipient may apply with a cosigner who is a U.S. citizen or U.S. permanent resident.
Must be a U.S citizen, permanent resident, or DACA recipient.
Must be a U.S citizen, permanent resident, or DACA recipient.
Enrollment
Must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Must be an undergraduate junior or senior enrolled full-time with a 2.9+ GPA.
Min. Income
Borrower or cosigner must have a minimum gross annual income of $24,000.
No income requirement.
No income requirement.
Credit
Student borrowers must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your cosigner.
Cosigners must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your borrower.
Minimum score required is subject to change, but must have at least two years of credit history.
No credit requirement.
Competitive interest rates
When looking for a student loan, finding a low-interest rate is typically a top priority. Ascent’s variable and fixed interest rates offer lower rates than typically provided for the lower credit scores. The ranges offered are:
Undergraduate, Cosigned
Undergraduate, Non-Cosigned Credit-Based
Undergraduate, Outcomes-Based
Graduate/MBA/Law
Dental
Medical
Fixed APR*
4.83% – 16.16%
10.01% – 16.16%
13.09% – 15.08%
5.83% – 16.16%
5.83% – 16.16%
5.61% – 16.16%
Variable APR*
6.15% – 16.08%
10.02% – 16.08%
13.07% – 15.02%
7.17% – 16.08%
7.01% – 16.08%
6.68% – 16.08%
*Rates as of November 01, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account. Borrowers with non-cosigned outcomes-based loans are eligible for an additional rate discount when you enroll in AutoPay.
Variety of repayment options
Ascent offers a range of repayment options depending on your financial situation. If you take out a credit-based loan, you will have access to all three repayment options. However, if you choose to take out a non-cosigned outcomes-based loan, you will only have access to the deferred repayment option.
Repayment Option
Terms
Pros
Cons
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Accessible to international and DACA students
Ascent prides itself on providing access to funding, regardless of your citizenship status. It is one of the few lenders helping DACA students with or without a cosigner.
Additionally, if you are an international student with a cosigner who is an American citizen or permanent resident, you are eligible to apply for a student loan through Ascent.
If you are an international student without a cosigner, check out MPOWER and Prodigy Finance, both of which offer private student loans to international students who do not have a cosigner.
1% Cash Back Graduation Reward Program
Ascent offers borrowers a 1% Cash Back Graduation Reward. In order to be eligible for the program, you will need to meet the following criteria:
Enrolled in autopay
No late history of payments
Graduated within five years of receiving your first Ascent student loan
If you are eligible, you will receive a one-time payment that is the amount of one percent of your loan balance. So, if you take out a $10,000 loan, you will receive $100. To learn more about Ascent’s Cash Back Graduation Reward program, visit Ascent’s website.
Cosigner release option after 12 months
If you need a cosigner for your student loan, Ascent might be a good option for you. Unlike several other lenders, Ascent allows you to release your cosigner after 12 months of timely payments. This can be helpful if you want to build credit in your own name.
Over $80,000 in scholarship opportunities
To demonstrate their commitment to students, Ascent gave away a $1,000 scholarship every weekday the summer of 2021. Ascent continues to give away scholarships on an ongoing basis. In order to qualify for one of these scholarships, you can visit Ascent’s Scholarship and complete the appropriate steps.
Provides engaging financial literacy courses
If you’re approved for a loan through Ascent, you’ll have access to additional resources to help you thrive throughout college and beyond. Ascent offers a suite of financial literacy courses that encourage awareness of the potential financial outcomes of your college choices (school, major, years in school, financing your education), helping you visualize where your career could go and what it could be – encouraging better decisions today to open up greater future opportunities. From learning how to find a cosigner and how to budget during school to how to find a mentor and secure a job after college, Ascent is committed to helping you on your journey to financial success.
Drawbacks of AscentStudent Loans
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through Ascent. If you’re studying less than half-time, you may want to consider College Ave for your private student loan.
Cosigner release not available to international students
Unfortunately, if you are taking out a student loan with Ascent as an international student, cosigner release is not available no matter how long payments have been made. For the remainder of your time making payments to Ascent, you must maintain a cosigner that is a citizen or a permanent resident in the United States.
Cosigned and Non-Cosigned Credit-Based Loans: • Fixed-rate: 5 or 10 years • Variable-rate: 5, 10, or 15 years
Non-Cosigned Outcomes-Based Loans: • Fixed-rate: 10 years • Variable-rate: 10 or 15 years
Loan Amounts
Cosigned and Non-Cosigned Credit-Based Loans: $2,001 to $200,000 over the lifetime of a borrower (individual loans cannot exceed total cost of attendance)
Non-Cosigned Outcomes-Based Loans: $2,001 to $20,000
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes. After the payment is 10 days late, a fee equal to 5% of the amount of the past due payment applies. The minimum late fee is $5; the maximum is $25, except where prohibited by law.
Eligibility Requirements – Financial
Minimum Credit Score
Cosigned Credit-Based Loan: Student borrowers must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your cosigner. Cosigners must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your borrower.
Non-Cosigned Credit-Based Loan: Minimum score required is subject to change, but must have at least two years of credit history.
Non-Cosigned Outcomes-Based Loan: A credit score is not considered. Instead, Ascent takes into account a borrower’s future earnings rather than emphasizing current income or credit.
Minimum Income
Cosigned Credit-Based Loan: $24,000.
Non-Cosigned Credit-Based Loan: $24,000.
Non-Cosigned Outcomes-Based Loan: Not considered.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, after five years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen, permanent resident, or DACA recipient. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident. The same requirements apply to cosigners.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes. Non-cosigned outcomes-based borrowers must also have a 2.9 GPA or higher.
School requirements
Borrowers must be enrolled in a two year or four year degree-granting program at an eligible school.
Percentage of borrowers who have a cosigner
100% for cosigned loans. 0% for non-cosigned loans.
Repayment Options
In-school repayment options
Interest-only repayment: Only pay interest while you’re in school.
Partial repayment: Pay $25 a month during school.
Deferred repayment: Wait to make payments until you’re out of school.
Graduated Repayment
Yes, upon graduation, borrowers may be eligible for the graduated repayment option. This option requires monthly payment amounts that start with an amount that is less than a fully-amortizing payment amount. These payments get bigger over time so the loan will be fully paid within the original loan term.
In-school Deferment
Yes, students enrolled at least half-time are eligible for up to 24 months of deferment.
Military Deferment
Yes, active-duty service members can defer payments for a cumulative 36 months.
Disability Deferment
Did not disclose.
Reduced payments for medical and dental residents
Bachelor’s degree holders can defer payments for up to 24 months if accepted into a residency or internship program.
Forbearance
Postpone loan payments up to four consecutive periods lasting anywhere from one to three months. Borrowers have a 24-month limit on forbearance. Forbearance will not extend the loan’s repayment term, and interest will continue to accrue on the loan.
Cosigner Release
Yes, for the cosigned loan option.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Launch Servicing LLC
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Immediately for conditional approval, eight days for final approval.
Before you take out a loan from Ascent…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Ascent a legitimate lender?
Yes, Ascent is a legitimate lender that has been providing student loans since 2014. The company offers cosigned and non-cosigned private student loans to undergraduates and graduate students. Ascent also offers a forward-looking outcomes-based loan that is best suited for borrowers with limited credit history and no cosigner.
Is Ascent available in all 50 states?
Yes.
How long does it take to get an Ascent student loan?
Submitting an application through Ascent takes a few minutes. Once you’ve submitted your loan application, Ascent will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an Ascent student loan?
If you don’t qualify for an Ascent student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Ascent student loans federal or private?
Ascent loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through Ascent hurt my credit score?
In order to estimate what rate you qualify for, Ascent conducts a soft credit check — this does not affect your credit score. If you choose to accept the Ascent loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
*Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2023 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs require interest-only payments, the shortest loan term, and a cosigner, and are only available to our most creditworthy applicants and cosigners with the highest average credit scores.
**The minimum amount is $2,001 except for the state of Massachusetts. Minimum loan amount for borrowers with a Massachusetts permanent address is $6,001.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA offers three types of student loans: undergraduate and graduate loans, family loans, and student loan refinancing. While ASLA’s student loan refinancing is only available to Arkansas residents or students attending a school in Arkansas, they do offer competitive interest rates and flexible terms to those who qualify. ASLA is best if you are an Arkansas resident or attending a school in Arkansas and want flexible repayment options.
• Competitive interest rates • Ability to refinance several types of loans • Variety of repayment options • Cosigner release option after 48 months • Offers 0.25% interest rate reduction for opting into auto-debit payments
• Strict residency requirements • Inaccessible for international students
When looking to refinance your student loan, finding a low-interest rate is typically a top priority. If you qualify for student loan refinancing through ASLA, you will have access to competitive rates.
ASLA’s Student Loan Refinance
Fixed APR*
3.50% to 7.48%
*Rates as of May 11, 2023. The lowest states rates include 0.25% auto-debit discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Ability to refinance several types of loans
ASLA allows borrowers to refinance several types of loans such as:
Federal Loans (Federal Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans)
Undergraduate and graduate subsidized and unsubsidized student loans
PLUS Loans taken out by parents or graduate/professional students
Private education loans
Previously refinanced or consolidated education loans
Variety of repayment options
ASLA offers a range of repayment options depending on your financial situation. If you refinance with ASLA, you will have access to all three repayment options: standard repayment, graduated repayment, and ASLA’s unique Select 2 repayment option.
Repayment Option
Terms
Pros
Cons
Standard Repayment
Make minimum monthly payments for the entire duration of your repayment period.
Your monthly payment will remain the same over the course of your loan, making it easier to manage and budget for.
You will likely pay more in interest if you make only the minimum monthly payment.
Graduated Repayment
Begin with lower payments, then increase payment amount by 10% every two years.
Your monthly payments will be more manageable.
You will pay more interest over the life of the loan because the principal balance will decrease at a slower rate.
Select 2 Payment Plan
Make interest-only payments during the first two years of repayment, then increase to a standard payment amount for the remainder of the repayment term.
Your monthly payments will be more manageable in the beginning.
You will pay more interest over the life of the loan because the principal balance will decrease at a slower rate.
Cosigner release option after 48 months
If you need a cosigner to refinance your student loan(s), ASLA might be a good option for you. Unlike several other lenders, ASLA allows you to release your cosigner after 48 months of timely payments. This can be helpful if you want to build credit in your own name.
Offers 0.25% interest rate reduction for opting into auto-debit payments
Similar to other lenders, ASLA offers a 0.25% interest rate discount for borrowers who opt into auto-debit payments. This interest rate discount can save you thousands over the life of your loan.
Drawbacks of Refinancing with ASLA
Strict residency requirements
While most student lenders accommodate borrowers in all 50 states, ASLA refinance loans are only available to borrowers who are Arkansas residents. If you are not, you are not eligible to refinance with ASLA.
Inaccessible to international students
Due to ASLA’s strict citizenship and residency requirements, international students are ineligible to refinance with ASLA. If you are an international student without permanent legal residence, check out MPOWER and Prodigy Finance who offer student loan refinancing to international students.
Not an Arkansas resident? Complete our 2-minute form to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
Arkansas Student Loan Authority: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
3.50% to 7.48%
Variable APR Range
N/A
Loan Terms
5, 7, 10, or 15 years
Loan Amounts
$5,000 to $250,000
Ability to transfer a parent loan to the student
Did not disclose.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
670
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
40%; if mortgage or rent is not includes, DTI cannot exceed 25%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers who live in Arkansas.
Must have graduated
Did not disclose.
Must have attended a school authorized to receive federal aid
Did not disclose.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school Deferment
Yes.
Graduated repayment
Yes.
Military Deferment
ASLA offers an Armed Forces interest reduction program that allows service members to have 0% interest on their student loans while on federal active duty.
Disability Deferment
Did not disclose.
Forbearance
Did not disclose.
Cosigner Release
Yes, after 48 consecutive monthly principal and interest payments. The borrower must meet underwriting and credit criteria at the time of cosigner release.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Did not disclose. Allows for biweekly payments via autopay: Did not disclose.
Customer Service
Loan Servicer
Aspire Servicing
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Did not disclose.
Borrowers get assigned a personal customer service representative
Did not disclose.
Average time from approval to payoff
Did not disclose.
Before you take out a loan from Arkansas Student Loan Authority…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is ASLA a legitimate lender?
Yes, ASLA is a legitimate lender that has been supporting students pursuing higher education for over four decades. ASLA is a division of the Arkansas Development Finance Authority and is a state entity created to provide access to information about educational funding for all Arkansas students pursuing higher education. They offer a variety of educational support for students, from student loans to informational workshops.
Is ASLA available in all 50 states?
No. ASLA refinance loans are only available for borrowers that live in Arkansas.
How long does it take to get an ASLA student loan?
Submitting an application through ASLA takes a few minutes. Once you’ve submitted your loan application, ASLA will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for an ASLA student loan?
If you don’t qualify for an ASLA student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are ASLA student loans federal or private?
ASLA loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through ASLA hurt my credit score?
In order to estimate what rate you qualify for, ASLA may conduct a soft credit check — this does not affect your credit score. If you choose to accept the ASLA loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
See Arkansas Student Loan Authority’s disclosures here.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA offers three types of student loans: undergraduate and graduate loans, family loans, and student loan refinancing. The traditional undergraduate and graduate student loans are best for students who have a qualified cosigner and want a variety of repayment options. The family loan is best for family members or friends who want to help an undergraduate or graduate student with college costs. The refinance loan is best for students looking to refinance existing debt to simplify repayment and get a lower interest rate. Collectively, the three options provide a great selection for borrowers who are located in Arkansas, have a qualified cosigner, and want competitive interest rates.
Fixed APR Range: 3.20% to 6.34%
Variable APR Range: 6.06% to 10.61%
Loan Amounts: $1,001 to the cost of attendance minus other aid; $100,000 lifetime maximum
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for a student loan with ASLA, you’ll have access to some of the best rates in the industry. ASLA’s fixed and variable interest rates are typically lower than competing student lenders. The ranges offered are:
Undergraduate & Graduate
Family
Fixed APR*
3.20% to 6.34%
3.20% to 6.42%
Variable APR*
6.06% to 10.61%
N/A
*Rates as of July 23, 2023. The lowest states rates include 0.25% auto-debit discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Family loan option
Unlike many other lenders, ASLA offers a family loan designed for family members or friends looking to borrow a student loan on a student’s behalf. The family loan option is great for students who do not qualify for a loan on their own.
Variety of repayment options
ASLA offers a range of repayment options depending on your financial situation. If you take out an undergraduate or graduate student loan, you will have access to all three repayment options: immediate, interest-only, and deferred repayment. However, if your family member or friend opts for the family loan to fund your education, you will only have access to the immediate and interest-only repayment option.
Repayment Option
Terms
Pros
Cons
Immediate Payment Option
Make principal and interest payments while you’re in school.
You will make significant progress in paying off your student debt. This option will save you the most money in the long run.
It may be challenging to afford to make full payments while in school.
Interest-Only Payment Option
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Payment Option
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Cosigner release option after 48 months
If you need a cosigner for your student loan, ASLA might be a good option for you. Unlike several other lenders, ASLA allows you to release your cosigner after 48 months of timely payments. This can be helpful if you want to build credit in your own name.
Provides assistance with college planning
ASLA provides a wide variety of college planning resources, from checklists to workshops to college fairs. ASLA’s college planning services can help you find scholarships, save for college more efficiently, and make sure you’re completing financial aid forms on time.
Offers 0.25% interest rate reduction for opting into auto-debit payments
Similar to other lenders, ASLA offers a 0.25% interest rate discount for borrowers who opt into auto-debit payments. This interest rate discount can save you thousands over the life of your loan.
Drawbacks of Arkansas Student Loan Authority
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through ASLA. If you’re studying less than half-time, you may want to consider College Ave for your private student loan. To be eligible for a loan with ASLA, you must meet the following criteria.
Undergraduate and Graduate Student Loan
Family Loan
Citizenship & Residency
Must be a U.S citizen or permanent resident. You are also required to be an Arkansas resident or attend a school in Arkansas.
Borrower must be a U.S citizen or permanent resident. The borrower or the student must be an Arkansas resident, or the student must be attending a school in Arkansas.
Enrollment
Must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Student must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Min. Income
Did not disclose. Borrowers must have a debt-to-income ratio that does not exceed 40% of their gross monthly income.
Did not disclose. Borrowers must have a debt-to-income ratio that does not exceed 40% of their gross monthly income.
Credit
Borrowers must have a credit score of 670 or a cosigner with a credit score of 670.
Borrowers must have a credit score of 670.
Strict residency requirements
While most student lenders accommodate borrowers in all 50 states, ASLA student loans are only available to borrowers who either live in Arkansas or are pursuing a degree at a school in Arkansas. If you are neither, you are not eligible for a student loan with ASLA.
Inaccessible to international and DACA students
Due to ASLA’s strict citizenship and residency requirements, international students are ineligible for student loans with ASLA. DACA students are only eligible for student loans with ASLA if they have also received permanent resident legal status. If you are an international or DACA student without permanent legal residence, check out MPOWER and Prodigy Finance who offer private student loans to international and DACA students.
Arkansas Student Loan Authority: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
3.20% to 6.34%
Variable APR Range
6.06% to 10.61%
Loan Terms
10 or 15 years
Loan Amounts
$1,001 to the cost of attendance minus other aid; $100,000 lifetime maximum
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
670
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
40%; if mortgage or rent is not included, DTI cannot exceed 25%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers who either live in Arkansas or are attending a school in Arkansas.
Must be enrolled half-time or more
Yes.
School requirements
Must attend an eligible nonprofit, Title IV eligible, degree-granting, accredited college or university.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school repayment options
Immediate repayment: Make full principal and interest payments while in school.
Interest-only repayment: Only pay interest while you’re in school.
Deferred repayment: Wait to make payments until you’re out of school.
In-school Deferment
Yes.
Graduated repayment
No.
Military Deferment
ASLA offers an Armed Forces interest reduction program that allows service members to have 0% interest on their student loans while on federal active duty.
Disability Deferment
Did not disclose.
Forbearance
Did not disclose.
Cosigner Release
Yes, after 48 consecutive monthly principal and interest payments. The borrower must meet underwriting and credit criteria at the time of cosigner release.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Did not disclose. Allows for biweekly payments via autopay: Did not disclose.
Customer Service
Loan Servicer
Aspire Servicing
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Did not disclose.
Borrowers get assigned a personal customer service representative
Did not disclose.
Average time from application to approval
Did not disclose.
Before you take out a loan from Arkansas Student Loan Authority…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is ASLA a legitimate lender?
Yes, ASLA is a legitimate lender that has been supporting students pursuing higher education for over four decades. ASLA is a division of the Arkansas Development Finance Authority and is a state entity created to provide access to information about educational funding for all Arkansas students pursuing higher education. They offer a variety of educational support for students, from student loans to informational workshops.
Is ASLA available in all 50 states?
No. ASLA is only available to borrowers living in or attending school in Arkansas.
How long does it take to get an ASLA student loan?
Submitting an application through ASLA takes a few minutes. Once you’ve submitted your loan application, ASLA will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an ASLA student loan?
If you don’t qualify for an ASLA student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are ASLA student loans federal or private?
ASLA loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through ASLA hurt my credit score?
In order to estimate what rate you qualify for, ASLA may conduct a soft credit check — this does not affect your credit score. If you choose to accept the ASLA loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
See Arkansas Student Loan Authority’s disclosures here.
In a sea of student loan companies, finding the best one for you may feel overwhelming. Each private student loan company will offer something different. Some elements may be right up your alley and others maybe not so much.
While the best student loan company for you will ultimately be the one that suits your needs and desires best, the following are our top picks for the best student loan companies.
Arkansas Student Loan Authority
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions.
What They Offer: ASLA offers three types of student loans: undergraduate and graduate loans, family loans, and student loan refinancing. The traditional undergraduate and graduate student loans are best for students who have a qualified cosigner and want a variety of repayment options. The family loan is best for family members or friends who want to help an undergraduate or graduate student with college costs. The refinance loan is best for students looking to refinance existing debt to simplify repayment and get a lower interest rate.
Best Features:
Competitive interest rates
A variety of loan options
Flexible cosigner release policy
A variety of repayment options
Offers 0.25% interest rate reduction for opting into auto-debit payments
Drawbacks:
Strict residency requirements (Borrowers must be residents of or students in Arkansas.)
Inaccessible to international students
ASLA is the best student loan company for borrowers who are located in Arkansas, have a qualified cosigner, and want competitive interest rates.
Ascent
Ascent is an online student lender offering a wide selection of student loan options. Ascent was named Best Private Student Loan for 2021 by Forbes Advisor, NerdWallet, and Money.com.
What They Offer: Ascent offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. The traditional cosigned loan is best for students who have a qualified cosigner and want to pay off their debt fast. The non-cosigned loan is best for borrowers with a strong credit score and stable income. The non-cosigned outcomes-based loan is best for upperclassmen with limited credit and income and no access to a cosigner.
Best Features:
Variety of loan options
Competitive interest rates
Accessible to international and DACA students
Flexible cosigner release policy
Drawbacks:
Unavailable to students enrolled less than half-time
Cosigner release is not available to international students.
Ascent is the best student loan company for borrowers who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos
Brazos is a non-profit lender that launched in 1975 with a focus on bringing transparency and low-cost loans to Texas residents.
Strict eligibility criteria (Only available to Texas residents.)
Brazos is the best student loan company for borrowers who are Texas residents with an established income and strong credit.
College Ave
College Ave is an online student loan company with the mission to make the student loan process more simple, clear, and personal.
What They Offer: College Ave offers both private student loans and student loan refinancing for undergraduates, graduate students, professional school students, career school students, and parents of students.
Best Features:
Strong customer experience
Competitive interest rates
Ability to choose your own loan term
Drawbacks:
Unclear forbearance policy
College Ave is the best student loan company for borrowers who want a more flexible repayment term that allows them to find a loan that matches their budget.
The Custom Choice Loan®
The Custom Choice Loan® is powered funded by Citizens. The loan option is designed to provide borrowers with greater flexibility and control when it comes to funding their college education.
What They Offer: The Custom Choice Loan is available for undergraduate and graduate students.
Best Features:
Competitive interest rates
Flexible repayment options
Strong customer service
Drawbacks:
Some Custom Choice Loans are not accessible to students enrolled less than half-time
No repayment plan shorter than 7 years or longer than 15 years
The Custom Choice Loan is the best student loan option for borrowers that want competitive interest rates, are seeking a flexible repayment term, and want strong borrower benefits.
Earnest
Earnest is an online student lender that was founded in 2013 with the mission to make the student loan process simpler for students and graduates.
No cosigner release option on traditional student loans; no option to add a cosigner on refinance loans
Loan products are unavailable in certain states
Earnest is the best student loan company for borrowers who want competitive interest rates, unique borrower perks, and flexible repayment options that allow them to find a loan that matches their budget.
Edly
Edly offers Income-Based Repayment (IBR) loans through FinWise Bank, an FDIC-insured bank. IBR loans create an alternative loan option for students by setting post-graduation payments based on income.
Students who borrow an IBR loan from Edly will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income.
Repayment begins when the borrower has an income of at least $30,000.
No cosigner required
Drawbacks:
The borrowing limit is capped at $15,000 per academic year, which may not cover all programs.
Only available for a select group of schools
Offers a 4-month grace period, which is shorter than the typical 6-month grace period offered by other private student lenders.
Edly is the best student loan company for borrowers who want a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at the borrower’s credit score or income, Funding U looks at non-traditional metrics such as GPA and estimated future income to assess creditworthiness.
What They Offer: Funding U offers non-credit-based student loans for undergraduate students.
Best Features:
No cosigner required
No credit history required
Variety of repayment options
Available to DACA students with a work-eligible Social Security card
Drawbacks:
Unavailable in 13 states
Maximum funding amount is $20,000, which is less than most other private lenders.
Unavailable to students enrolled less than half-time
Loan payments are required while in school
Funding U is the best student loan company for borrowers who are high-achieving undergraduate students with limited credit history and no access to a creditworthy cosigner.
INvestED
INvestED has been providing students in Indiana with higher education solutions for over 40 years.
INvestED is the best student loan company for borrowers who are residents of or students in Indiana who want competitive interest rates and a variety of repayment options.
ISL Education Lending
ISL Education Lending is a nonprofit student lender established in 1979 with the mission of supporting students and families who have exhausted other sources of aid.
What They Offer: ISL Education lending offers both private student loans and student loan refinancing.
Best Features:
Competitive interest rates
Zero fees
Drawbacks:
Limited repayment options
ISL Education Lending is the best student loan company for borrowers who want to work with a nonprofit lender and want competitive interest rates.
LendKey
LendKey is an institution that connects borrowers with a network of 100+ lesser-known credit unions and community banks, allowing borrowers to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions.
Allows borrowers to work with credit unions and community banks
Competitive interest rates
Variety of borrower benefits
Drawbacks:
Unavailable to part-time students, parents, and non-U.S. citizens/permanent residents
Unavailable in certain states
LendKey is the best student loan company for borrowers who want to work with a credit union or community bank, have strong credit, and have stable income.
MPOWER
MPOWER is an online lender that works with international and DACA students to provide affordable college financing.
What They Offer: MPOWER offers non-cosigned undergraduate and graduate student loans for international, domestic, and DACA students.
Best Features:
Available to international, domestic, and DACA students
Provides additional assistance such as scholarship opportunities
Borrowers can receive up to 1-1.5% in rate discounts depending on the loan type.
Drawbacks:
Only one repayment term of 10 years
Higher interest rates and fees than other lenders
MPOWER is the best student loan company for borrowers who are international or DACA students, don’t have a credit history, and can’t access a qualified cosigner.
Nelnet Bank
Nelnet Bank is an online student lender founded over 40 years ago with the mission to make educational dreams possible.
Unavailable to international students or student visas
No biweekly payment via autopay
Nelnet Bank is the best student loan company for borrowers who want competitive interest rates, a variety of repayment options, and a flexible forbearance policy.
Prodigy Finance
Prodigy Finance is an online student lender founded in 2007 to help international students find affordable college financing.
What They Offer: Prodigy Finance offers student loans for international students in master’s degree programs.
Best Features:
No cosigner required
No collateral required
No credit history required
Variety of repayment options
Drawbacks:
Not available in all 50 U.S. states
Limited interest and repayment options
Higher interest rates and fees than other online lenders
Prodigy Finance is one of the best student loan companies for international student borrowers with no credit history.
Sallie Mae
Sallie Mae is one of the largest online private student lenders and is committed to helping borrowers find affordable college financing.
What They Offer: Sallie Mae offers student loans for undergraduate, graduate, MBA, law, medical, dental, and career training programs.
Best Features:
Competitive interest rates
Strong customer experience
Various repayment options
Flexible cosigner release policy
Drawbacks:
No biweekly student loan payments via autopay
Unable to see what rate you qualify for before formally applying
Sallie Mae is the best student loan company for borrowers who want a more flexible repayment plan and competitive interest rates.
SoFi
SoFi is an online student lender founded in 2019 and is now one of the largest student loan companies in the industry.
What They Offer: SoFi offers both private student loans and student loan refinancing. SoFi’s student loan offering is available for undergraduates, graduates, law and MBA students, as well as parents of students.
Best Features:
Competitive interest rates
Variety of repayment options
Fast online application and no fees
Drawbacks:
Unclear credit requirements
High loan minimum
SoFi is the best student loan company for borrowers that have a high credit score and want competitive interest rates.
Final Thoughts from the Nest
When picking a student loan company to move forward with, make sure you compare options side by side. Start by using Sparrow. Our free student loan search tool will allow you to see what student loan rates you pre-qualify for in as little as 3 minutes. Then, we’ll help you compare loan rates side by side so you can pick the best option for you. Sign up today to get started.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The Custom Choice Loan® is funded by Citizens. The Custom Choice Loan offers borrowers competitive rates, flexible repayment terms, and strong customer service. The loan is available for undergraduate and graduate students. It’s best if you want competitive interest rates, are seeking a flexible repayment term, and want strong borrower benefits.
Fixed APR Range: 4.43% to 14.65%*
Variable APR Range: 5.38% to 15.19%*
Loan Amounts: $1,000 up to 100% of the school-certified cost of attendance minus other aid; cannot exceed $99,999 annually; cannot exceed $180,000 in aggregate education debt
• Competitive interest rates and zero fees for qualified borrowers • Offers a variety of repayment options • Offers a 2% principal reduction with proof of graduation • Offers an autopay discount • Offers a 6-month grace period with flexible extension options • Strong customer experience
• No repayment plan shorter than 7 years or longer than 15 years
Rather than searching for lenders one-by-one, we recommend comparing Custom Choice’s rates with a student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for the Custom Choice Loan, you’ll have access to some of the best rates in the industry. The Custom Choice Loan’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
*Rates as of November 1, 2023. Lowest APR includes 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Offers a variety of repayment options
While still in school, the Custom Choice Loan offers four repayment options, with terms ranging from 7, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Flat Repayment
Pay $25 per month while you’re in school and during the grace period to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Offers a 2% principal reduction with proof of graduation
The Custom Choice Loan offers a unique 2% principal reduction for borrowers who are able to provide proof of graduation. The principal reduction is based on the total dollar amount of all disbursements made, excluding any amounts that were reduced, returned, or canceled. To receive the principal reduction, borrowers must request it with proof of graduation from a bachelor’s degree program or higher.
So, for example, if you borrowed a $30,000 loan and were eligible for the principal reduction, your balance would be lowered to $29,400. This is a unique borrower perk that competing lenders do not offer.
On top of its generous principal reduction offer, the Custom Choice Loan provides borrowers with a 0.25% interest rate discount for opting into autopay. Autopay requires borrowers to agree to make scheduled monthly principal and interest payments by an automatic monthly deduction (ACH) from a savings or checking account. This interest rate discount is in addition to other discounts offered to Custom Choice borrowers.
Offers a 6-month grace period with flexible extension options
After you are no longer in school at least halftime, you have a grace period before you begin making full principal and interest monthly payments. The grace period is six months for Custom Choice undergraduate and graduate loans. The loan also provides borrowers with flexible extension options, allowing you to extend one month at a time for an additional 6 months.
From loan application to loan disbursement and beyond, Monogram’s borrowing experience is done entirely online. The lender also offers excellent customer service that is available through email, chat, and phone. If you’re comfortable with an entirely virtual experience, Monogram’s seamless online borrowing process is a huge benefit.
Drawbacks of the Custom Choice Student Loan
No repayment plan shorter than 7 years or longer than 15 years
While the Custom Choice Loan offers 7-, 10-, and 15-year repayment terms, it could improve by offering repayment plans that are shorter and longer. Although the three repayment term options provide a decent selection for borrowers, it would be helpful to offer 5- and 20-year repayment options for borrowers who are looking to either pay off their loan faster or over a longer timeframe.
$1,000 up to 100% of the school-certified cost of attendance minus other aid; cannot exceed $99,999
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
660 without a cosigner; On a cosigned loan, 625 for the cosigner and 600 (or no score) for the student borrower
Minimum Income
Borrowers must demonstrate at least $1 income.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Typical Income of Approved Cosigner
Did not disclose.
Maximum Debt-to-Income Ratio
Less than or equal to 85%.
Ability to qualify if you’ve filed for bankruptcy
Yes, but not if you filed in the last 10 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
No. The Custom Choice Loan is available to students enrolled less than half time/part time during a given loan period. Only the Immediate Repayment option is offered for students enrolled less than half time
Percentage of borrowers who have a cosigner
Over 80%.
Repayment Options
In-school Repayment Options
Immediate Repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Flat repayment: Pay $25 a month during school and the grace period. This repayment option is only available for loans with a balance of $5,000 or more.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
6 months with an option to extend month-to-month for an additional 6 months.
Grace Period Extension
Yes, up to 6 additional months.
In-school Deferment
Yes, up to 48 months.
Military Deferment
Yes, up to 48 months if the borrower and cosigner cannot repay the loan while the borrower or cosigner is on active duty.
Disability Deferment
Did not disclose.
Forbearance
Up to 12 months available, in 2-month increments.
Cosigner Release
Yes, after 36 months of on-time payments.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
American Education Services.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No
Average time from application to approval
Prequalifying takes less than a minute
Before you take out a student loan from Custom Choice…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
The Custom Choice Loan is funded by Citizens. Citizens is a legitimate lender that has been around for over 190 years. The company provides student loans to undergraduate and graduate students through the Custom Choice Loan.
Is Custom Choice available in all 50 states?
Yes, as of 6/1/2022, the Custom Choice Loan is available in all 50 states.
How long does it take to get a Custom Choice Loan?
Submitting an application for a Custom Choice Loan takes a few minutes. Once you’ve submitted your loan application, Monogram will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time for your school to receive the proceeds of your loan. Monogram estimates that the entire process from the school certification request to receiving the funds takes around 19 days.
What happens if I don’t qualify for the Custom Choice Loan?
If you don’t qualify for the Custom Choice Loan, Monogram will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or try with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all ready to support you.
Is the Custom Choice Loan federal or private?
The Custom Choice Loan is a private loan. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for the Custom Choice Student Loan hurt my credit score?
In order to estimate what rate you qualify for, Monogram conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the Custom Choice Loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Around 1 in 5 Americans hold student loans, which is hardly a surprise. After exhausting your scholarship, grant, work-study, fellowship, and financial aid options, student loans are a plausible option for filling in the gaps in your education costs.
Given the nationwide student debt crisis, it’s more important than ever to secure a competitive student loan that offers quality terms, like low-interest rates, loan deferment/loan consolidation options, and an ample repayment period.
Typically, the parent/guardian of the student helps navigate through the process of securing student loans and paying for tuition. Going through the process alone, however, can be overwhelming and lonely, but we’re here to help.
If you’re a student who is looking to land a good student loan option without the help of your parent(s), continue reading this article.
Explore Federal Loan Options
The United States Department of Education offers student loan options for qualifying students in the U.S.
Federal student loans are usually the better option as opposed to private student loans because federal student loans come with a plethora of benefits that private loans do not offer, such as loan cancellation, fixed interest rates, interest rate reduction, income-driven repayment plans, etc. Most federal student loans also do not require a cosigner or a credit check, which most private student loans do.
Since you are applying for student loans without a parent or guardian, consider the Direct Unsubsidized Loans and the Direct Subsidized Loan options.
Direct Subsidized Loan
Direct Unsubsidized Loan
For undergraduate students with demonstrated financial need
For undergraduate and graduate students; do not need to demonstrate financial need
Your school determines how much you can borrow.
Your school determines how much you can borrow.
The U.S. Department of Education pays the interest on the loan • If you’re in school at least half-time • During deferment • During the first six months of a grace period
You must pay the interest on the loan at all times.
As you can see, the Direct Subsidized Loan is a far better option than the Direct Unsubsidized Loan. This is because you do not need to pay the interest on the loan if you’re in school half-time or more, during loan deferment (when you can temporarily stop making loan payments due to difficult financial circumstances), and during the first six months of your grace period (a period of time that allows the borrower to delay their payment for a short period of time).
Find a Friend or Other Relative to Cosign
91% of undergraduate loans are cosigned. When applying for private student loans, it’s extremely likely that you will need a cosigner, or an additional person who will take responsibility for the loan with you.
Anyone can be a cosigner, as long as they are 18-years-old or older and have a steady flow of income. It’s recommended to have a cosigner with an excellent credit score, however, to get you more favorable terms for your private student loan. Having a cosigner with adverse credit history can harm your chances of receiving a competitive student loan.
Having a cosigner tends to be necessary because most students don’t have a credit history and aren’t considered to be trustworthy borrowers; therefore, having two people responsible for a loan makes it more likely that the loan will be paid back.
More often than not, having a cosigner on your loan will be a make-it-or-break-it factor when it comes to being approved for a private student loan.
If your parents cannot or will not cosign a private student loan for you, consider asking a friend or other relative to cosign the student loan with you.
If someone cosigns a loan with you, their credit score and credit history are as on the line as yours is. Asking someone to cosign a loan with you is a very serious thing, so it should be done thoughtfully and communicatively.
Find a Private Student Loan Without a Cosigner
A private student loan that doesn’t require a cosigner comes with its own benefits and drawbacks. For example, the liability of the private student loan doesn’t lie upon two individuals. However, a private student loan without a cosigner will most likely have higher interest rates and less favorable terms in comparison to a private student loan with a cosigner.
According to the Wall Street Journal, undergraduates with a cosigner were offered interest rates of 5.37%, while private student loans without a cosigner offered interest rates of 7.46%.
However, it’s important to take advantage of the private student loan options you have that do not require a cosigner, especially if you do not have the assistance of your parents or others.
Best Student Loans With No Cosigner
Sparrow’s partners offer private student loans that do not require a cosigner. Here are some of the best student loans on the market that you can get without having a cosigner.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. To qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you are a Texas resident, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a College Ave student loan without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5- or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA, and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. MPOWER is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. Prodigy Finance is a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. To qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. SoFi does not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. If you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
To see what student loans you qualify for and at what rate, complete the Sparrow application.
Closing Thoughts From the Nest
Affording school is not easy, but it is definitely doable if you are a strategic, informed consumer.
Before anything, be sure to submit your FAFSA as soon as possible so that you can receive federal financial aid before it runs out.
Secondly, look into as many scholarships, grants, and fellowships as you can to pay for your education. You should exhaust your options to get free money for college as much as possible so that you won’t accumulate overwhelming amounts of student debt.
Read Sparrow’s articles on scholarships and grants to find the best search engines to streamline your application process.
Furthermore, consider picking up a side hustle to be able to save up money to afford college. Whether it be coaching at a local elementary school, writing blogs for companies, or working as a cashier, anything can help.
After completing all of these steps, start researching the private student loan options that you have. Sparrow’s free online tool can help you do that. If you submit an application with us today, we’ll show you some of the best student loan options on the market and let you compare cosigners so you can find the best rate.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Each year, college-bound students anticipate receiving their college financial aid award letters. Oftentimes, financial aid becomes a make-it-or-break-it factor in pursuing a higher education.
If your financial aid award is too small, it could put attending that university out of the question. But what if you receive nofinancial aid at all?
Before you throw your college dreams out the window, let’s break this down. Here’s what you can do to pay for college with no financial aid.
Opening a financial aid award letter only to see a series of zeros is both disappointing and uncommon. In fact, the vast majority of students do receive at least some sort of financial aid, whether that be scholarships, grants, work-study, or loans.
Financial aid is calculated based on a variety of factors, however, it tends to be either need-based or merit-based. Need-based financial aid is given based on your financial need, or how much you or your family is expected to be able to contribute to your college education. Merit-based aid, on the other hand, is given based on achievements, such as academic or athletic excellence.
Why Didn’t I Get Financial Aid?
How your financial aid is calculated is frankly a complex process. So, in theory, there are a variety of reasons you didn’t qualify for financial aid.
That said, there are seven common things that often disqualify students from receiving financial aid.
#1: You Didn’t Submit Your FAFSA
The FAFSA, or Free Application for Federal Student Aid, must be filled out for you to be considered for federal financial aid. Federal financial aid includes all federally-funded aid programs, such as federal grants, work-study, and federal student loans.
The FAFSA opens each year on October 1st and closes on June 30th of the following year. You should complete the FAFSA the year before you plan to enroll in college. For example, if you plan to attend college for the 2023-2024 academic year, you should complete the FAFSA during the October 1st, 2022-June 30th, 2023 cycle.
If you did not complete the FAFSA, you will not be eligible for federal financial aid.
#2: You Submitted the FAFSA Late
Federal financial aid is awarded on a first-come, first-served basis.
The later you submit your application, the lower your chances of receiving financial aid. Because of this, we recommend submitting your FAFSA as close to the October 1st opening date as possible.
Likewise, the June 30th deadline for submitting the FAFSA is firm. If you submitted the FAFSA past the deadline, you will be ineligible for federal financial aid for that academic year. You must wait until the next application cycle to fill it out again.
If helpful, put the FAFSA opening date and submission deadline in your calendar for future academic years so you don’t forget.
#3: You’ve Reached Your Financial Aid Limit
Certain financial aid has limits. For example, some grant programs award recipients with $20,000 and allow them to use the funds as they see fit. So, if the recipient had already used the entire $20,000 of that award to fund their freshman year tuition, they will not receive any additional grant funding from that program in following years.
If you have already met the maximum award or borrowing limits for the financial aid you have access to, you will not see more financial aid in your aid package.
Some of the most common financial aid programs with limits are:
6 years of funding. Recipients are eligible to receive 600% of their yearly award (over the course of a 6-year period). If recipients use 150% of their total 600% in their freshman year, they will have a remaining 450% for the rest of their college career.
The total Cost of Attendance minus your Estimated Family Contribution (EFC).
Federal Undergraduate Unsubsidized Loans (Dependent Students)
• First Year: $5,500 ($3,500 subsidized, $2,000 unsubsidized) • Second Year: $6,500 ($4,500 subsidized, $2,000 unsubsidized) • Third Year and Beyond: $7,500 ($5,500 subsidized, $2,000 unsubsidized) • Total Limit Over the Course of Your Entire Education: $31,000 ($23,000 subsidized, $7,000 unsubsidized)
Federal Undergraduate Unsubsidized Loans (Independent Students)
• First Year: $9,500 ($3,500 subsidized, $6,000 unsubsidized) • Second Year: $10,500 ($4,500 subsidized, $6,000 unsubsidized) • Third Year and Beyond: $12,500 ($5,500 subsidized, $7,000 unsubsidized) • Total Limit Over the Course of Your Entire Education: $57,500 ($23,000 subsidized, $34,500 unsubsidized)
Graduate Federal Student Loans
$20,500 in unsubsidized loans with a lifetime limit of $138,500, which includes undergraduate federal student loans.
If you have already reached your maximum award or borrowing limit, you may not receive more financial aid.
#4: You are Defaulted on a Federal Student Loan
Your federal student loans are considered defaulted after you’ve missed your scheduled loan payments for more than 9 months, which is around 270 days.
If you are defaulted on a federal student loan, you are ineligible for federal student aid, regardless of whether you submitted the FAFSA.
If your student loans are in default, or you believe they may be in default, contact your federal student loan servicer as soon as possible to discuss options such as loan rehabilitation.
You will not be eligible for any federal financial aid until the defaulted loan is paid off.
#5: You Did Not Meet the Income Threshold for Need-Based Aid
Need-based financial aid requires you to meet a certain threshold of financial need to be eligible. Information such as your expected family contribution (EFC), your school year, and the cost of attendance at your school will determine your eligibility for need-based financial aid.
#6: You Did Not Meet the Eligibility Requirements for Merit-Based Aid
When determining your eligibility for merit-based aid, your academic standing may be considered. If you are not making Satisfactory Academic Progress (SAP), you will be ineligible for merit-based federal financial aid.
To make SAP, you must have at least a 2.0 GPA on a 4.0 scale (a C average) and pass enough classes to make progress toward earning a degree.
#7: You Are Not a U.S. Citizen
When it comes to federal financial aid, only U.S. citizens and permanent residents with a green card are eligible. If you are neither, you will not be eligible to receive federal financial aid.
6 Ways to Pay for College Without Financial Aid
If you fall into one of the above categories, and thus did not receive financial aid, there are a few things you can — and should — do to pay for college.
Here are the top six things you can do to pay for college with no financial aid:
Write an Appeal Letter
While it may sound intimidating, appealing your financial aid package should be your first step. Before you write an appeal letter, though, you should consider the following:
Has your or your family’s financial situation changed since you submitted the FAFSA due to unexpected or special circumstances? (ie. medical expenses)
Did you make an error on your FAFSA that you believe impacted your financial aid package?
Did you receive a better financial aid package from another school that you’d like another school to match?
If any of the above circumstances are applicable to you, it is worthwhile to appeal your financial aid award.
When writing your appeal letter, be mindful of what you say and how you say it. Remember, their initial assessment granted you $0 in financial aid. They will need to spend time reevaluating your financial aid package, so be understanding and respectful of their time.
Look for Merit-Based Scholarships
Merit-based scholarships should be your next stop in paying for college without financial aid. Scholarships, unlike student loans, do not have to be paid back. (Yup, free money.)
We recommend starting your search with scholarship search engines. These sites compile thousands, sometimes even hundreds of thousands, of scholarship opportunities, making it easy for you to apply to several in one place.
For example, if you received your financial aid package of $0 on May 1st, 2023, you still have until June 20th, 2023 to complete the FAFSA. While you may not receive any financial aid due to submitting so late in the cycle, it is worth a shot.
To complete the FAFSA, start by gathering any necessary documents such as:
Your social security number
Your parents’ social security numbers (if you are a dependent)
Your Alien Registration Number (if you are not a U.S. citizen)
Tax information, such as tax returns
Records of any untaxed income
Information on cash you may have
After you have this information, fill out the FAFSA, and submit it before June 30th.
Look for Jobs that Offer Tuition Assistance
If receiving other financial aid is not an option, pursuing employment at a company with tuition assistance is another solid option.
There are a variety of companies offering both part-time and full-time employment with incredible tuition reimbursement benefits.
For example:
Starbucks offers both full-time and part-time employees up to 100% tuition reimbursement for courses taken through Arizona State University’s online program.
Target offers employees up to 100% tuition reimbursement for undergraduate degrees.
Papa John’s offers employees at corporate-owned locations up to 100% tuition reimbursement for undergraduate and graduate degree programs done through Purdue University Global.
Consider Private Student Loan Options
If you are unable to secure other forms of financial aid, private student loans can be a viable option. As with any loan, however, you should always compare interest rates and terms so you can get the best student loan possible.
The following are our top picks for private student loans:
Arkansas Student Loan Authority – Best if you are located in Arkansas, have a qualified cosigner, and want competitive interest rates.
Ascent – Best if you don’t have a cosigner, are an international or DACA student, or have a low credit score.
Brazos – Best if you are a Texas resident, have strong credit, and want competitive interest rates.
College Ave – Best if you are seeking competitive interest rates and a more flexible repayment plan that matches your budget.
Earnest – Best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options.
Funding U – Best if you are a high-achieving student with limited credit history and no access to a creditworthy cosigner.
INvestED – Best if you are a resident of or student in Indiana seeking competitive interest rates and a variety of repayment options.
LendKey – Best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER – Best if you are an international or DACA student, don’t have a credit history, or can’t access a qualified cosigner.
Nelnet Bank – Best if you are seeking competitive interest rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance – Best if you are an international student who doesn’t have a credit history and can’t access a qualified cosigner.
Sallie Mae – Best if you are seeking a more flexible repayment plan and competitive interest rates.
SoFi – Best if you are seeking competitive interest rates and have a strong credit history or a creditworthy cosigner.
Rather than completing an individual application with each lender to see what you qualify for, consider using Sparrow. The Sparrow application allows you to submit one single application to see what rates you qualify for at 15+ student lenders. Using Sparrow is also free and won’t impact your credit score.
Consider Community College
If your top choice school is simply out of reach due to a lack of financial aid, it may be worthwhile to consider a less expensive school, or even a year or two at a local community college. Community college is often far cheaper than traditional 4-year institutions.
Final Thoughts from the Nest
If you didn’t receive any financial aid, don’t lose hope. There are a variety of things you can do to still pursue a higher education. Start with appealing your financial aid award, then look for other avenues for aid, such as scholarships and private student loans.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Navigating adult life is easier with a good credit score. This three-digit number affects nearly every facet of your financial life, from paying for college, to renting an apartment, to buying a car.
In this article, we’ll go over everything you need to know about credit, focusing on how your credit score impacts your ability to get a student loan.
What is a Credit Score?
A credit score is a number that represents an individual’s creditworthiness. In other words, it reflects the willingness of a lender to trust you to pay back your debts.
Credit scores are important because lenders use them to determine whether they’ll grant you credit and at what cost. The higher your credit score, the more a lender will consider you able and responsible enough to repay your debt.
Where Do Credit Scores Come From?
There are three main credit bureaus: Experian, Equifax, and TransUnion. Each of these credit bureaus obtain individual credit information through lenders. They then keep track of all the information and store it until requested to release it in the form of a credit report.
Some lenders don’t report information to all three credit bureaus. Thus, not all three credit bureaus will have all of your financial information. This means that your credit report from Experian may look different than your credit report from Equifax, which may look different than your credit report from TransUnion…(you get the idea).
Check-in: Credit bureaus essentially keep track of your financial information. Then, when requested, they provide this information to lenders and creditors, in the form of a credit report, so they can determine your credit score and decide whether to lend to you.
Each credit report includes information about your financial history. Lenders use this information to determine your credit score. Let’s break this down.
Lenders and creditors calculate individual credit scores through credit scoring models. A credit scoring model is a framework or equation used to calculate a credit score. There are two main credit scoring models: FICO and VantageScore. You can think of them as the Walmart and Target of the financial world – they’re similar, yet slightly different.
Let’s use an example to illustrate this concept.
If you asked 10 people to go bake a vanilla cake, they would all come up with a vanilla cake. However, each one would be slightly different. Everyone will have access to a different recipe and use slightly different ingredients to make their final product.
The same goes for lenders and creditors.
Each lender or creditor will use the information they have access to about your finances, along with the credit scoring model they prefer to use, to generate a credit score. Thus, while all lenders and creditors will generate the same final product (a credit score), it may vary based on which credit bureau they got your information from and which credit scoring model they used to calculate the score.
Currently, around 90 percent of top lenders use the FICO scoring model, while less than 10 percent use VantageScore. However, there are hundreds of credit scoring models lenders can choose from. So, you can theoretically have hundreds of credit scores.
This doesn’t mean you need to go calculate every single credit score you might have. It just makes understanding your credit score, how it’s calculated, and why it matters incredibly important.
Check-in: If this is still seeming a bit fuzzy, let’s try to put all the pieces together here. Credit bureaus collect and store information about your finances. The credit bureaus use this financial data to create a credit report that sums up your credit history. Then, when a lender wants to assess your creditworthiness, they pull information from these credit bureaus and the credit reports they generate to create an individual credit score. To create the score, they will use a credit scoring model. Different lenders will prefer different credit scoring models.
Why the Credit-Scoring Model Matters
If you checked your FICO credit score based on information from your Experian credit report, it will likely be different from your VantageScore credit score based on your Experian credit report. Even though both credit scoring models are factoring in information from the same credit report, they are two separate formulas and will thus generate different results.
When a lender wants to evaluate your creditworthiness, they will select the credit scoring model they want to use. You do not get to choose which model a lender uses. This is important to note because you may, for example, think you will qualify for a certain loan because you have a decent FICO score. Butif a lender uses the VantageScore model and your VantageScore is lower, they may deem you not creditworthy enough to borrow.
So, while the bureaus collect the information and create the credit reports, it’s the lenders that choose which model they’d like to use to assess your credit. This means that the lender who issues you your student loan will probably look at a different credit score than the lender who issues you your auto loan or your mortgage.
Check-in: Okay. Let’s put this all together again. Credit bureaus collect and store information about your finances. Then, when a lender wants to assess your creditworthiness, they pull information from these credit bureaus in the form of a credit report. Lenders use the information in your credit report in combination with the credit scoring model of their choice to generate a credit score. They then use that credit score to assess your creditworthiness.
How is My Credit Score Calculated?
Your credit score is calculated using many different pieces of credit data in your credit report. This data is grouped into five categories, each of which is weighted differently. FICO, the most common credit score provider, uses the following information on your credit report to determine your FICO score.
Payment History (35%): How you’ve repaid your credit in the past
Credit Utilization (30%): How much of your available credit you’ve used
Length of Credit History (15%): How long your credit accounts have been in use
New Credit (10%): The number of credit accounts you recently opened
Credit Mix (10%): The different types of credit accounts you have
Each of these is important for a different reason.
Payment History (35%)
What it means: Your payment history shows how you’ve repaid your credit in the past. It often includes your past payments on credit cards, installment loans, auto loans, student loans, home equity loans, and mortgage loans.
Why it matters: Payment history is the most important factor in a credit score. When a lender looks at your credit score to determine whether to lend you money, they are trying to answer the question “If I give this person money, will they pay me back on time?” This helps a lender figure out the amount of risk they will take on when extending credit. Having a few lines of credit and paying them back on time can help you look more reliable to a lender.
For example, if you had 8 accounts and you had a late payment on 6 of them, your payment history wouldn’t look so great to the lender. This makes this section of your credit score very important.
Credit Utilization(30%)
What it means: Your credit utilization shows how much of your available credit – the “credit limit” – you are using. The ratio is calculated by dividing the total revolving credit you are currently using by the total of all your revolving credit limits.
For example, if you have a credit limit of $3,000, and you’ve only used $1,000 of it, you’d have a 30% credit utilization ratio.
Why it matters: Your credit usage is the second most important factor in your credit score. Lenders and creditors like to see that you are responsibly able to use credit and pay it off regularly. Experts recommend using no more than 30% of your available credit.
Length of Credit History (15%)
What it means: Length of credit history is all about how long your credit accounts have been in use. This includes the age of your oldest credit account, the age of your newest credit account, and the average age of all your accounts.
Why it matters: Length of credit history is the third most important factor in your credit score. Lenders want to know you’ve been in the credit game for a while — the longer your credit history is, the better. Having a history of responsibly paying your credit accounts shows lenders that you are capable of doing the same for them.
If you are just getting started with building your credit, this may be the area that hurts your credit score the most. Only time will be able to boost this section as you prove over time that you’re able to pay off your credit.
New Credit (10%)
What it means: New credit refers to the number of credit accounts you recently opened. When you apply for new credit, lenders will conduct a hard inquiry. A hard inquiry is essentially a peek into your credit report to examine your financial history. A hard inquiry can lower your credit score, but typically only by 0-5 points.
If you choose to accept the offer and open a new line of credit, it could also lower the average age of your total accounts. This, in effect, lowers your length of credit history and subsequently, your credit score.
Why it matters: The number of credit accounts you’ve recently opened, as well as the number of hard inquiries lenders make when you apply for credit, accounts for 10% of your credit score. Too many accounts or inquiries can indicate increased risk and hurt your credit score.
Credit Mix (10%)
What it means: Credit mix refers to the different types of credit accounts you have, including revolving debt (such as credit cards) and installment loans (such as mortgages, home equity loans, auto loans, student loans, and personal loans). Credit scoring models consider the types of accounts and how many of each you have as an indication of how well you manage a wide range of credit products.
Why it matters: Lenders like to see a healthy credit mix that shows that you can successfully manage different types of credit. People with top credit scores often carry a diverse portfolio of credit accounts, which might include a car loan, credit card, student loan, mortgage, or other credit products.
For example, responsibly managing a credit card, student loans, and a mortgage may demonstrate a significant level of responsibility in the eyes of a lender. Thus, diversifying your credit accounts can help demonstrate greater creditworthiness. It’s important to note that there is a “limit” to this, so to speak. Having 30 retail credit accounts probably wouldn’t be a great idea.
What is a Good Credit Score?
Credit scores range from 300-850. Generally speaking, FICO credit scores are ranked as follows:
Below 630: Bad
Between 630 and 689: Fair
Between 690 and 719: Good
Above 720: Excellent
It’s important to note that each student loan lender is different, and therefore, there is no “magic number” that will guarantee you a lower interest rate or better terms. However, there is a general principle for credit scores: “the higher, the better.”
Your Credit Score’s Impact on Student Loans
You don’t need to have a credit history to secure a federal student loan, however, private lenders may use your credit score to determine whether or not you’re eligible and at what terms. Most private lenders will look for a credit score of 670 or higher on the FICO scale (the one discussed above).
Your credit score will impact your ability to take out a private student loan and may also impact the interest rate assigned to that loan. Of course, over time this impacts how much you obtain in student debt and how much you pay for your education in the long run.
If you have a low credit score (or none at all), you should consider applying with a cosigner, such as a parent or guardian, who can help you qualify for a student loan with better terms. If that isn’t an option for you, there are specific private lenders that are known for lending to people with bad credit.
Final Thoughts from the Nest
While not the end-all-be-all, your credit score is an important factor in determining your ability to get a student loan. Don’t worry if your credit score isn’t up to par though, there are ways you can improve it.
Whether you’re the parent, aunt, or friend of a student who is planning to pursue a higher education, chances are that the student will need a cosigner to be approved for a private student loan.
Students usually don’t have long enough credit histories in order to be deemed reliable borrowers. So, most private student lenders will require borrowers to have a cosigner as a form of insurance that the loan will be paid back in full.
Cosigning on a student loan is a big deal – not only can it have an impact on the student’s credit score, but it can also impact yours as well.
In this article, we’ll tell you what you need to know to make an informed decision when cosigning a student loan.
What is a Private Student Loan Cosigner?
A cosigner is an individual who “signs” the student loan with the borrower, becoming contractually obligated to pay off the loan or any missed payments if the student is unable to do so. This means that whatever payments the student borrower cannot make, you must take responsibility for. Cosigners are usually parents, extended family members, or close friends, though anyone can cosign for a private student loan.
What Are the Requirements for a Cosigner?
Cosigners must be a minimum of 18 years old, be a U.S. citizen, and have cosigned the student loan without coercion, manipulation, or force.
Principally, it is ideal for the cosigner to have an excellent credit score and a steady income to improve the primary borrower’s chances of qualifying for the private student loan. This is because a cosigner who demonstrates creditworthiness, or the reliability to pay off payments on time, increases the chances for the student loan being approved.
Pros and Cons of Cosigning a Student Loan
It’s important to preface this conversation by saying that you should only consider cosigning a private student loan after you’ve exhausted all other options.
Whether it be scholarships, grants, federal student aid, or federal loan options, be sure that you know what options are available (or not) to the student on the market.
Pros of Cosigning a Student Loan
You Can Help the Borrower Get Approved
Only 8% of students get approved for private student loans without a cosigner. So, without a cosigner, the chances are incredibly slim that the student borrower will get approved for the private student loan on their own. In the case that the private loan is even approved, the student will most likely have unfavorable interest rates and inflexible repayment options.
On the other hand, having a cosigner improves the chances of the student being approved for a private loan with adequate terms. Having a cosigner adds an additional amount of security for private lenders, as the chances of the loan being paid back in full increases with two signers.
Some private student loans require a cosigner when issuing loans, while others highly recommend the option.
You Can Help the Borrower Get a Lower Interest Rate
With or without a cosigner, student borrowers still need a way to pay for their education costs, so they end up signing private loans with disadvantageous terms (higher interest rates, shorter repayment periods, limited loan options). This often results in student borrowers racking up overwhelming amounts of education debt (hence the student debt crisis in the United States). Currently, over 3 million people in the United States have more than $100,000 in student debt.
Cosigning for a private student loan can help your student land a private loan with lower interest rates, more so if you have a strong credit history. This will help the borrower save money in the long run.
You Can Help the Borrower Build Credit
Cosigning a student loan can allow a borrower to get approved more easily. Once the student borrower is approved for the private student loan, the borrower can begin to build their credit history as they make payments for the loan. The lender reports the student borrower’s payment activity to major credit bureaus, and this information is utilized to calculate a portion of the student’s credit score.
Payment history makes up 35% of the student borrower’s FICO score, a numerical score that assesses their credit based on five components. Payment history is how well you’ve paid for your lines of credit over time, and if the student stays on top of the payments, their credit score can improve.
This couldn’t be possible without having a cosigner on the loan, and paying off student loans is a great way for students to start building their credit history.
Cons of Cosigning a Student Loan
Your Debt-to-Income Ratio Can Be Impacted
Your debt-to-income ratio is one way that lenders measure your creditworthiness, which is your reliability to pay back a loan on time.
What is a Debt-to-Income Ratio?
Your debt-to-income (DTI) ratio is the ratio between your monthly debt expenses (payments that show up on your credit report) and your monthly gross income (this is an odd way to say pre-tax income). In order to calculate your DTI, you divide your monthly debt expenses by your monthly pre-tax income, and your DTI ratio will be in the form of a percentage. The lower the DTI ratio, the better (this makes mathematical sense because your monthly debt expenses make up a smaller percentage of your income).
Within debt-to-income ratios, there are front-end ratios and back-end ratios. The front-end ratio is also called the housing ratio. It calculates what percentage of your monthly pre-tax income goes to all housing-related debt payments, like homeowner association fees, rent, mortgages, homeowners insurance, etc.
The back-end ratio calculates what percentage of your monthly pre-tax income goes to all of your monthly debt payments, meaning housing-related debt payments + payments like credit card bills, auto loans, student loans, etc.
For example, let’s say your monthly debt expenses consist of the following:
Car payment: $200
Homeowners Association fees: $300
Credit card payments: $542
Student loan payment: $321
Hospital bill: $120
This adds up to a total of $1,483 of monthly payments. Let’s say your monthly pre-tax income is $6,249.
What is a Good Debt-to-Income Ratio?
A good DTI ratio is lower than 36% for the back-end ratio (which measures what percentage of all your monthly debt payments make up of your monthly pre-tax income) and no more than 28% for the front-end ratio (which measures what percentage of only your housing expenses make up your monthly pre-tax income).
The DTI ratio for the example above would be 23% because $1,483 divided by $6,249 is .23. This is an excellent DTI ratio as it is lower than 28% overall.
Does Cosigning for a Student Loan Affect Your Debt-To-Income Ratio?
Yes, cosigning for a student loan will impact your debt-to-income ratio. If you cosign for a student loan and are approved, the amount of the loan is added to the back-end ratio of your debt-to-income ratio and to your credit report. This means that your DTI will increase.
Take this fact into consideration before you cosign for a student loan and do the calculations beforehand.
If your DTI ratio goes beyond 36% when you factor in the private student loan, it is probably best for you to not cosign the student loan. Having a DTI ratio that is higher than the ideal ratio can harm your likelihood of being approved for favorable mortgages, auto loans, and new lines of credit. However, if cosigning the borrower’s student loan is the only way they can get approved, then you will need to weigh the pros and cons and determine if it is worth it for you individually.
That said, if your DTI ratio safely remains under the threshold, you do not need to worry.
The Loan is Technically Your Responsibility
If you cosign for a student loan, any amount that the student borrower does not pay falls into your hands. You are legally obligated to pay any missed payments or even the full amount of the loan if the student borrower does not.
It Could Hurt Your Credit
While being a cosigner in itself does not hurt your credit score, your credit score will be negatively impacted if the primary student borrower misses any payments. Not only will it negatively impact your credit score, but any missed or late payments will also show up on your credit report (and cannot be removed for seven years).
Whether you are financially challenged or comfortable, there is no margin for error for the student borrower when cosigning a student loan. Any missed or late payments will become your responsibility and can even put a strain on your current bills.
It Could Strain Your Relationship with the Borrower
Student loans can get messy, fast.
For one thing, the student will be financially linked with you until the entire loan is paid off, unless there is a cosigner release policy. If there isn’t, it could be quite a bit of time until you are off the hook in regards to the loan.
Even worse, if the student defaults on the private student loan or is late/completely misses a payment, these actions will have severe implications for the both of you.
Be sure to cosign a student loan with someone that you know to be trustworthy and responsible. Cosigning a student loan isn’t a lighthearted decision, and you need to know what you’re getting into before you sign anything.
How Long Does a Cosigner Have to Stay On a Student Loan?
Be sure to consider cosigner release terms before cosigning a student loan. While some student loans do not have any cosigner release options and the cosigner remains linked with the student loan until it is completely paid off, other student loans have cosigner release options.
Cosigner release, as the name implies, releases the cosigner from a loan if the student borrower makes a certain number of payments on time and also meets the credit requirements.
If cosigner release is not an option, consider refinancing the student loan. Refinancing is when you can trade in your current loan for a more favorable one with lower interest rates, longer repayment plans, etc. If the primary borrower, the student, refinances the student loan under their name, you are no longer contractually linked to the student loan. This is only an option if the student has a strong credit history.
Is It a Good Idea to Cosign for a Student Loan?
Cosigning is common in the United States. In fact, 91% of undergraduate student loans have a cosigner. However, the decision is ultimately up to you. It is crucial to consider the pros and cons before agreeing to cosign for a student loan.
Before you cosign for a student loan, make sure you have a serious discussion with the student. Outline what you expect from the student, whether it be a minimum GPA, expectations for graduation, and repayment responsibilities.
It’s crucial for you and the student borrower to both know what is expected of one another.
Closing Thoughts From the Nest
Non-cosigned loans are a great option to explore if cosigning does not seem like a plausible option for you. Sparrow offers services that can help you and the student explore private student loan options. By submitting a free application with us, you can see which student loans the student can qualify for on their own (and the lowest interest rate on the market) and also compare loan options with alternative cosigners. Most loans do not offer this precheck, so be sure to take advantage of this tool.
Nelnet Bank offers both private student loans and student loan refinancing. Nelnet Bank’s student loan offering is available to undergraduate, graduate, MBA, law, and health professional students. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Fixed APR Range: 4.49% to 15.47%*
Variable APR Range: 6.29% to 15.51%*
Loan Amounts: $1,000 with an aggregate loan limit of $125,000 for undergraduates; $1,000 with an aggregate limit of $500,000 for graduate students
Minimum Credit Score: 680 individually, 640 with a qualified cosigner
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for a Nelnet Bank student loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate, Graduate, MBA, Law, and Health Professional Students
Fixed APR*
4.49% to 15.47%*
Variable APR*
6.29% to 15.51%*
*Rates as of November 1, 2023. Rate ranges listed include a 0.25% ACH deduction on the lower boundary only, not the upper boundary.
Variety of repayment options
While still in school, Nelnet Bank offers you three repayment options for your student loans, with terms ranging from 5 – 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Repayment
Don’t make any payments while you’re in school for up to 78 months. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Offers a six-month grace period
Similar to federal student loans, Nelnet Bank offers a six-month grace period before you are required to begin making full principal and interest monthly payments. The grace period is available if you are no longer in school at least halftime – because you’ve graduated, left school, or dropped below half-time enrollment.
Allows up to 12 months of forbearance due to economic hardship or natural disaster
Nelnet Bank offers up to 12 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability). Nelnet Bank’s forbearance is offered in increments of two or three months, with a maximum of 12 months available over the life of the loan.
While Nelnet Bank handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship. If you find yourself in need of forbearance, contact Nelnet Bank directly to check your eligibility.
Drawbacks of Nelnet Bank Student Loans
Strict eligibility criteria
In order to qualify for a private student loan through Nelnet Bank, borrowers must meet the following criteria:
U.S. citizenship or permanent residency status and possession of a valid U.S. Social Security number. Nelnet Bank Student Loans are currently available in all U.S.
At least half-time enrollment at a Nelnet Bank eligible school for the loan period in question.
Have a credit score of 680 or more, or 640 with a qualified cosigner
Neither borrower nor cosigner can have previously defaulted on a student loan
Neither borrower nor cosigner can have filed for bankruptcy in the past seven years
If you do not meet Nelnet Bank’s criteria for a student loan, you should try applying with a cosigner who does meet the criteria. If you don’t have access to an eligible cosigner, you may want to look elsewhere for your private student loan
Don’t meet Nelnet Bank’s eligibility criteria? Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through Nelnet Bank, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Nelnet Bank, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Not accessible to international students
Nelnet Bank does not offer loans to students who are not U.S. citizens or permanent residents. If you are an international student, check out MPOWER and Prodigy Finance both of which offer private student loans to international students. In addition, Earnest, College Ave, and Ascent all offer private student loans to international students who have a U.S. citizen as a cosigner.
Nelnet Bank: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.49% to 15.47%*
Variable APR Range
6.29% to 15.51%*
Loan Terms
5, 10, or 15 years.
Loan Amounts
$1,000 with an aggregate loan limit of $125,000 for undergraduates; $1,000 with an aggregate limit of $500,000 for graduate students.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is either 5% of the unpaid amount of the monthly payment or $10, whichever is less).
Eligibility Requirements – Financial
Minimum Credit Score
680 individually, or 640 with a qualified cosigner.
Minimum Income
N/A.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid. Most four-year public and private schools are accepted.
Yes, hardship and natural disaster forbearance for up to 12 months.
Cosigner Release
Yes (requires 24 months of timely repayments).
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services.
In-house Customer Service Team
Yes. Firstmark Services (a division of Nelnet, Inc.)
Process for Escalating Concerns
Yes. Complaints are addressed internally by Nelnet Bank and the Customer Service Team.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
5 minutes.
Before you take out a loan from Nelnet Bank…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Nelnet Bank a legitimate lender?
Yes, Nelnet Bank is a legitimate lender. Nelnet Bank is backed by Nelnet Inc, which is one of the largest federal student loan servicers. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
What is Nelnet Bank?
Nelnet Bank is a lender that offers its own private student loans and refinancing loans. Backed by a company that’s helped over 30,000,000 students successfully navigate repayment, Nelnet Bank was established to help make your educational dreams a reality. This strong background helps Nelnet Bank offer expert help and educational funding solutions that give you an advantage at every step.
Is Nelnet Bank available in all 50 states?
Nelnet Bank is available to borrowers in all 50 states.
How long does it take to get a Nelnet Bank student loan?
Submitting an application through Nelnet Bank takes a few minutes. Once you’ve submitted your loan application, Nelnet Bank will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Nelnet Bank student loan?
If you don’t qualify for a Nelnet Bank student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Nelnet Bank student loans federal or private?
Nelnet Bank offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
*Note: Nelnet, NOT Nelnet Bank, services federal loans.
Does applying for a loan through Nelnet Bank hurt my credit score?
In order to estimate what rate you qualify for, Nelnet Bank conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the Nelnet Bank loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Fixed APR Range: up to 13.74% (14.75% APR)*
Variable APR Range: N/A
Loan Amounts: $2,001 up to $50,000 per semester with an annual limit of $100,000
• Offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students • You can get up to 0.25% in rate discounts • Three unique scholarship opportunities for international students
• Only available to students within two years of graduation • Higher interest rates and fees than other online lenders • You have to make loan payments while you’re in school • Offers only one repayment term of 10 years
Offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students
International and DACA students studying in the U.S. often struggle to finance their education because they do not have access to federal student loans and are not eligible with most private lenders.
Luckily MPOWER has given international and DACA students an option. MPOWER offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students.
MPOWER considers dozens of data points, such as future income potential, to determine creditworthiness and make a lending decision. The company reviews credit history, but credit scores are not a factor in its decision since most international students do not have U.S. credit scores.
The non-cosigned loan offer is available to borrowers from more than 190 countries and 400+ schools.
In order to be eligible for MPOWER’s student loan, you will need to meet the following criteria:
You must be admitted to or enrolled in an eligible school in the U.S. or Canada
You must be within two years of graduating from your program
Your program must start within 12 months
You must live in either the U.S. or Canada while you’re in school
Your program must be degree-granting
If you qualify for a student loan through MPOWER, you’ll get a fixed-rate loan with flexible loan amounts ($2,001 to $100,000 total) that can cover tuition, school supplies, and living expenses for future semesters or past due balances. Check out the table below for more information:
MPOWER Student Loans
Fixed APR*
up to 13.74% (14.75% APR)*
Variable APR*
N/A
*Rates as of January 08, 2023.
You can get up to 0.25% rate discounts
MPOWER rewards you for borrowing responsibly by offering up to a 0.25% rate discount on student loans. You can qualify for these rate discounts by enrolling in autopay.
Autopay will automatically debit your loan payment each month. When you enroll, MPOWER gives you a 0.25% deduction on your interest rate for as long as you remain enrolled.
Your discount will remain if you make on-time payments via autopay. An invalid payment, hardship (i.e., forbearance) request, or entering into a modified payment plan may reset your discount, so you may need to enroll again to earn your interest rate discount.
If you take advantage of the autopay discounts, you could save yourself hundreds, and maybe even thousands, of dollars throughout the lifetime of your loan.
Three unique scholarship opportunities for international students
MPOWER offers three unique scholarship opportunities for international students.
Global Citizen Scholarship: One grand prize winner will get a $5,000 scholarship, while four regional winners will get $3,000 each. To be eligible, you must be an international student studying at an eligible school in the U.S. or Canada.
Women in STEM Scholarship: Female international and DACA students who are enrolled in or accepted to an eligible full-time STEM degree program can receive $5,000, $3,000, or $2,000.
MBA Scholarship Program: MBA students pursuing an MBA at one of MPOWER’s supported schools will be awarded up to $10,000.
In order to be eligible for MPOWER’s scholarships, you must meet the following criteria:
Accepted at, or enrolled in, a full-time degree program at a U.S. or Canadian school that MPOWER supports
An international student allowed to legally study in the U.S. or Canada.
Drawbacks of MPOWER
Only available to students within two years of graduation
If you want to take out a private student loan through MPOWER, you must be within 2 years of graduating from your program. For example: if your anticipated graduation date is May 2023, then your program must have started in May 2021 or later.
Higher interest rates and fees than other online lenders
MPOWER is unique in that it does not require a cosigner, collateral, or credit history. With that said, its rates are quite high compared to other lenders. Depending on your citizenship status and degree type, you will get the following rates:
International undergraduates: 14.75% APR
International graduate students: 13.72% APR
DACA undergraduates: 10.91% APR
DACA graduate student: 8.89% APR
MPOWER also charges a 5% origination fee that is added to your loan balance. You can spread the origination fee across the lifetime of the loan. So for example, if you borrow $10,000, you will have to pay a $500 fee as part of your monthly loan payments after graduation.
You have to make interest-only loan payments while you’re in school
While many lenders offer a variety of payment options that allow you to postpone repayment until after you’ve graduated, MPOWER requires all borrowers to make interest-only payments starting 45 days after loan funds have been disbursed.
Although in-school payments can be difficult for some borrowers, it is the best way to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Interest-Only Repayment
Pay only interest starting 30-45 days after loan funds have been disbursed.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
MPOWER: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
up to 13.74% (14.75% APR)*
Variable APR Range
N/A.
Loan Terms
10 years.
Loan Amounts
$2,001 up to $55,000 per semester with an annual limit of $100,000.
Application or Origination Fee
Yes, 5% origination fee added to the loan balance.
Prepayment Penalty
No.
Late Fees
Yes.
Eligibility Requirements – Financial
Minimum Credit Score
N/A.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers
N/A.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Did not disclose.
Eligibility Requirements – Personal
Citizenship
International students must be from one of the 180 countries MPOWER works with. DACA students do not need a Social Security number to qualify.
Location
Available to international borrowers attending eligible schools in all 50 states, Washington, D.C., and Puerto Rico.
Must be enrolled half-time or more
Yes.
Types of schools served
Borrowers must be attending an eligible Title IV that MPOWER works with.
Percentage of borrowers who have a cosigner
N/A.
Repayment Options
In-school Repayment Options
Interest-only repayment: Pay only interest starting 30-45 days after loan funds have been disbursed.
Grace period
6 months. Interest-only payments are still required.
In-school Deferment
Students enrolled at least half-time are eligible for up to 24 months of deferment while continuing to make interest-only payments.
Military Deferment
Active-duty service members can defer payments for 24 months, in 12-month increments. Interest still accrues, but during the period of active service, interest on loans will be reduced to 6%.
Disability Deferment
Did not disclose.
Forbearance
Available if you have a late payment or are about to miss a payment. Borrowers have a 24-month limit on forbearance, available in six-month increments. During forbearance, interest will continue to accrue on the loan.
Cosigner Release
N/A. No cosigner is required.
Death or Disability Discharge
Yes.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Launch.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
Yes.
Average time from application to approval
10 days.
Before you take out a loan from MPOWER…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is MPOWER a legitimate lender?
Yes, MPOWER is a legitimate lender that offers private student loans to international and DACA students.
Is MPOWER available in all 50 states?
Yes, MPOWER is available in all 50 states.
How long does it take to get an MPOWER student loan?
Submitting an application through MPOWER takes a few minutes. Once you’ve submitted your loan application, MPOWER will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an MPOWER student loan?
If you don’t qualify for an MPOWER student student loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are MPOWER student loans federal or private?
MPOWER’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through MPOWER hurt my credit score?
It is unclear whether it will hurt your credit score. MPOWER conducts a soft credit check to determine your eligibility. While soft credit checks typically don’t hurt your credit score, MPOWER has stated that “Any potential lender pulling your credit may slightly lower your overall credit score temporarily.” Therefore, it isn’t totally clear whether or not applying for a loan with MPOWER will hurt your credit score or not.
Although MPOWER doesn’t use your FICO score to make loan decisions, the lender does review your credit history. If you have documented credit issues (missed payments, collection items, charge offs, etc.), these will negatively impact your chances to be pre-approved for a loan.
*MPOWER Financing Disclosure
Subject to credit approval, loans are made by Bank of Lake Mills or MPOWER Financing, PBC. Bank of Lake Mills does not have an ownership interest in MPOWER Financing. Neither MPOWER Financing nor Bank of Lake Mills is affiliated with the school you attended or are attending. Bank of Lake Mills is Member FDIC. None of the information contained in this website constitutes a recommendation, solicitation or offer by MPOWER Financing or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.
Prodigy Finance is an online lender that offers non-cosigned graduate student loans to international students. It is best for international students who don’t have a credit history and can’t access a qualified cosigner.
Fixed APR Range: N/A
Variable APR Range: 6.7%+
Loan Amounts: $10,000 ($35,000 in specific U.S. states) to $220,000
Minimum Credit Score: N/A – No credit score required.
• Offers non-cosigned graduate student loans for international students • A variety of repayment options • No prepayment penalties or hidden charges
• Limited interest and repayment options • Higher interest rates and fees than other online lenders • Only available to graduate students • Not available in all 50 U.S. states • Limited grace period for part-time students
Offers non-cosigned graduate student loans to international students
International students studying abroad often struggle to finance their education because they do not have access to federal student loans and are not eligible with most private lenders.
Luckily, Prodigy Finance has given international graduate students an option. Prodigy Finance offers non-cosigned graduate student loans to international students.
Prodigy Finance uses information such as future income potential and credit history to determine your creditworthiness and make a lending decision. While the company reviews credit history, credit scores are not a factor in its decision since most international students do not have U.S. credit scores.
A variety of repayment options
Prodigy Finance provides its borrowers with repayment terms ranging from 7-20 years. Borrowers can choose between 7, 10, 15, or 20-year repayment terms.
Borrowers can also choose between immediate and deferred repayment. If the borrower selects immediate repayment, they will be required to make full monthly payments as soon as the loan is disbursed. If the borrower selects deferred repayment, they will not be required to make full monthly payments until after the grace period.
No prepayment penalties or hidden charges
While Prodigy Finance does have a single 5% origination fee, you will not face any prepayment penalties or hidden charges if you borrow a loan with them.
Drawbacks of Prodigy Finance
Limited interest and repayment options
Prodigy Finance, unlike many other private lenders, does not offer a fixed interest rate option. If you are comfortable with your interest rate changing throughout the life of your loan, this may be a good option for you. If not, you may want to look at other lenders.
Additionally, Prodigy Finance only offers immediate and deferred repayment options. So, borrowers either have to (1) begin making loan payments immediately after disbursement or (2) defer repayment until after the grace period. It would be nice to see Prodigy Finance offer more in-school repayment options for borrowers such as interest-only repayment.
Higher interest rates and fees than other online lenders
Prodigy Finance is unique in that it does not require a cosigner or collateral. With that said, its rates are slightly high compared to other lenders. Additionally, due to not having fixed interest rates, your interest rate could get higher over time.
Unlike most private lenders, Prodigy Finance also charges a 5% origination fee that is added to your loan balance. You can spread the origination fee across the lifetime of the loan. So for example, if you borrow $10,000, you will have to pay a $500 fee at the end of the loan term.
Only available to graduate students
Prodigy Finance’s student loans are only available to students pursuing graduate degrees. If you are an undergraduate international student, you will want to look elsewhere for your private student loans.
Not available in all 50 U.S. states
Prodigy Finance offers private student loans to students studying at over 850 schools across 18 different countries. When it comes to the United States, Prodigy Finance loans are available to borrowers in all 50 states except Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Indiana, Louisiana, Maine, Montana, Nevada, North Dakota, Oregon, Rhode Island, South Dakota, Vermont, Washington and Wyoming.
If you are an international student planning to attend school in one of these states, you may want to check out loan options with MPOWER who lends to international students in all 50 states.
Limited grace period for part-time students
Prodigy Finance offers a standard 6-month grace period for full-time student borrowers. Meaning, repayment will begin 6 months from the class end date. For part-time student borrowers, however, Prodigy Finance only offers a 3-month grace period, with repayment beginning 3 months after the final disbursement date. So, in a typical spring semester, with the final loan disbursement being in January, repayment will begin in April for part-time student borrowers. Knowing that most college programs end in May, it would be nice to see Prodigy Finance extend the grace period for part-time student borrowers.
Prodigy Finance: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
N/A
Variable APR Range
6.7%+
Loan Terms
7, 10, 15, or 20 years.
Loan Amounts
$10,000 ($35,000 in specific U.S. states) to $220,000.
Application or Origination Fee
Yes, 5% origination fee added to the loan balance.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
N/A.
Minimum Income
N/A. Future earnings are considered.
Typical Credit Score of Approved Borrowers
N/A.
Typical Income of Approved Borrower
N/A. Future earnings are considered.
Maximum Debt-to-Income Ratio
Not based on current income. Future earnings are considered.
Ability to qualify if you’ve filed for bankruptcy
Yes, on a case-by-case basis.
Eligibility Requirements – Personal
Citizenship
International students.
Location
Available to borrowers in all 50 states except Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Indiana, Louisiana, Maine, Montana, Nevada, North Dakota, Oregon, Rhode Island, South Dakota, Vermont, Washington and Wyoming.
Must be enrolled half-time or more
Most of Prodigy Finance’s borrowers are full-time students, however, they do support part-time students on a course-by-course and case-by-case basis.
Types of schools served
No specific type of school. Prodigy Finance supports over 850 schools in 18 different countries.
Percentage of borrowers who have a cosigner
N/A.
Repayment Options
In-school Repayment Options
Immediate: Start making full monthly payments as soon as the loan is disbursed.
Deferred: Borrowers are not required to make any payments until the grace period ends.
In-school Deferment
Reviewed on a case-by-case basis.
Military Deferment
Reviewed on a case-by-case basis.
Disability Deferment
Did not disclose.
Forbearance
Reviewed on a case-by-case basis. The length of forbearance given ranges depending on the circumstances.
Cosigner Release
N/A.
Death or Disability Discharge
Reviewed on a case-by-case basis.
Loan discharge if cosigner dies or becomes disabled
Did not disclose.
Autopay
Allows for surplus payments via autopay: No. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Prodigy Finance.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
3 weeks.
Before you take out a loan from Prodigy Finance…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Prodigy Finance a legitimate lender?
Yes, Prodigy Finance is a legitimate lender that offers private student loans to international students.
Is Prodigy Finance available in all 50 states?
No, Prodigy Finance is not available in Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Indiana, Louisiana, Maine, Montana, Nevada, North Dakota, Oregon, Rhode Island, South Dakota, Vermont, Washington and Wyoming. Prodigy Finance is available in all other U.S. states.
How long does it take to get a Prodigy Finance student loan?
Submitting an application through Prodigy Finance takes a few minutes. Once you’ve submitted your loan application, Prodigy Finance will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Prodigy Finance student loan?
If you don’t qualify for a Prodigy Finance student loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you get the best rates. And best of all, it won’t impact your credit score.
Are Prodigy Finance student loans federal or private?
Prodigy Finance’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, as well as grants and scholarships.
Does applying for a loan through Prodigy Finance hurt my credit score?
Yes, it may temporarily hurt your credit score. Although Prodigy Finance doesn’t use your FICO score to make loan decisions, the lender does review your credit history. If you have documented credit issues (missed payments, collection items, charge offs, etc.), these will negatively impact your chances to be pre-approved for a loan.
College Ave offers both private student loans and student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. College Ave’s student loan refinance offering is best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Fixed APR Range: 6.99% to 11.99%*
Variable APR Range: 6.99% to 11.99%*
Loan Amounts: $5,000 to $300,000 (depending on degree type)*
• Strong customer experience • Competitive rates • Choose any loan term between five and 15 years including nonstandard terms such as 6 or 9 years
• Limited eligibility criteria • Unclear forbearance policy • Not available to borrowers without a degree, visa holders, or those with parent PLUS loans • Doesn’t allow spousal consolidation loans
From loan application to loan disbursement and beyond, College Ave’s borrowing experience is done entirely online. The lender also offers excellent customer service that is available through email, chat, and phone. If you’re comfortable with an entirely virtual experience, College Ave’s seamless online borrowing process is a huge benefit.
Competitive interest rates and zero fees for qualified borrowers
When looking to refinance existing student loans, finding a low interest rate is typically a top priority. If you qualify for a refinance loan through College Ave, you will have access to some of the best rates in the industry. College Ave’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
College Ave’s Student Loan Refinance
Fixed APR
6.99% to 11.99%*
Variable APR
6.99% to 11.99%*
*Rates as of September 01, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
You can choose any loan term between 5 and 15 years*
College Ave prides itself on allowing you to choose from a wide range of loan terms (up to 11 options) to make repayment as easy as possible. If you are looking for a lender that offers flexibility to match your monthly payments to your budget, College Ave is an excellent option for you.
Drawbacks of Refinancing with College Ave
Limited eligibility criteria
In order to refinance with College Ave, you will need to be a U.S. citizen or permanent resident who has graduated from a participating school. You will also need to have a credit score around 680 and $50,000 of annual income.
Not a U.S. citizen or permanent resident?SoFi allows you to apply to refinance your student loan if you do not have a U.S. citizen as a cosigner.
Didn’t graduate? EDvestinU allows you to refinance your student loans without a degree.
Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
Unclear forbearance policy
While College Ave does offer up to 18 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability), it is unclear who qualifies and under what circumstances. Although many borrowers don’t end up needing forbearance, it can be a helpful safety net if you were to fall into financial hardship.
Not available to borrowers without a degree, visa holders, or those with parent PLUS loans
While College Ave offers some of the best rates in the industry, its refinance loans are not available to everyone. Borrowers without a degree or those who are visa holders will have to look elsewhere to refinance their student debt.
If you are a student looking to take over your parent’s PLUS loans under your name, you will need to consider another private student lender.
With that said, if you are a parent with parent PLUS loans, you can refinance your loans under your name with College Ave.
No spousal consolidation loans
College Ave does not provide people who are married with the opportunity to combine student loan debt which many see as a simpler route to paying off their debt.
College Ave: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
6.99% to 11.99%*
Variable APR Range
6.99% to 11.99%*
Loan Terms
Choose a term between 5 and 15 years.*
Loan Amounts
$5,000 – $150,000, or up to $300,000* for borrowers with medical, dental, pharmacy, or veterinary degrees.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment isn’t made within 15 days of the due date, the fee is either 5% of the unpaid amount or $25, depending on whichever is less).
Eligibility Requirements – Financial
Minimum Credit Score
Upper 600s.
Minimum Income
$50,000 per year.
Typical Credit Score of Approved Borrowers or Cosigners
Mid 700s.
Typical Income of Approved Borrower
$100,000k+ per year.
Maximum Debt-to-Income Ratio
50% (in other words, this means that the total monthly debt payments must not exceed 50% of income).
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Must have graduated
Yes, with an associate degree or higher.
Must have attended a school authorized to receive federal aid
Yes.
Repayment Options
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Up to 18 months available, in either 3 or 6-month increments.
Death or Disability Discharge
Yes, if the primary borrower dies or becomes totally and permanently disabled.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
College Ave.
In-house Customer Service Team
Yes (call center staffed by a third-party company).
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
Two to three weeks.
Before you take out a loan from College Ave…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is College Ave a legitimate lender?
Yes, College Ave is a legitimate lender that has been providing student loans since 2014. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
How long does it take to get a College Ave student loan?
Submitting an application through College Ave takes a few minutes. Once you’ve submitted your loan application, College Ave will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a College Ave student loan?
If you don’t qualify for a College Ave student loan, the company will inform you why. Depending on the reason, you may consider reapplying later on or applying with a different lender altogether. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you get the best rates. And best of all, it won’t impact your credit score.
Are College Ave student loans federal or private?
College Ave loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through College Ave hurt my credit score?
In order to estimate what rate you qualify for, College Ave conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the College Ave loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
College Ave offers both private student loans and student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. College Ave’s student loan offering is available for undergraduates, graduate students, professional school students, career school students, and parents of students. It’s best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Fixed APR Range: 5.05% to 16.99%*
Variable APR Range: 5.59% to 16.99%*
Loan Amounts: $1,000 up to the total cost of attendance*
• Strong customer experience • Competitive interest rates • Offers flexible repayment plans to match monthly payments to your budget • Choose your loan term • Allows a six-month grace period on undergraduate loans • Available to international, community college, and part-time students
From loan application to loan disbursement and beyond, College Ave’s borrowing experience is done entirely online. The lender also offers excellent customer service that is available through email, chat, and phone. If you’re comfortable with an entirely virtual experience, College Ave’s seamless online borrowing process is a huge benefit.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for a College Ave student loan, you’ll have access to some of the best rates in the industry. College Ave’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate
MBA
Law
Medical/Dental
Parent
Fixed APR
5.05% to 16.99%*
5.05% to 14.49%*
5.05% to 14.49%*
5.05% to 14.47%*
5.05% to 14.47%*
5.05% to 16.99%*
Variable APR
5.59% to 16.99%*
5.59% to 14.49%*
5.59% to 14.49%*
5.59% to 14.47%*
5.59% to 14.47%*
5.59% to 16.99%*
Rates as of October 4, 2023.
Offers flexible repayment plans to match monthly payments to your budget
While still in school, College Ave offers you four repayment options for your student loans, with terms ranging from 5, 8, 10, or 15 years for undergraduate loans, and up to 20 years on some graduate loans. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after your grace period ends.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students are limited to interest only and immediate repayment options.
You can choose your loan term
College Ave prides itself on allowing you to choose from a wide range of loan terms (5, 8, 10, or 15 years on undergraduate loans; up to 20 years on some graduate loans) to make repayment as easy as possible. If you are looking for a lender that offers flexibility to match your monthly payments to your budget, College Ave is an excellent option for you.
Allows a six-month grace period
After you are no longer in school at least half-time – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. The grace period is six months for College Ave undergraduate loans.
Available to international, community college, and part-time students
Beyond offering loans to undergraduate, graduate, professional, and career school students, and parents of students, College Ave also offers student loans to international, community college, and part-time students.
International students: As long as you have a Social Security number and a U.S. citizen or permanent resident cosigner, you’re eligible to apply for a student loan through College Ave. (If you don’t have a Social Security number and/or a cosigner, consider MPOWER or Prodigy Finance, which do not require a cosigner on student loans for international students.)
Community college students: Unlike some other private lenders, College Ave offers student loans to borrowers pursuing a career program. Part-time students: While most private lenders require borrowers to be enrolled at least half-time, College Ave makes its loans available to part-time students seeking a degree at eligible schools.
Drawbacks of College Ave Student Loans
Strict cosigner release policy
According to College Ave, 93% of all student loans are cosigned. This means that the cosigner (often a parent) will be responsible for repaying the loan in the event that you cannot. Given the prevalence of cosigned loans, it would be nice to see College Ave offer more flexibility with cosigner release (i.e. taking the cosigner’s name off the loan and removing the cosigner’s responsibility to pay). As of now, College Ave has a strict cosigner release policy that is only available for borrowers who meet the following criteria:
The borrower must be a U.S. citizen
More than half of the repayment period has elapsed
The most recent 24 consecutive payments were made on-time
The borrower has earned income for the previous two years that is more than twice the outstanding balance
The borrower’s credit report shows no late payments on any other obligations for the past 24 months
This means that for a standard 10-year repayment term, the borrower would need to make at least 5 years of payments before the cosigner is released — this is a longer term than other lenders require to release a cosigner. Given that many borrowers benefit by including a cosigner on their loan, it’s important that you and your cosigner are well-aware of College Ave’s strict cosigner release policy.
Need a loan that offers more flexible cosigner release policies? Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
Unclear forbearance policy
While College Ave does offer up to 12 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability), it is unclear who qualifies and under what circumstances. Although many borrowers don’t end up needing forbearance, it can be a helpful safety net if you were to fall into financial hardship.
If you find yourself in need of forbearance, call College Ave’s loan servicer, University Accounting Services (UAS), to check your eligibility. UAS awards this forbearance on a case-by-case basis, unlike other lenders with more definitive and transparent practices.
College Ave: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
5.05% – 16.99%*
Variable APR Range
5.59% – 16.99%*
Loan Terms
5, 8, 10, or 15 years for undergraduate loans; up to 20 years on some graduate loans*
Loan Amounts
$1,000 up to cost of attendance
Application or Origination Fee
No
Prepayment Penalty
No
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is either 5% of the unpaid amount of the monthly payment or $25.)
Eligibility Requirements – Financial
Minimum Credit Score
Mid 600s.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Mid 700s.
Typical Income of Approved Borrower
About $65,000 per year.
Typical Income of Approved Cosigner
About $120,000 per year.
Maximum Debt-to-Income Ratio
Can be up to 80% in some cases, but depends on credit characteristics.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident. DACA borrowers are eligible with a valid social security number.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
No.
School requirements
Borrowers must be enrolled in a degree-granting program at an eligible school.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only Repayment
Only pay interest while you’re in school.
Partial Repayment
Pay $25 a month during school.
Deferred Repayment
Wait to make payments until you’re out of school.
Grace period
6 months for undergraduates, 9 months for graduate students.
Grace period extension
Yes, up to 6 additional months.
In-school Deferment
Yes.
Military Deferment
Yes.
Forbearance
Up to 18 months available, in 3 or 6-month increments.
Natural disaster forbearance
Borrowers can postpone payments if they’re involved in a natural disaster, as determined by FEMA.
Cosigner Release
Yes (requires timely repayments of at least half of the loan term).
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
University Accounting Services (UAS).
In-house Customer Service Team
Yes (call center staffed by a third-party company).
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
3 minutes.
Before you take out a loan from College Ave…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is College Ave a legitimate lender?
Yes, College Ave is a legitimate lender that has been providing student loans since 2014. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
Is College Ave available in all 50 states?
Yes.
How long does it take to get a College Ave student loan?
Submitting an application through College Ave takes a few minutes. Once you’ve submitted your loan application, College Ave will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. College Ave estimates that the certification process takes around ten days.
Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a College Ave student loan?
If you don’t qualify for a College Ave student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are College Ave student loans federal or private?
College Ave loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through College Ave hurt my credit score?
College Ave offers a prequalification tool which utilizes “a soft credit check” – this does not affect your credit score – which can help you understand if your credit qualifies and what interest rates you can expect. If you choose to apply for a student loan with College Ave, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
In the 2019-20 academic year, 92%1 of private, newly originated undergraduate student loans were cosigned.
Agreeing to cosign a student loan is a great option to bolster a student borrower’s chances of receiving a student loan. It can also help the borrower secure more favorable terms, such as competitive interest rates, preferable repayment options, and higher loan amounts.
Before you jump the gun and cosign a student loan for someone, bear in mind that you can do more harm than help, depending on your credit score.
If you have adverse credit history, read this article to learn about what you should take into consideration before cosigning a student loan.
Who Can Cosign a Private Student Loan?
Cosigners are usually parents, grandparents, partners, or close friends to the student borrower, although they can be any individual the borrower would like. To be a cosigner, you must be over 18 years old.
As a cosigner, you should keep in mind that you are contractually obligated to repay the student loan in the allocated period of time if the borrower is unable to do so.
Things to Consider Before Cosigning a Private Loan
Make sure the borrower has maxed out all possible federal student loan options before pursuing a private student loan. Federal loans usually don’t require a cosigner or credit history, have lower interest rates, and offer options like income-driven repayment and loan forgiveness opportunities.
Make sure the borrower has looked into federal Direct PLUS loans. Direct PLUS loans are federal loans for graduate students, professional students, and parents of dependent undergraduate students. While Direct PLUS loans require a credit check, they generally have lower interest rates than private student loans.
What Credit Score Do You Need to Be a Cosigner on a Student Loan?
To be approved by a private lender, you will typically need to have a steady income, a minimum FICO credit score of 670 or higher, and a strong credit history.
Does The Borrower’s Credit Score Matter if They Have a Cosigner?
Yes, the borrower’s credit score still matters even if you are cosigning the loan as a reliable, creditworthy individual. Some lenders take the average of the two credit scores, others take the higher of the two credit scores, and some only take the cosigner’s credit score. It truly depends on the lender.
Can a Cosigner Hurt Your Chances of Getting a Student Loan?
Yes, if you have a lower credit score than the borrower, cosigning the loan could hurt the borrower’s chance of getting a student loan with favorable terms.
The purpose of adding a cosigner to a loan is to lower the overall risk to the lender. By adding a creditworthy cosigner onto a loan, a lender essentially has a second layer of protection when it comes to making sure the loan is paid back. If you have a poor credit score, you could make the overall perceived risk to the lender higher, which would generate less favorable terms. If you have a strong credit score or credit history as a cosigner, the loan application overall will pose less of a risk to the lender, which could generate more favorable terms for the primary borrower.
If cosigning a borrower’s student loan worsens the terms they are able to qualify for, we recommend refraining from cosigning the loan unless the borrower is unable to qualify altogether without a cosigner.
Sparrow can help you explore private student loan options and compare cosigners. We offer services that allow borrowers to see which student loans they’d qualify for on their own and with different cosigners. When debating which parent or grandparent to cosign a private student loan with, Sparrow allows borrowers to input their information and see which individual would be better to cosign with. Most loans do not allow for this pre-check before loan prequalification, so take advantage of this tool. Submit an application with us today to see which loans you qualify for and which cosigner is best.
What Student Loans Can You Get Without a Cosigner?
If cosigning a student loan worsens the terms the borrower is able to qualify for, they may want to opt for a loan that does not require a cosigner. The following are Sparrow’s partners that offer private student loan options that do not require a cosigner.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. To qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a student loan with College Ave without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5 or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. To qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. SoFi does not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. If you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
Without a cosigner, the borrower’s interest rate may be higher. So, as you are exploring loan options, consider selecting a lender with the option to enroll in automatic payments. An automatic payment does exactly what its name implies: the lender sets up automatic payments from your bank account so that you don’t have to manually complete your monthly payments.
This is beneficial for both you and the lender if you have sufficient funds in your bank account. As payments come out automatically, you won’t miss a payment and the lender is guaranteed to receive a payment every month. In return, private student loan lenders usually offer an interest rate reduction of 0.25% or even 0.50% if you opt-in to their automatic payment. This can save borrowers a significant amount over the life of the loan.
Closing Thoughts From The Nest
Before cosigning a private student loan, you should consider a variety of factors. Factors like credit score, income stability, and credit history are important to think about when aiming to bolster the borrower’s chances of being approved for a private loan with favorable terms.
You’ll also want to account for loan eligibility. Make sure the school the borrower intends to pay for accepts the loan you intend to cosign for. Before you begin making hard inquiries on private loan options that can negatively impact your credit score, use Sparrow’s online tool to see whether cosigning is the right choice or not.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
There’s no doubt that college can get expensive, and a lot of times you may need a student loan to pay for it. But what if you’re denied a loan? Here’s what you can do.
Why You’re Getting Denied a Student Loan
There are many different reasons why your student loan applications might be getting denied. It’s important to know what they are and why you got denied. That way, you can take steps to fix it so it doesn’t happen again. Here are some of the reasons you might get denied a student loan.
You Don’t Meet the Credit Requirements
Most private lenders have a credit requirement. They need to know that you’re trustworthy enough to pay back the loan, and your credit score is how they determine that. Not meeting the minimum credit score requirement makes you risky to lenders and a lot more likely to get denied a student loan.
You’ve Already Reached Your Borrowing Limit
Private lenders will have their own borrowing limits, often dependent on your school’s cost of attendance. These amounts are what institutions believe to be the amount you’ll need for college. If you’ve already borrowed either the lender’s limit or the total of your school’s cost of attendance, lenders may deny your loan application requesting more.
You Don’t Meet the Basic Eligibility Requirements
There are other requirements lenders will look at such as meeting a minimum income, your debt-to-income ratio, your employment and income history, and your future earning potential. All these, in one way or another, relate to your ability to pay back the loan. If you fall short on any of these according to the lender’s requirements, they may deem you too risky to give money.
What to Do If You’re Denied a Student Loan
Being denied a student loan can make you feel like there’s nothing left that you can do. But that’s not true. There are certain steps you can take to help your situation, even if you’ve been denied a loan. The following is a list of actions you can take that’ll help you.
#1: Submit An Appeal
If you were denied but now believe you would be eligible due to extenuating circumstances or incorrect information, you can appeal the decision. This is true for both federal and private student loans. In general, you’ll need to provide a written statement explaining your situation with evidence backing up your claim. Because each private lender is a unique entity, they each may have a unique appeal process, so be sure to check with them directly.
#2: Consider Adding a Creditworthy Cosigner
A lot of lenders require you to meet a minimum credit score. If you don’t meet that credit score, consider adding a cosigner. A cosigner is someone who signs onto the loan, taking legal responsibility for the loan alongside you. A good cosigner is someone with a good financial history and someone you can trust. Typically, a cosigner is a parent or a family member, but, in reality, they can be anyone, including friends, so long as they are able and willing. Even if you don’t need a cosigner, it’s still a good idea to get one because they can help you secure better loan terms.
#3: Check Your Credit Report
You’ll also want to check your credit report to see why you have a bad credit history and what you can do to fix it. Go to the Annual Credit Reportwebsite where you can get a free credit report. These reports provide a detailed overview of your credit history. You can see where you fall short and take steps to fix it. This will raise your credit score and make it easier to apply for loans in the future. Even paying your bills on time can raise your credit score in as little as six months.
#4: Apply for More Scholarships and Grants
Loans aren’t the only source of funding you can use for a college education. You can also apply for college scholarships and grants. Since they are free money, you’ll never have to pay them back, making them a great help in covering the costs of college. You’ll want to apply to as many scholarships and grants, small and large, as you can to help your chances of winning.
#5: Find a Job That Offers Tuition Assistance
There are many different jobs out there that offer to pay for part or all of your school tuition if you work for them. The steady income you’ll get can help take care of college expenses. You might even have extra income left over to cover other things. This is great because not only do you get work experience but you’re, in essence, getting paid to go to school.
#6: Consider Community College
Community college is also another great option if you’re denied a student loan because it’s often more affordable than traditional 4-year schools. In some cases, you may not pay anything because your aid covers all the college costs. Or, you will more easily be approved for loans because you’re asking for a lesser amount. Community colleges also have a lot of different programs that might interest you. This includes partnering with 4-year schools and having their own bachelor’s programs.
#7: Look Into Loan Options with Flexible Eligibility Criteria
There are lenders who offer bad credit loans or have more flexible eligibility criteria. While you can look for them online one-by-one, you can use Sparrow instead to save both time and money. Sparrow partners with lenders who offer these types of loans. That way more students can take advantage of them. Just fill out the Sparrow application to see what rates you can get.
Final Thoughts from the Nest
In some ways, being denied student loans can feel like the end of the world. But don’t worry. There are still plenty of things you can do. And we, here at Sparrow, have got your back. Sign up with us to apply for new loans and take some of the measures we’ve listed above. The important thing is to not give up. Trust us, you will make it to college.
Nelnet Bank offers both private student loans and student loan refinancing. Nelnet Bank’s student loan refinance offering is best if you are seeking competitive rates, a flexible forbearance policy, and the ability to refinance both private and/or federal student loans, including parent PLUS Loans.
• Competitive interest rates • You can refinance parent PLUS loans in your name • Offers 12 months of forbearance due to economic hardship or natural disaster • Cosigner release option after 24 months of timely payments • Flexible repayment options
• Strict eligibility criteria • No biweekly payment via autopay • Not accessible to international students or borrowers with student visas
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify to refinance your student loans through Nelnet Bank, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Fixed APR*
7.12% to 11.19%*
Variable APR*
7.60% to 14.50%*
*Rates as of November 01, 2023. Rates listed have an autopay discount only on the lower boundary, not the upper boundary.
You can refinance parent PLUS loans in your name
If your parent has taken out a Parent PLUS loan or a private student loan in their name, Nelnet Bank gives your parent the option to refinance that loan or transfer the loan to your name (so long as you are the primary applicant).
Offers 12 months of forbearance due to economic hardship or natural disaster
While borrowers who refinance their federal student loans with a private lender lose access to federal protections (income-driven repayment, loan forgiveness, and loan forbearance), Nelnet Bank offers up to 12 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability). Although Nelnet Bank handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship. If you find yourself in need of forbearance, contact Nelnet Bank directly to check your eligibility.
Cosigner release option after 24 months
If you need a cosigner for your student loan, Nelnet Bank might be a good option for you. Unlike several other lenders, Nelnet Bank allows you to release your cosigner after 24 months of timely payments. This can be helpful if you want to build credit in your own name.
Flexible repayment options
If you qualify for student loan refinancing through Nelnet Bank, you could have access to a variety of repayment terms to match your specific financial situation.
Nelnet Bank offers repayment terms ranging from 5 to 25 years. Before you decide on your repayment plan, be sure to consider the following:
A 5-year repayment term is generally the cheapest option because it would cause higher monthly payments.
A 25-year term would be the most expensive because lower monthly payments would be offset by accruing and compounding interest.
Many borrowers choose a term in between these extremes to balance the burden of monthly dues with interest costs.
Drawbacks of Refinancing with Nelnet Bank
Strict eligibility criteria
In order to qualify for a private student loan through Nelnet Bank, borrowers must meet the following criteria:
Be a U.S. citizen or permanent resident and possess a valid U.S. Social Security number
Have obtained at least a bachelor’s degree
Meet Nelnet Bank’s annual income criteria (undisclosed)
Have a credit score of 680 or more, or 640 with a cosigner who has a credit score of 680 or more
Neither borrower nor cosigner can have previously defaulted on a student loan
Neither borrower nor cosigner can have filed for bankruptcy in the past 7 years
If you do not meet Nelnet Bank’s criteria for student loan refinancing on your own, you should try applying with a cosigner who does meet the criteria.
If you don’t have access to an eligible cosigner, you may want to look elsewhere to refinancing your student loan.
Don’t meet the eligibility criteria? Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan. It is an effective strategy if you want to “set it and forget it” — essentially allowing you to automatically make payments without having to manually do it at the end of each month.
Unfortunately, when you borrow through Nelnet Bank, you don’t have the option to make biweekly payments via autopay.
Not accessible to international students
Nelnet does not offer student loan refinancing to students who are not U.S. citizens or permanent residents. If you are an international student, check out our partner MPOWER, who offers private student loan refinancing. In addition, Earnest and College Ave offer private student loan refinancing to international students who have a U.S. citizen as a cosigner.
Nelnet Bank Refinancing: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
7.12% to 11.19%*
Variable APR Range
7.60% to 14.50%*
Loan Terms
5, 7, 10, 15, or 20 years. 25-year terms available for variable-rate loans. 20 and 25-year terms require $25,000 minimum.
Loan Amounts
$5,000 – $500,000 depending on degree type.
Ability to transfer a parent loan to the student
Yes (see disclosure below)
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes. Borrowers may incur a late payment fee of 5% of the portion of the monthly payment that was not paid in full when due, or $25, whichever is less, if the borrower fails to make any part of a payment within 15 days of the due date.
Eligibility Requirements – Financial
Minimum Credit Score
680 individually or 640 with a qualified cosigner.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
45%
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens or permanent residents, or apply with a cosigner who is a U.S. citizen or permanent resident.
Location
Available to borrowers in all 50 states.
Must have graduated
Yes.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
Academic Deferment
Yes, borrowers can postpone payment if they return to school.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes, hardship and natural disaster forbearance for up to 12 months.
Cosigner Release
Yes (requires 24 months of timely repayments).
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services.
In-house Customer Service Team
Customer service is run by Firstmark Services.
Process for Escalating Concerns
No. Complaints are handled internally by Nelnet Bank’s customer service team.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
3 days.
Before you take out a loan from Nelnet Bank…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Nelnet Bank a legitimate lender?
Yes, Nelnet Bank is a legitimate lender. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
Is Nelnet Bank available in all 50 states?
Yes, Nelnet Bank is available to borrowers in all 50 states.
How long does it take to get a Nelnet Bank refinance loan?
Submitting an application through Nelnet Bank takes a few minutes. Once you’ve submitted your loan application, Nelnet Bank will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a Nelnet Bank refinance loan?
If you don’t qualify for a Nelnet Bank student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or try with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all competing to get you the best rates.
Are Nelnet Bank student loans federal or private?
Nelnet Bank offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
*Note: Nelnet, not Nelnet Bank, services federal student loans.
Does applying for a loan through Nelnet Bank hurt my credit score?
In order to estimate what rate you qualify for, Nelnet Bank conducts a “soft credit check,” which does not affect your credit score. If you choose to accept the Nelnet Bank loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
*Rates listed have an autopay discount only on the lower boundary.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your GPA and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
Fixed APR Range: 7.49 – 12.99%
Variable APR Range: N/A
Loan Amounts: $3,001 up to $20,000 per school year
• You do not need a cosigner or credit history • You can get a loan based on your academic performance • Variety of repayment options • 0.5% interest rate discount if you make interest-only payments while in school • You get a dedicated Loan Officer that helps you simplify the borrowing process • DACA students with a work-eligible Social Security card are eligible
• You might be able to find a lower interest rate elsewhere • Loans aren’t available in 13 states • You have to make loan payments while you’re in school • Maximum funding amount is less than most lenders • Not accessible to students enrolled less than half-time
Rather than searching for lenders one-by-one, we recommend comparing Funding U’s rates with a student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The majority of private lenders look at your income and credit score to assess your creditworthiness. Since most undergraduates have minimal income and limited credit, they are forced to find a cosigner who qualifies. But for many students, finding a cosigner is not an option. This is where Funding U comes in.
Funding U’s goal is to provide a loan that you can get on your own, based on hard work, tenacity, and focus – not based on the income level or credit score of a loan cosigner. By offering loans based on your academic history, employment activities, and other non-credit-based factors, Funding U allows you to take out a student loan without needing a cosigner with strong credit history. This prevents you from having to find someone to go into debt on your behalf and offers opportunities for you to take out a loan without credit history.
You can get a loan based on your academic performance
Funding U determines eligibility using their proprietary SMaRT™ scoring system. SMaRT™ (Student Merit and Risk Test) relies on non-credit variables incorporating 40 years of research. All such data points conform to the Federal Equal Credit Opportunities Act. The SMaRT™ scoring system is designed to predict the probability of an undergraduate college student defaulting on their student loan.
Funding U takes into account a number of factors largely based on the attributes of successful federal student loan borrowers. The lender considers:
Your academic success in college – especially in your major
Your likelihood to graduate on schedule by taking and passing about 15 credits per semester
Your projected total student debt
Your projected earnings based on your major
By basing its lending decisions on forward-looking factors, Funding U aligns itself with borrowers and encourages students to think long term.
Funding U offers you two repayment options for your student loans, both of which require you to make in-school loan payments. While in-school payments can be difficult for some borrowers, it is the best way to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Fixed Repayment
Pay $20 every month while enrolled in school and during the grace period.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Note: While there is no immediate repayment option, Funding U allows you to make extra payments, with no prepayment penalties, if you wish before the repayment period starts post-graduation. Those payments will reduce your loan balance.
0.5% interest rate discount if you make interest-only payments while in school
If you elect to make interest-only payments while in school, you will receive a 0.5% interest rate discount. While making payments while you’re in school might be difficult, it will limit the amount of interest that accrues and lead to significant savings over the lifetime of the loan.
You get a dedicated Loan Officer that helps you simplify the borrowing process
If you are pre-approved for a loan through Funding U, you will be assigned a dedicated loan officer that helps you throughout the borrowing process. Accordingly, the loan officer will discuss your student loan offer, repayment options, and academic plans to ensure you have the support you need.
DACA students with a work-eligible Social Security number can qualify
If you are a DACA recipient with a Social Security number, you are eligible for a Funding U student loan. This separates Funding U from many other lenders, which require you to be a U.S. citizen.
Drawbacks of Funding U Student Loans
You might be able to find a lower interest rate elsewhere
The interest rates on Funding U’s fixed-rate loan range from 7.49% to 12.99% without autopay. While this may seem higher than most other lenders, it is an incredible option for students who have limited credit history and no access to a cosigner. Otherwise, these students most likely wouldn’t qualify for a traditional credit-based loan.
However, if you do have a strong credit history or qualified cosigner, you might be better off going with a credit-based lender that can offer you a lower rate.
Funding U loans are only offered to students who are residents in the following states:
Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin
If you don’t live in one of these states, complete our 2-minute form to see if you qualify and at what rate with over 17 different lenders. It’s quick, easy, and does not impact your credit score.
You have to make loan payments while you’re in school
While many lenders offer a deferred payment option that allows you to postpone repayment until after you’ve graduated, Funding U requires in-school payments.
Funding U’s in-school repayment options include:
Fixed repayment: Pay $20 every month while enrolled in school and during the grace period.
Interest-only repayment: Pay interest every month you’re in school and during the grace period.
In-school repayment allows you to minimize the interest that accrues, but it is a negative for those who do not want to make payments while in school. If you’re looking for a lender who offers a deferred repayment plan (payment doesn’t begin until after graduation), you may want to look at other lenders.
Maximum funding amount is lower than most lenders
Funding U offers student loans as large as $20,000 per school year. This is a great option if the gap between your federal student loans and your total cost of attendance is less than $20,000 per year.
If you need to borrow more than $20,000 per year, you might need to look elsewhere to cover the cost of your education. Several of the other private student lenders we partner with offer loans up to the total cost of attendance.
Not accessible to students enrolled less than half-time
Given that Funding U has such a strong emphasis on academic achievement, it makes sense that the lender requires you to enroll at least half-time.
If you are not enrolled in school at least half-time, you are ineligible for Funding U student loans. If you’re studying less than half-time, you may want to consider College Ave.
No credit required, but borrowers can’t have a history of delinquency.
Minimum Income
No minimum, but borrowers must demonstrate they can make monthly in-school payments.
Typical Credit Score of Approved Borrowers
640.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Funding U uses salary and student loan data to estimate your post-graduation debt-to-income ratio. The maximum ratio is 20%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen, permanent resident or DACA recipient with a work-eligible Social Security number.
Location
Available only to residents of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin.
Must be enrolled half-time or more
Full-time only.
Types of schools served
Borrowers must attend nonprofit colleges that meet the following 6-year graduation rate requirements and have the following minimum GPA: • 90% graduation rate for freshmen with a 3.5 high school GPA. • 70% graduation rate for sophomores with a 3.0 GPA. • 50% graduation rate for juniors with a 2.75 GPA. • 50% graduation rate for seniors with a 2.5 GPA.
Percentage of borrowers who have a cosigner
N/A — no cosigner allowed
Repayment Options
In-school repayment options
Interest-only repayment: Pay interest each month you’re in school and during the 6-month grace period.
Fixed repayment: Pay $20 each month while enrolled in school and during the 6-month grace period.
Note: Funding U does not offer a full principal and interest repayment option, but borrowers can opt to pay more than what’s required.
Grace period
6 months, but only for the deferred repayment option
In-school Deferment
Yes, up to 24 months.
Military Deferment
Yes, up to 24 months.
Forbearance
Borrowers are eligible for 24 months of forbearance, in 90-day increments, if they have an economic hardship, are completing a medical residency or are affected by a natural disaster.
Cosigner Release
N/A — No cosigner allowed.
Death or Disability Discharge
Funding U will discharge loans in the event of the death of the borrower. Should the borrower become disabled, Funding U offers up to 24 months of deferment for temporary disability and up to 60 months deferment for permanent or complete disability.
Loan discharge if cosigner dies or becomes disabled
N/A — No cosigner allowed.
Autopay
Allows for surplus payments via autopay: No. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Scratch.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
Yes.
Average time from application to approval
Pre-approval happens immediately. Official approval typically takes 3 days.
Before you take out a loan from Funding U…
Complete the Sparrow application to compare real rates from more than 17 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Funding U a legitimate lender?
Yes, Funding U is a legitimate lender. The company was founded in 2016 to support students who have strong projected income but do not have the credit history or access to cosigners to take out credit-based private student loans.
How long does it take to get a Funding U student loan?
Submitting an application through Funding U takes a few minutes. Once you’ve submitted your loan application, Funding U will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Funding U student loan?
If you don’t qualify for a Funding U student loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free student loan search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all bidding for your business.
Are Funding U student loans federal or private?
Funding U’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Funding U hurt my credit score?
In order to estimate what rate you qualify for, Funding U may conduct a “soft credit check” — this does not affect your credit score. If you choose to accept the Funding U loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Brazos is a non-profit lender that offers private student loans and student loan refinancing. Since it was launched in 1975, Brazos has focused on bringing transparency and low-cost loans to Texas residents. While Brazos student loan refinancing is only available to Texas residents, the non-profit lender offers competitive rates and flexible terms to those who qualify. It’s best if you are a Texas resident with at least a bachelor’s degree and have an established income and strong credit.
(Note: borrowers are not required to have graduated from a Texas school in order to qualify).
Fixed APR Range: 4.90% to 6.99%*
Variable APR Range: 5.32% to 9.12%*
Loan Amounts: $10,000 to $400,000.
Minimum Credit Score: 720, or 690 with a qualified cosigner.
• Work with a non-profit, rather than a traditional lender • Competitive interest rates • Variety of repayment terms ranging from 5 to 20 years • Generous forbearance options
• Strict eligibility criteria • No cosigner release • No bi-weekly payment via autopay • Students cannot take over Parent PLUS loans that parents took out on their behalf
Work with a non-profit, rather than a traditional lender
As a non-profit student lender, Brazos has been helping Texas families finance the cost of their college education for over 40 years. Brazos is not affiliated with any school, and as a non-profit, its goal is to save you money by offering the most competitive rates possible. While Brazos doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
Competitive interest rates
When looking to refinance your student loan, finding a low-interest rate is typically a top priority. If you qualify for student loan refinancing through Brazos, you will have access to competitive rates.
Fixed APR*
4.90% to 6.99%
Variable APR*
5.32% to 9.12%
Choose from a variety of repayment terms between 5 and 20 years
Brazos allows you to choose from a wide range of loan terms to make repayment as easy as possible. Often, choosing a shorter repayment term helps you qualify for a lower rate, and minimize your total interest charges. Stretching out repayment over a longer period of time can lower your monthly payment amount, but your total repayment costs may increase.
Offers up to 12 months of forbearance due to economic hardship, natural disaster, or military duty
If you experience economic hardship, a natural disaster, or are called up for active-duty military service, Brazos offers up generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
Brazos offers up to 12 months of forbearance, in three-month increments. While Brazos handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
Drawbacks of Refinancing with Brazos
Strict eligibility criteria
In order to qualify for a student loan refinancing through Brazos, borrowers must meet the following criteria:
A U.S. citizen, permanent resident or, if applying with an eligible cosigner, a non-citizen with a work or student visa
Live in the State of Texas (students don’t need to attend college in Texas in order to qualify)
At least the 18 years old
Graduated with at least an undergraduate bachelor’s degree
Be employed or self-employed at the time of the application, or accepted an offer of employment with a start date within 60 days
Have a credit score of 720, or 690 if applying with a qualified cosigner
Have an annual income of $60,000, or $30,000 if applying with a qualified cosigner
Not a Texas resident? Complete the Sparrow form to see if you pre-qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
No cosigner release
Given that young people generally have a limited credit history, a cosigner can help you qualify for better loan terms. Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky. Unfortunately, Brazos does not offer any form of cosigner release. Instead, you will have to apply for a new refinance loan through Brazos to release your cosigner.
That said, 85% of Brazos refinance loans are not cosigned. So, a cosigner release policy may not be a concerning drawback if you opt for a non-cosigned refinance loan.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through Brazos, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Brazos, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Students cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). Unfortunately, Brazos does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through Brazos — it will just be in your name, not the student’s name.
If you’re looking for a lender that does allow you to transfer parent PLUS loans to the student, you may want to consider SoFi.
Brazos: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.90% to 6.99%
Variable APR Range
5.32% to 9.12%
Loan Terms
5, 7, 10, 15 or 20 years
Loan Amounts
$10,000 to $400,000, depending on the degree earned.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the monthly payment or $7.50, whichever is greater. Maximum fee is $35.
Eligibility Requirements – Financial
Minimum Credit Score
720 or 690 with a qualified cosigner.
Minimum Income
$60,000 or $30,000 if applying with a cosigner.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
$172,579
Maximum Debt-to-Income Ratio
40% (this means that the total monthly debt payments must not exceed 40% of monthly income).
Ability to qualify if you’ve filed for bankruptcy
Must not have had a bankruptcy within the past 7 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident. If applying with an eligible cosigner, a non-citizen with a work or student visa can qualify.
Location
Borrowers must be a Texas resident.
Must have graduated
Yes, an undergraduate degree is required.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
13.2%
Repayment Options
In-school Deferment
No.
Military Deferment
Yes for up to 36 months.
Disability Deferment
Yes, but only if there is no cosigner. If the primary borrower dies, the cosigner is still responsible for paying the loan.
Forbearance
Yes, borrowers are eligible for 12 months of economic hardship forbearance and natural disaster forbearance, in three-month increments, over the life of the loan.
Cosigner Release
No. Applicants may reapply individually to release cosigner.
Death or Disability Discharge
Yes, but only if there is no cosigner. If the primary borrower dies, the cosigner is still responsible for paying the loan.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No
Customer Service
Loan Servicer
Firstmark.
In-house Customer Service Team
Only for application process.
Process for Escalating Concerns
Yes, through Firstmark.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
N/A.
Before you take out a loan from Brazos…
Complete the Sparrow form to compare real, pre-qualified rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Brazos a legitimate lender?
Yes, Brazos is a legitimate lender. The lender is part of the nation’s largest group of nonprofit student loan organizations and has been an integral part of financing more than 2 million student loans.
Is Brazos available in all 50 states?
Brazos is only available for Texas residents. If you’re a Texas resident, you do not need to go to school in Texas in order to borrow from Brazos.
How long does it take to get a Brazos student loan?
Submitting an application through Brazos takes a few minutes. Once you’ve submitted your loan application, Brazos will instantaneously return a decision about your eligibility. If you qualify, you will be asked to upload documents to verify your income and residence to determine your rate and terms.
Brazos estimates that the entire process will take a few weeks. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a Brazos student loan?
If you don’t qualify for a Brazos student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Brazos student loans federal or private?
Brazos’ student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Brazos hurt my credit score?
Yes. If you decide to apply for a Brazos loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score. We recommend submitting the Sparrow form prior to submitting a formal loan application with Brazos. The Sparrow form will allow you to see what rate you’d qualify for with Brazos without hurting your credit score.
Whether you’re well-versed with student loans or know nothing about it, we all want to make the smartest, most cost-effective decision when it comes to our financial circumstances.
Refinancing your student loan is a great financial decision and a feasible option for student borrowers, even if you have poor credit.
Refinancing, in simple terms, is a trade. You can refinance, or “trade”, the mortgage to your house, car loan, and student loan for a better option.
Most people refinance their student loans because they want to reduce the overall amount of the loan or get the lowest interest rate possible.
What Credit Score Do You Need to Refinance?
Generally, most loan servicers require a credit score of 620 and up in order to refinance your student loan. Sparrow’s lending partners typically have a minimum credit score requirement of 650 or higher if you want to refinance your student loan.
If your credit score doesn’t meet the minimum requirement, exploring your cosigner options and adding a cosigner to the loan is your best bet to qualify.
Has your credit score improved, qualifying you for competitive interest rates and loan options?
Are you paying high interest rates, but know there are better, lower interest rate options than your current interest rate on the market?
Do you want to extend your repayment term and pay smaller amounts over a longer period of time?
Are you paying a variable interest rate, meaning that your interest rate fluctuates based on the benchmark interest rate or index?
If you answered yes to even one of these questions, consider refinancing your loan and applying with a cosigner to bolster your chances.
Best Student Loan Refinance Companies for Bad Credit
Sparrow partners with refinancing companies that want to help student borrowers with bad credit get the best option that they can. The following are our top picks:
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides student loan refinancing for Arkansas residents. ASLA has a minimum credit score requirement of 670.
College Ave offers student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. College Ave’s student loan refinance offering is best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget. To qualify for a refinance loan with College Ave, you will need a credit score in the mid-600s.
Earnest’s student loan refinancing option is great if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget. Earnest has a minimum credit score requirement of 650.
ISL is a nonprofit lender that offers both private student loans and student loan refinancing. ISL’s student loan refinancing is best if you haven’t graduated and want generous forbearance policies. ISL has a minimum credit score of 670.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 680. It’s best if you want generous cosigner release and forbearance policies.
SoFi is one of the largest student loan refinance companies in the industry. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with an associate’s degree or higher or borrowers with a high income. SoFi has a minimum credit score of 650.
What if I Don’t Get Approved For Refinancing My Student Loan?
If you don’t get approved for refinancing your student loan, don’t lose hope. It is still possible for you to reapply to refinance your loan. Under the Equal Credit Opportunity Act, you have a right to request a written explanation of why your application was denied from your lender. This will allow you to either reapply with new lenders or reapply for the same loan once you’ve addressed the discrepancies in your application.
Consider taking the following steps to increase your chances of being approved for a refinance loan.
Step 1: Add a cosigner.
A cosigner is an individual that “co-signs” the loan with you, meaning that if you fail to pay off the loan, your cosigner is contractually obligated to pay it off on your part. When you add a cosigner with a higher credit score to your loan, the lender will factor in their credit score to the rates and terms you’re able to access. Thus, having a creditworthy cosigner is advantageous as it can help you qualify for a loan you otherwise wouldn’t on your own.
As for cosigners, you won’t be contractually obligated until the entire loan is paid off, depending on the circumstances. The requirements to qualify for cosigner release vary, but the borrower needs to sign off on a cosigner release form, meet a certain number of on-time payments, and have their credit history reviewed.
Step 2: Improve your credit score.
Improving your credit score is the most intuitive fix if you’re trying to get approved to refinance your student loan. A poor credit score is between 300-579, a fair credit score is between 580-669, a good credit score is between 670-739, a very good credit score is between 740-799, and an excellent credit score is between 800-850.
You’ll want to bump your credit score up a range (or more, if possible!). Here are some steps you can take to improve your credit score.
Pay your bills on time. 35% of your FICO credit score consists of your payment history, or your ability to pay your bills on time. This is the most important factor to your credit score, so stay on top of paying off any outstanding debt or bills you may have.
Pay off your debt. Your credit score also considers your credit utilization ratio. Your credit utilization ratio is how much credit you’ve spent versus how much credit you have available. For example, let’s say you have two lines of credit. One line of credit has a $500 credit limit, while the other has a $750 credit limit. In total, you have $1,250 of available credit. Now let’s say you’ve used $20 on your first line of credit, and $600 on your second line of credit, meaning you owe $620. $620 is 49.5% of $1,250, which isn’t a great credit utilization ratio. You’ll want to have a credit utilization ratio of 30% or less.
Limit new credit accounts. Applying for a new credit line requires a hard inquiry, which can damage your credit score temporarily. To prevent your score from dropping, stick to the credit lines you have currently. If you really need to open a new line of credit, make sure to explore your options in a 45-day period. Banks don’t count three new credit applications as three separate hard inquiries if you submit them within a 45-day period.
Don’t close any credit card accounts. Your length of credit history is 15% of your FICO credit score, so the longer credit history you have, the better it is for your credit score.
Pay attention to your credit reports. It’s important to check your credit reports for any misinformation, fraud, error, or possible identity theft. You’ll want your credit reports to be 100% accurate when trying to qualify for a new loan.
Step 3: Boost your cash flow or cut down on expenses.
Lenders measure your creditworthiness with the debt-to-income ratio (DTI). Your DTI tells lenders the ratio of how much you owe to your monthly gross income. For example, let’s say you pay $250 a month for your student loan and $450 for your auto loan.
That’s $700 in monthly debt payments. Now let’s say your gross monthly income (the total you earned before taxes) is $1,500. $700 is roughly 46% of $1500, so your debt-to-income ratio is 46%.
A healthy DTI is 34% and under, an okay DTI is 35%-50%, and an unhealthy DTI is over 50%.
Alternatives to Refinancing
Okay, let’s say that refinancing your student loan hasn’t been working out for you, but you still need lower monthly payments or a longer repayment term.
Consider the following options to get the benefits of refinancing without actually refinancing your loan.
Opt for an income-driven repayment.
An income-driven repayment option is for federal student loans only. An income-driven repayment option is a type of federal repayment plan that readjusts your monthly student loan payment based on your income and family size.
The federal government offers four different income-driven repayment plans that all cap your loan payment between 10% and 20% of your discretionary income (total income after taxes) and forgives your remaining loan balance after 20-25 years of payment.
Revised Pay As You Earn Repayment Plan (REPAYE Plan)
Pay As You Earn Repayment Plan (PAYE Plan)
Income-Based Repayment Plan (IBR Plan)
Income-Contingent Repayment Plan (ICR Plan)
If federal income-driven repayment is an option for you, make sure to read up on each plan and determine which one is the best fit for you.
Opt for federal student loan consolidation.
Federal student loan consolidation is combining multiple federal student loans into one federal loan. This allows you to extend your loan term, lower your monthly payment, get rate discounts, and potentially qualify for an income-driven repayment plan.
On the flipside, federal student loan consolidation warrants longer pay periods, higher interest accumulation, and the loss of specific borrower benefits.
Closing Thoughts From The Nest
Don’t be discouraged if you have to refinance your student loan but have a bad credit score. There are many options available to you as long as you stay deliberate and informed in your journey to securing a new student loan.
Sparrow’s many refinancing partners can help you refinance your student loan. Submit an application with us today to see your options.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Becoming a dentist has a variety of benefits, but getting there can be quite expensive. A 4-year dental school program could run you about $400,000 with all expenses included. That’s why it’s essential to understand how to best pay for dental school
The return on investment with a dental degree is promising, with the average dentist making around $155,000 per year. So, while expensive, pursuing a dental degree is worthwhile.Regardless of your career goals or projected outcomes, financing your dental degree can still be overwhelming. There are four main strategies you’ll want to know about when it comes to knowing how to pay for dental school.
#1: Scholarships & Grants
Regardless of what type of degree you’re paying for, scholarships and grants should always be your first priority. Scholarships and grants are a form of free money, meaning you aren’t responsible for paying them back.
Both scholarships and grants for dental school can come from a variety of sources and vary in amount.
Scholarships for Dental School
Dental school scholarships can come from internal or external sources. Internal scholarships are awarded by your dental program, while external scholarships are awarded by private, professional, or non-profit organizations. The amount you receive in a scholarship will depend on who is providing the scholarship.
For example, the ADEA Crest Oral-B Scholarship awards recipients a one-time stipend of $3,000, while the Chinese American Medical Society awards recipients a $5,000 stipend each year they are accepted.
The eligibility for scholarships will vary depending on the scholarship provider. In general, you must:
Be enrolled in an eligible program. Most scholarship programs require you to be enrolled in an accredited, four-year dental program. If you are unsure whether your program is eligible, check with the scholarship provider.
Demonstrate academic or professional achievement. Scholarship programs will typically require applicants to excel in a specific area, have a special interest, or belong to a specific group. For example, many scholarship programs provide awards to students of certain minority groups, students with a certain GPA, or students who demonstrate financial need. To be a competitive applicant for any scholarship, you should aim to have an array of academic and extracurricular experiences.
Have a solid GPA. While some dental scholarship programs will not require you to report your GPA, many will. A 3.0 GPA is typically the minimum to qualify, however, there are scholarships that award students with lower GPAs. To be a competitive applicant, you will want to aim for a GPA of 3.5 or higher.
Internal dental scholarships will typically appear on your financial aid package when you are accepted to a dental school. However, you should always check in with your school’s financial aid office to inquire about any additional scholarships you may be eligible for.
For external scholarships, you’ll want to focus your search on professional organizations and scholarship search engines. Organizations such as the American Dental Association provide an array of scholarships for dental students. Scholarship search engines such as Scholarships.com, Sallie Mae’s Scholarship Search Tool, and Bold.org are all great options for exploring thousands of dental scholarships in just a few clicks.
Can I Get a Full Ride Scholarship for Dental School?
Full ride scholarships do exist for dental school, however, they are typically significantly more competitive, and thus, harder to receive.
While you can rack up a significant amount in dental scholarships, it typically won’t be enough to cover your tuition entirely. On average, dental school tuition ranges from $53,000 to $70,000 per year, totaling to roughly $200,000 to $280,000 over the course of a standard four-year dental degree. While entirely possible, securing enough scholarship money to cover $200,000+ in tuition may prove to be challenging.
Grants for Dental School
Similar to scholarships, dental grants can come from a variety of sources, but they typically come from your state, your university, or professional organizations. Eligibility for grants is typically based on your financial need, often determined by the information submitted on your FAFSA application
State Grants
State grants are an incredibly underrated resource for free money. Nearly all 50 U.S. states offer grants to students in various programs. To check your eligibility for state grants, fill out the FAFSA, then check your state website. Many states will require you to have submitted the FAFSA to be eligible.
University Grants
Many dental programs offer grants for enrolled students. So, to see which university grants may be available to you, talk to your school’s financial aid office. There may be grant programs that require an additional application beyond the FAFSA.
Professional Organization Grants
Whether a professional organization offers a scholarship or a grant is truly a semantic matter. Some professional organizations will refer to the awards as scholarships, while others will refer to them as grants. So, in your search, be sure to search for both keywords so you don’t miss an opportunity for free money.
After pursuing all scholarship and grant options, you’ll want to look into service programs (if they interest you). A service program will provide you with financial aid in exchange for service work.
Most service programs will require you to commit to serving a specific community for a set amount of time, often providing dental care to people without access. For example, the National Health Service Corps Scholarship service program requires recipients to complete service work for 1-2 years to receive funding. The Health Professions Scholarship Program, on the other hand, covers all tuition and fees and provides a living stipend, but requires recipients to be serving in the military.
If completing a service program sounds interesting to you, it’s worth checking out and submitting applications where you see fit. Be aware, though, that if at any point you decide to withdraw from a service program, your financial aid from the program will be revoked.
#3: Federal Work-Study
Work-study is a federal aid program that provides part-time jobs to undergraduate and graduate students who demonstrate financial need. Federal work-study funds are not awarded upfront, but rather, given in exchange for worked hours throughout the duration of your program. Because of this, work-study is considered “earned money” and should be accepted after all free money options have been exhausted.
Federal work-study is available to dental students at schools that decide to participate. Due to the rigor of dental school, some schools may decide not to participate in the federal work-study program. If your school does not offer work-study, we recommend exploring part-time jobs that offer tuition assistance.
How Do You Get Work-Study for Dental School?
To be eligible for work-study, you must complete the FAFSA and demonstrate financial need. Then, if you receive work-study aid, you will see the aid offer in your financial aid package at each school you are accepted to.
Jobs within the work-study program must pay at least $7.25 per hour, per federal regulations. Although, if the state’s minimum wage is higher, schools must pay that minimum wage. According to a 2020 report by Sallie Mae, the average work-study award was around $1,847 for students with an eligible job.
#4: Student Loans
After pursuing all free money and earned money options, you should consider taking out a student loan. Student loans, regardless of type, are a form of borrowed money. You will be responsible for paying the money back over time, typically with interest. This means that you will likely pay more than what you initially borrowed by the time you pay off your loan(s) completely.
When figuring out how to pay for dental school through a student loan, you will have two main options: federal and private loans.
As a dental student, you will be eligible for two types of federal student loans: Direct Unsubsidized Loans and Direct PLUS Loans. Unlike in undergrad, you are ineligible for Direct Subsidized Loans as a dental student.
Federal Loan Borrowing Limits for Dental School
Direct Unsubsidized Loans have a maximum borrowing limit of $20,500 per year, with a lifetime limit of $138,500. Direct PLUS Loans, however, have a more flexible borrowing limit, allowing you to borrow up to the cost of attendance minus other aid.
How to Get Federal Loans to pay for Dental School
To borrow Direct Unsubsidized or Direct PLUS Loans, you must complete the FAFSA and be considered eligible. You may only be eligible for a certain amount of each depending on your level of financial need or overall borrower profile.
You will not need a cosigner for Direct Unsubsidized Loans, however, you may need an endorser for Direct PLUS Loans depending on your credit history.
Private student loans are provided by private entities such as financial institutions and banks. Each private lender will have their own unique eligibility requirements, interest rates, and borrowing limits.
In general, to secure a private student loan to pay for dental school, you must:
Be a U.S. citizen, permanent resident, or eligible noncitizen
Have a solid credit score (or a cosigner with a solid credit score)
Be enrolled in an eligible dental program
Have a debt-to-income ratio of 65% or less
Not have declared bankruptcy in the last 7 years
Private Loan Borrowing Limits for Dental School
Most private lenders will allow you to borrow anywhere from $5,000 to the total cost of attendance at your dental program. So, if your program costs $250,000 total, private loans will likely cover the entire cost. Some lenders do have minimum borrowing requirements, typically $5,000 or $10,000. If you plan to borrow less than $5,000 for dental school, you will need to find a lender with a more flexible borrowing minimum.
Best Student Loans for Dental School
The best private graduate student loan will ultimately be the one that works best for you. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
ASLA is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option if you are from or studying in Arkansas.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection if you don’t have a cosigner available, are an international or DACA student, or have a lower credit score.
Brazos is a non-profit lender offering educational funding to Texas residents. They are a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding that’s available to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best if you are an international or DACA student who doesn’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option if you are an international student who doesn’t have a credit history and can’t access a qualified cosigner.
Sallie Mae offers cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option if you’re seeking competitive interest rates and have a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit if you have a strong credit score or a creditworthy cosigner.
What is the Interest Rate on Dental School Loans?
The interest rate you receive on dental school loans depends largely on whether the loan is federal or private. Federal loans have fixed interest rates that are the same across all borrowers. As of May 2022, the interest rate on Direct Unsubsidized Loans is 5.28%, and the interest rate on Direct PLUS Loans is 6.28%.
Private student loans will have either a fixed or variable interest rate. Because each lender is its own unique entity, interest rates will vary between them. Sparrow partners with 15+ lenders, with interest rates ranging from 0.94% to 14.52%. To check your eligibility across lenders and see what interest rates you would qualify for, complete the Sparrow application.
Final Thoughts from the Nest
Being a dentist can be an incredibly lucrative career. Getting there, however, can be an expensive journey. Understanding how to pay for dental school is a crucial first step in setting yourself up for a successful dental career.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Your credit score is like the report card of adulthood, except it’s one number based on your creditworthiness, as opposed to letter grades. As a college student, having a bad credit score isn’t optimal when it comes to securing a private student loan.
However, don’t lose hope just yet. You still have a variety of options to choose from.Check out this quick read to see the best private student loans for student borrowers with bad credit history.
Best Private Student Loans for Bad Credit
First, here’s is a list of the top 5 student loans for bad credit. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
Yes, you can still receive student loans with bad credit. Bad credit doesn’t automatically disqualify you from receiving a student loan, though the eligibility criteria may vary between loan options.
Federal Student Loans
Federal student loans will be your best option if you have a bad credit store. They are issued by the federal government and are extremely borrower-friendly.
Federal student loans don’t assess your credit score in most cases and come with income-based repayment options, loan forgiveness, and deferment options.
In addition to having flexibility as a borrower, federal student loans also carry a flat interest rate that is typically lower than the interest rates offered by private student loans. This means that interest rates are the same amongst all student borrowers, regardless of credit score.
In order to receive a federal student loan, make sure you meet the eligibility requirements and submit your FAFSA application.
Receiving a private student loan can be more challenging, and you’ll need to be deliberate with your actions.
Find the best private student loan for yourself on the market. You should consider interest rates, repayment options, origination fees, and whether or not these loans are enough to pay for your tuition. Submitting formal applications to multiple private student lenders can damage your credit score temporarily (this is called a hard inquiry), and this is a risk you should not take. Instead, use Sparrow to see what loan options you can get with premier lenders without damaging your credit score. We help borrowers with bad credit find a loan that suits them without hurting their credit.
Consider getting a creditworthy cosigner. A cosigner is an individual, usually a family member or friend, who is responsible for the loan with you. If you can’t or do not repay the loan on-time or in-full, the cosigner is contractually obligated to do so. If you have a bad credit score, having a cosigner is useful because it reduces your risk profile as a borrower. Accordingly, this allows you to have a wide array of loan options with lower interest rates. Though there are loans that don’t require a cosigner, having a cosigner boosts your chances significantly in getting a private student loan.
Explore outcome-based private student lenders who evaluate metrics outside of your credit score. There are private student lenders who do not evaluate credit score, and instead look at your academic performance, major/school, and future income potential. Ascent, Edly, and Funding U are popular outcome-based lenders that are accommodating to students.
What is Considered a Bad Credit Score?
FICO and VantageScore are the two leading scoring models to measure credit, though FICO is the most widely used scoring model and used by 90% of lenders.
This is the most important factor of your FICO score. Your credit history is your record of payments in past credit accounts and assesses your punctuality in payments (or lack thereof).
Amounts owed (30%)
This is the second most important factor of your FICO score. If you have outstanding amounts of money to pay back (ex. You have a $1,000 credit line and you’ve used $900), this can indicate to lenders that you are overextended in your finances.
Length of credit history (15%)
Though you don’t need a long credit history to have a high FICO Score, your credit history takes into account the following items:
When your credit accounts were created (your oldest account, your newest account, and the average age of all your accounts)
Usage of certain credit accounts
Longevity of specific credit accounts
Credit mix (10%)
There are two types of credit accounts: revolving accounts and installment accounts.
Revolving accounts are credit accounts that have flexible repayment plans and options, like credit cards, HELOC (Home Equity Line of Credit), retail store accounts, and gas station cards.
Installment accounts consist of mortgages, auto loans, and student loans.
Having a varied credit mix improves your FICO score, as it shows that you don’t have a limited credit experience. However, this doesn’t mean that you should try to open different types of credit accounts.
Your credit mix is largely dependent on your age, socioeconomic status, and other factors, so it won’t determine whether or not you obtain credit from lenders.
First and foremost, your payment history is the most influential factor for your credit score, so focus on paying your dues on time.
New credit (10%)
Opening multiple credit accounts in a short period of time is a red flag for lenders and can have negative effects on your credit score. Be sure to demonstrate reliability and creditworthiness with the credit lines you have open, instead of opening multiple accounts.
FICO considers a credit score to be poor if it falls below 580, fair if it ranges between 580-669, and good if it falls between 670-739.
What Can I Do to Raise My Credit Score Before Getting a Student Loan?
Though there is no magical quick fix to raise your credit score substantially in a short period of time, you can still raise your credit score by your next credit report with the following steps:
Pay your bills on-time.
Pay off any outstanding debt.
Hold off on opening new lines of credit.
Don’t close your current credit card accounts.
Check your credit report to assure that there is nothing incorrect or fraudulent.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA and estimated future earnings to assess your creditworthiness. Therefore, Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no creditworthy cosigner.
For Undergraduate & Graduate Private Student Loans
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. In order to qualify for a student loan with ASLA, you need a credit score of above 670. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores. Ascent’s minimum credit requirement varies based on the loan.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos does not disclose their minimum credit requirement. Brazos is a great option if you live in Texas and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. In order to qualify for a student loan with College Ave, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. In order to qualify for a student loan with Earnest, you will need a credit score of 650. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. Therefore, an Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 660. It’s best for students who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. Specifically, it is best for international students and DACA students who don’t have a cosigner or a credit history.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. Accordingly, they’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. In order to qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
Closing Thoughts from the Nest
Having a bad credit score as a student can be extremely disadvantageous. Raising your credit score should be an important priority if you plan to take out student loans, open new lines of credit, and more.
However, there are still student loan options available to you, even if you have a bad credit score. Start thinking ahead about where your credit is at, and if it’s not ideal, start taking small steps to build it. In order to find a private student loan for students with bad/no credit, complete the Sparrow application today.
Remember to research federal student loans and outcome-based, borrower-friendly student loans. When looking for private student loans, remember to be deliberate with your actions (think about the effects of hard inquiries on your credit score, consider getting a cosigner, and make an effort to raise your credit score).
On top of that, apply to college scholarships and grants to fill the gaps in college costs.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
According to the Law School Admission Council, a law degree can cost upwards of $150,000. While there are more affordable law programs, it isn’t uncommon for law school graduates to end up in a fair amount of student debt. If you’re headed to law school any time soon, the reality of how much it costs may be setting in…hard.
Before you let this number consume your mind, know that there are a variety of ways to pay for law school. Here’s how you can do it.
#1: Scholarships
Scholarships are a form of free money because they don’t need to be paid back. So, the more scholarships you can rack up, the better.
Where Can I Find Scholarships for Law School?
Law school scholarships can come from various sources such as professional organizations, your university, the Law School Admission Council, and search engines.
Professional Organizations
Professional organizations are typically focused on furthering the development of individuals within their industry. So, many professional organizations offer scholarships to students pursuing a degree in their field. Organizations such as the American Bar Association and the National Bar Association both offer compelling scholarships options for law school students.
Your University
Universities also tend to offer a hefty amount of scholarship money. While most scholarships are merit-based, some university scholarships may require you to meet a certain level of financial need. Sometimes, your university will automatically award you a scholarship upon acceptance. Other times, you may need to reach out to your school’s financial aid office to see what scholarships are available to you.
The Law School Admission Council
The Law School Admission Council (LSAC) website has a frequently-updated list of reputable law school scholarships, with many designed specifically for marginalized students. With over twenty scholarships on the list, LSAC is a great source for trustworthy scholarship programs.
Search Engines
Scholarship search engines will allow you to refine your scholarship search a bit more than the other options. Sites like Sallie Mae’s Scholarship Search Tool and Bold.org’s Scholarship Search Engine allow you to filter your search based on a variety of factors such as your year in school, your interests, your LSAT score, and more. This allows you to find scholarships that match your unique qualifications, which increases your chances of winning the scholarship once you apply.
What LSAT Score Do I Need to Get a Scholarship?
Generally speaking, you’ll need an LSAT score of 165 or higher to be a competitive applicant for most law scholarships. That said, there are a variety of law scholarships catering to applicants with lower LSAT scores.
#2: Grants
Grants are another form of free money, so you’ll want to maximize how much you can receive in these, too. That said, grants are almost always need-based, so they won’t be accessible to every law school student.
If you do demonstrate financial need, there are a few main places you’ll want to look for grants.
University Grants
University grants are similar in nature to university scholarships, except they’re typically based on financial need rather than merit. If you receive a grant from your university, you’ll usually see it on your financial aid package. That said, your university may have grant programs that require a separate application. Reach out to your school’s financial aid office to inquire about any grant programs they may offer.
Private Grants
Private grants are offered by private institutions such as nonprofit organizations, professional organizations, and businesses. To secure a private grant for law school, you will typically need to submit an application with each individual organization that may require your transcript, an essay, and your FAFSA application. Because each private organization is its own unique entity, they may have different eligibility or application requirements.
The Law School Admission Council, for example, offers a variety of private grants such as pipeline grants, grants for underrepresented groups, and outreach grants.
Can Pell Grants be Used for Law School?
Unfortunately, Pell Grants cannot be used for law school. The Pell Grant is an award given to undergraduate students.
#3: Work-Study
Work-study is a form of need-based financial aid that is considered earned money. While you may be awarded a specific amount in work-study, you’ll need to complete a work-study job to receive that money.
Due to the caliber of law school, many universities do not participate in the work-study program or limit the number of work-study hours a first-year student can complete. For second- and third-year law students, universities typically limit work-study employment to 20 hours per week.
Because work-study requires you to complete working hours to receive it, you won’t be able to use work-study funds to cover tuition expenses up front. However, a work-study role can help you cover living expenses while in school.
If you’re attending law school part-time while working, always check with your employer to see if they offer tuition assistance programs to help fund your law school education. If not, it may be worthwhile to explore other part-time employment opportunities that offer tuition assistance or programs to cover education expenses.
#4: Loans
After pursuing all free money and earned money options, you may need to explore borrowed money options to cover that last bit of tuition. In general, law school loans come in two forms: federal and private.
Federal Student Loans
To be eligible for federal student loans, you will need to submit the Free Application for Federal Student Aid (FAFSA). As a law school student, you are eligible for two types of federal loans: Direct Unsubsidized and PLUS Loans.
With Direct Unsubsidized Loans, you are eligible to borrow up to $20,500 per academic year. There is a lifetime borrowing limit of $138,500.
With Direct PLUS Loans, you are eligible to borrow up to the cost of attendance minus other aid you’ve received. There is no lifetime limit for Direct PLUS Loans. You will, however, need to pass an adverse credit check to be able to borrow Direct PLUS Loans.
Private Student Loans
To borrow a private student loan, you will need to submit an application with the lender of your choice. To see what rates you would qualify for with several lenders at once, complete the Sparrow application.
How Much Can I Borrow in Law School Loans?
The amount you can borrow in private student loans will depend on the individual lender’s borrowing limits. Annually, most private lenders will allow you to borrow up to the cost of attendance at your law school minus other aid you’ve received.
Some lenders will have lifetime borrowing limits, which limit how much you can borrow cumulatively. For example, some lenders have a lifetime borrowing limit of $500,000. Note that this limit may include undergraduate loans as well. So, if you previously borrowed a loan to fund your undergraduate academic career, that loan amount may count towards your overall borrowing limit if you plan to use the same lender for law school loans.
What Do I Need to Qualify for a Private Student Loan for Law School?
Each private lender will have its own unique set of borrower eligibility criteria. In general, you’ll need to:
Be a U.S. citizen, permanent resident, or eligible non-citizen
Be enrolled in an eligible program at least half-time
Have a solid credit score, or a cosigner with a solid credit score
Have a steady income, or a cosigner with a steady income
What Can I Use Law School Loans For?
Both federal and private student loans will cover traditional law school expenses such as tuition, room and board, and fees. Private student loans, however, can cover a wider array of expenses including the bar exam. Some private lenders offer a specific bar exam loan designed to cover all bar exam expenses, from the actual exam cost to living expenses during your exam prep.
Best Student Loans for Law School
While there are a variety of lenders ready to help you cover the cost of law school, the following are our top picks.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for law students either from Arkansas or pursuing a degree in Arkansas.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for law students who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
Borrowing money to pay for law school is incredibly common. In fact, the vast majority of attorneys take on student debt to pay for their J.D. So while financing such an expensive degree may feel overwhelming, know that you’re not alone.
Begin the process by exploring scholarship and grant options, see if you qualify for work-study, then dive into the loan process as your last step.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The average dental student’s debt is around $300,000. While this can be overwhelming, it doesn’t have to be. You can minimize your debt by making educated loan decisions and choosing the right loans for you. Let’s get into it.
Can I Get Loans for Dental School?
Yes. The two main loans you’ll hear about are federal student loans and private student loans. Both can be a great help in paying for your dental education.
Federal Loans
With federal loans, you can get Direct Unsubsidized Loans or Direct PLUS Loans. The maximum loan amount you can borrow with Direct Unsubsidized Loans is $20,500 per year with a lifetime limit of $138,500. With Direct PLUS Loans, the maximum amount you can take out is the cost of attendance minus other aid.
Private Loans
Private student loan borrowing limits will vary more. But, you can typically get up to the cost of attendance minus other aid.
Do You Need a Cosigner for Dental School Student Loans?
It depends. For federal student loans, you usually won’t need a cosigner. The only instance where you might need one is with PLUS Loans. To qualify for a PLUS Loan, you need to pass an adverse credit check. If you fail that, you will need a cosigner to go forward.
Private student loans are where you’ll most often see a cosigner requirement. Lenders set certain requirements that if you don’t meet, then you’ll need a cosigner who does. The specifics of the requirements vary from lender to lender. The biggest one is the credit score requirement. Make sure either you or a cosigner have good to excellent credit. This is a score that is at least in the high 600s.
It’s important to note that a cosigner does more than just help you qualify for a loan. Cosigners can also help get you better terms or a lower interest rate. This can lower your monthly payments and make your loan more manageable.
How to Reduce Your Dental School Debt
First, look for scholarships and grants. This is free money that you won’t have to pay back. Plus, the more of these you get, the less you have to take out in loans. Once you get to loans, consider taking out some federal student loans. These are great because they come with lots of federal benefits such as flexible repayment plans, a grace period, and possible loan forgiveness. Finally, you’ll want to look at private student loans. As you search, carefully review the terms of each loan. The terms include interest rates, fees, and periods of deferment among other things. You might even be able to get a lower interest rate than on your federal student loans.
Use Sparrow to help you look for good private student loans. Fill out our online application to match you with what you qualify for at 15+ lenders. Then, save and compare the ones you liked the most before making a final decision.
Our Picks for Dental School Student Loans
Here is a list of lenders that give out great dental school loans:
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding that’s available to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit and who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
School debt can be overwhelming. Getting the right aid and loans, however, can lower it and make it more controllable. So, when you begin your career in the dental field, you can feel at ease knowing your student debt is under control.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The average lawyer earns about $148,000 per year. But the average law school debt is $160,000. It is important, then, that you understand law school loans and get the best ones. That way, when you graduate, your loans will be more manageable.
Student Loan Options for Law School
You have two main options when it comes to student loans: federal and private.
To be eligible for federal student loans you must fill out the FAFSA. Law students are eligible for two types of federal loans, Direct Unsubsidized and PLUS Loans. With Direct Unsubsidized Loans, you can take out $20,500 per year. The lifetime total is $138,500. With Direct PLUS Loans, you can take out the cost of attendance minus other aid you’ve received. You will need to pass an adverse credit check to be eligible for a Direct PLUS loan.
You can also take out private student loans. The loan amounts you can get will be dependent on each lender, but you can typically get up to the cost of attendance minus other aid. To be eligible to borrow, you’ll need to meet certain qualifications, which will vary with each lender. However, you’ll at least need to make sure you have a good credit score, or have a cosigner with a good credit score. This can help you secure a lower interest rate. Some lenders may also offer a lower interest rate to borrowers who sign up for autopay.
No matter what type of loan you get, you can use the money to pay expenses related to your law degree. You can pay for education expenses like tuition, books, and other supplies you may need or living expenses like room and board and more personal things. Some private student loans will even cover bar exam expenses including the actual cost of the test as well as a prep course and lodging for the exam.
Do You Have to Pay Back Student Loans While in Law School?
It depends. With federal loans, you can typically defer until after you graduate. You’ll even get a grace period of six months before you have to start making payments. With private lenders, you may not be able to wait as long. You should talk with your lender to see what deferment options are available to you. You’ll also want to ask if they offer grace periods.
Once you know when your repayment period starts, ask about repayment plans. Federal student loans tend to have more flexible repayment options such as income-driven repayment and graduated repayment. Income-driven repayment bases your monthly payment on a percentage of your income. So, you’ll never pay more than what you could reasonably afford. Graduated repayment extends the repayment term to 25 years, which lowers your monthly payment. And these are just some. While typically not as flexible, private lenders may offer similar support in the form of deferred repayment plans and hardship plans. Deferred repayment plans allow you to postpone making payments on your loans while in school, however, interest will accrue in the meantime. You should talk with your lender for more information on your repayment options.
How to Minimize Law School Debt
Generally, when trying to minimize school debt, start with scholarships and grants. Then, federal student loans. Finally, private student loans.
Scholarships and grants should always be your first options. It’s free money that you receive and don’t have to pay back. It’s a great way to fund your education worry-free. As a bonus, it’ll lessen the load on how much you have to take out in loans.
Once you’re ready to start looking for loans, first explore federal loan options. In general, federal student loans tend to have lower interest rates and better terms. Additionally, federal student loans have the potential to be forgiven, which private student loans do not.
If you still need more money after that, then explore private loan options. With private loans, especially, take time to review the terms of each loan carefully. You can even use Sparrow to help you do that. Fill out the Sparrow application to get matched with what you qualify for at top lenders. Then, save and compare your favorite ones before making a final decision.
Our Picks for Law School Student Loans
Here are our best picks for law school loans that you can start with.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
Law school can be challenging, but paying for it doesn’t have to be. Securing free aid first through scholarships and grants can help ease the financial burden of law school. Then, use this article to help you navigate loans. Get federal student loans first and use Sparrow to help you look for private ones. That way you can focus more on succeeding at law school.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Medical school is really expensive. That’s why so many students opt to get student loans. Before you start applying though, let’s go over some things you need to know about medical school loans.
How Do Medical School Loans Work?
With medical school loans, you can take out a lot more than you’re probably used to.
Federal Direct Unsubsidized loans, for example, can lend up to $20,500 per year. Overall, the total amount you can borrow is $138,500.
Federal Grad PLUS Loans can lend you the cost of attendance minus other aid you’ve received.
Private student loan amounts will differ. It’ll all depend on the lender as well as your finances.
You can use all this money to pay for tuition, books, room and board, application or test fees, and other similar costs.
What Makes a Medical School Loan Good?
Now let’s go into what you should look at when figuring out which loans are best for you.
Cosigner vs No Cosigner
A cosigner is someone who takes on the legal and financial responsibility of the loan along with you. If you fail to make a payment, then it’s up to them to do so. A creditworthy cosigner can help bring down your interest rate and get you better terms.
Federal student loans don’t usually need a cosigner. The only instance where you may need one is if you fail the adverse credit history check for Grad PLUS loans. Otherwise, you’re good. But, you may need a cosigner to qualify for private student loans. There are non-cosigned private student loan options, but they tend to have higher interest rates than cosigned private loans.
So, before borrowing loans, look for a qualified cosigner and check the cosigner policies.
Interest Rate
Federal student loans have fixed interest rates that don’t change. They usually range anywhere from 3% to 5% depending on the type of loan you are getting. Private loan interest rates vary more. They can go between less than 1% all the way up to 13%+.
There are some things you can do that can maximize your chances of getting a lower rate. Having good credit, having a cosigner, and opting for an autopay discount are some.
Compare interest rates on different loans carefully before accepting any.
Repayment Terms
You want to take a careful look at the terms to make sure you understand and agree with them. For example, most medical school loans will offer grace periods. Federal student loans have a grace period of six months after you graduate, but with private loans, it can vary. You’ll also want to look at the deferment period, which depends on the lender. Some may even offer residency deferment options. Finally, look at the repayment plans. Federal student loans offer income-driven repayment plans while private lenders may offer hardship plans.
Again, be sure to read the repayment options and make sure that they are in line with what you need or want for repayment.
Our Picks for Medical School Loans
Federal student loans come from the government. But private lenders can range. These are our best picks for private medical school loans.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Ascent is a great option for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
College Ave’s student loan offers educational funding for undergraduates, graduate students, professional school students, career school students, and parents of students. It’s a great option for students seeking a more flexible repayment term that allows them to find a loan that matches their budget.
Earnest’s student loans provide funding that’s available to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit and who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a great option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduates, graduates, law and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
How to Apply for Medical School Loans
To apply for a federal student loan, fill out the FAFSA as soon as it comes out in October for every year you’ll be in school.
To apply for a private student loan:
Check your eligibility with the Sparrow application. You’ll need to meet these basic requirements:
Be a U.S. citizen, permanent resident, or eligible noncitizen
Be enrolled in a school
Meet credit and income requirements
Compare your student loan options. Before you accept any, compare your loan options, their terms, and interest rates. From there, you can use this information to make a final decision.
Submit a formal application with the lender, then wait to hear back. It takes time for lenders to verify information and make a decision. Typically, it takes at least a couple of weeks, but it can take longer.
Make sure that the funds get disbursed. Most lenders send the money to your school, so you should always check with them to see if it all went through.
Final Thoughts from the Nest
As you start your medical career, we want to make sure that you have everything you need to succeed. That includes being well informed on loans. To make the student loan search process easier, start with Sparrow.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The average graduate student borrower leaves school with $71,000 in student debt. This is on top of undergraduate student loans, bringing the average debt total for graduate students to $82,800.
While an exciting new chapter of your life, financing your graduate education may feel overwhelming. Before selecting a loan to pay for graduate school, it’s important to understand what your options are.
Federal and Private Loan Options
Federal Loan Options for Graduate School
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students. Eligibility is not based on financial need.
How much can you borrow in Direct Unsubsidized Loans?
Graduate students can borrow up to $20,500 annually in Direct Unsubsidized Loans. There is a lifetime limit of $138,500.
Direct PLUS Loans
Direct PLUS Loans are available to eligible graduate and professional students as well as parents of dependent undergraduate students. Eligibility is not based on financial need, however, a credit check is required. If you have adverse credit history, you will need to meet additional requirements to qualify.
How much can you borrow in Direct PLUS Loans?
In Direct PLUS Loans, graduate students can borrow up to the cost of attendance minus any financial aid already received.
Private Loan Options for Graduate School
There are a variety of private lenders, such as banks and financial institutions, that work with graduate students. Each individual lender will have its own unique eligibility requirements and borrowing limits. You can check your eligibility across 15+ lenders in one application using Sparrow.
What Makes A Graduate School Student Loan Good?
When borrowing a graduate school student loan, you should review a variety of factors to ensure it’s a good fit for you.
Cosigner vs No Cosigner
A cosigner is an individual who signs onto a loan alongside you. By signing onto the loan, the cosigner takes full responsibility for the loan should you fail to pay it back. Having a creditworthy cosigner can help you secure a lower interest rate and better terms.
Most graduate school student lenders will offer both cosigned and non-cosigned loan options. If you are searching for a student loan on your own, a non-cosigned loan option may be a good fit for you. However, if you do have access to a creditworthy cosigner, having them sign onto the loan may help you score better terms.
A creditworthy cosigner is someone who:
Has a stable income. If you are unable to make payments on your loan for any reason, your cosigner will be responsible for doing so. Make sure that your cosigner is in a position to make those payments if necessary.
Has little to no debt themselves. Again, if you are unable to make payments, you want to be sure your cosigner is in a financial position to make them. Balancing multiple debt payments could make it more difficult for the cosigner to manage yours.
Has a high credit score. A cosigner can help you secure a lower interest rate on your loan if they have a high credit score.
Has a solid debt repayment history. When you add a cosigner to your loan, the lender will evaluate their financial history. Having a solid debt repayment history shows the lender that the cosigner is responsible, and therefore, scores you a lower interest rate.
Minimum Income Requirements
If you are pursuing a graduate education immediately after your undergraduate education, you may not have a full-time income just yet. Many private student lenders require a minimum income to borrow. So, you’ll either need to meet that minimum income requirement or have a creditworthy cosigner who does.
There are also lenders that offer non-cosigned loan options with no minimum income requirement. Be sure to evaluate your options and select the loan that best aligns with your borrower profile.
Interest Rate
Each student loan will have its own unique interest rate and terms. If borrowing a loan with a cosigner, your interest rate will likely be lower. If borrowing a loan without a cosigner, your interest rate will likely be higher. Compare interest rates carefully to select the loan that is best for you.
Repayment Options
Each individual lender will offer a unique set of repayment options. While some lenders will allow you to defer repayment while in school, others will require immediate repayment. For example, MPOWER borrowers are required to make interest-only payments starting 45 days after loan funds have been disbursed. On the other hand, lenders such as SoFi and Sallie Mae offer several repayment options including deferred repayment.
Be realistic about which repayment options would work best for you. Always review your options carefully before selecting a loan.
Our Picks for Graduate School Student Loans
The best student loan will always be the one that works best for you. However, the following are our top picks for graduate school student loans.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering private student loans to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offering is available for undergraduate, graduate, professional, and career school students, as well as parents of students. It’s best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan offering is available to undergraduate and graduate students. It’s best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that offers non-cosigned graduate student loans to international students. It is best for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that offers cosigned and non-cosigned undergraduate, graduate, and career training student loans. It is best for students seeking competitive interest rates with a creditworthy cosigner.
SoFi is a strong option for undergraduate, graduate, law, and MBA students, as well as parents looking to fund their child’s education. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
How to Apply for a Graduate School Student Loan
To apply for a graduate school student loan:
Check your eligibility. Sparrow allows borrowers to check their eligibility with 15+ lenders in one free application.
Compare loan options. After seeing which lenders you qualify with, we’ll show you your loan options side-by-side. You can evaluate the loan options to see which one you’d like to pursue.
Wait to hear back. After selecting the lender you’d like to pursue, you can submit a formal loan application with them. It can take a few days to a few weeks to hear back from the lender about whether you’ve been approved.
Ensure the funds were disbursed. After your school certifies the loan, the lender will let you know. Then, the money will be sent to your school. Always follow up with your school to confirm that the funds were properly disbursed.
Final Thoughts from the Nest
Going to graduate school is an exciting new chapter. While funding that education can be overwhelming, we’ve got your back.
The most important thing to remember: Always evaluate your loan options carefully. Be sure that the loan you select feels right. If it doesn’t, keep browsing until you find one that does.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
When paying for college, there are two main types of student loans you will find: federal and private. Within these categories, there are several kinds of loans, each designed to cover a different academic program.
Before taking out a student loan, it’s important to understand the broader landscape of your loan options. That way, you can select the loan option that best fits the degree you are pursuing.
The federal government issues federal student loans. Each year, U.S. citizens pay federal taxes, and a portion of these tax dollars are allocated to providing federal student aid programs. Private student loans are issued by private entities such as banks and financial institutions.
Who is eligible for student loans?
To be eligible for federal student loans, you must:
Demonstrate financial need
Be a U.S. citizen or eligible noncitizen
Have a valid Social Security Number
Be enrolled or accepted for enrollment in an eligible degree or certificate program
Be enrolled at least half-time to be eligible for Direct Loan Program funds
Maintain satisfactory academic progress in college or career school
Show you’re qualified to obtain a college or career school education
Whether you are eligible for a private student loan will depend on the lender’s eligibility criteria. Each individual lender will have its own eligibility requirements.
How much can you get in student loans?
The amount you can borrow in both federal and private student loans depends on a variety of factors such as:
The type of loan
Your year in school
Your school’s cost of attendance
Types of Federal Student Loans
Federal student loans come in a variety of forms depending on your year in school and your financial need.
Direct Subsidized Loans
Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. While in school, the Department of Education pays the interest on Direct Subsidized Loans. So, the amount you receive in a Direct Subsidized Loan will be exactly the same the day you graduate — no interest will have accrued in the meantime.
Who is eligible for Direct Subsidized Loans?
Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. Direct Subsidized Loans will cover up to 150% of your program length. So, if you are pursuing a traditional 4-year program, you can only receive Direct Subsidized Loans for 6 years (4*150%).
How much can you get in Direct Subsidized Loans?
Your university will ultimately determine your financial need, which in turn dictates how much you are eligible to borrow in Direct Subsidized Loans. For example, if your school’s cost of attendance was $20,000, and you received $15,000 in scholarships, your financial need would be $5,000. You would be eligible for up to $5,000 in Direct Subsidized Loans.
There are, however, limits to how much you can borrow based on your year in school.
Undergraduate Year 1 Annual Limit: $3,500
Undergraduate Year 2 Annual Limit: $4,500
Undergraduate Year 3 Annual Limit: $5,500
Lifetime Subsidized Loan Maximum: $23,000
So, even if your financial need was $5,000, but you are in the first year of your undergraduate education, you would only be able to receive up to $3,500 in Direct Subsidized Loans.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to undergraduate and graduate students, regardless of financial need. Unlike Direct Subsidized Loans, the Department of Education does not pay the interest on Direct Unsubsidized Loans while you are in school. Interest will begin to accrue after the loan is disbursed.
Who is eligible for Direct Unsubsidized Loans?
Direct Unsubsidized Loans are available to both undergraduate and graduate students. You do not need to demonstrate financial need to receive a Direct Unsubsidized Loan.
How much can you get in Direct Unsubsidized Loans?
Individual universities will determine how much you can borrow in Direct Unsubsidized Loans based on your cost of attendance, any aid you’ve already received, and your dependency status.
To calculate your maximum borrowing eligibility for Direct Unsubsidized Loans, your university will first take into account any Direct Subsidized Loans you’ve already been offered. Then, the university will evaluate your dependency status and determine your eligibility with these factors in mind.
Year in School
Dependent Status Students
Independent Status Students
Undergrad Year 1 Annual Limit
$5,500
$9,500
Undergrad Year 2 Annual Limit
$6,500
$10,500
Undergrad Year 3 Annual Limit
$7,500
$12,500
Graduate/Professional Degree Annual limit
N/A
$20,500
Subsidized
$31,000
$57,500 for undergrads
$138,500 for graduate/professional students
Let’s use an example to illustrate this.
Brandon, a 3rd year undergraduate student, filed as a dependent. ($7,500 annual limit)
Brandon received $2,000 in Direct Subsidized Loans. (minus $2,000)
Brandon is eligible for up to $5,500 in Direct Unsubsidized Loans. ($7,500 – $2,000 = $5,500)
$7,500 (Brandon’s overall Direct Unsubsidized Loan eligibility) – $2,000 (What Brandon already received in Direct Subsidized Loans) = $5,500 (The maximum amount Brandon is eligible to borrow in Direct Unsubsidized Loans).
Note: This does not guarantee that Brandon will receive $5,500 in Direct Unsubsidized Loans. This is simply the maximum amount Brandon is eligible to receive.
PLUS Loans
PLUS loans come in two forms: Grad PLUS and Parent PLUS. Grad PLUS loans are available to students pursuing graduate or professional degrees. Parent PLUS loans are available to parents of dependent undergraduate students.
Who is eligible for PLUS loans?
To be eligible for a Grad PLUS loan, you must:
Be enrolled at least half-time in an eligible graduate or professional school
Pass a credit check
Meet the same eligibility requirements needed for federal student aid
To be eligible for Parent PLUS loans, you must:
Be the biological or adoptive parent of a student enrolled in school at least half-time
Be a citizen or eligible non-citizen
Pass a credit check
Meet the general eligibility requirements for federal student aid
How much can you get in PLUS loans?
PLUS loans can cover the entire cost of education minus any other financial aid you’ve already received.
For example, if your cost of attendance was $50,000, and you previously received $20,000 in additional aid, you would be eligible to borrow up to $30,000 in a PLUS loan.
This is true for both Grad PLUS and Parent PLUS loans.
Direct Consolidation Loans
A Direct Consolidation loan is available to you after you’ve graduated, left school, or dropped below half-time enrollment. A Direct Consolidation loan allows you to combine multiple federal student loans into one loan. This can simplify your payments, but there are certainly various pros and cons to weigh.
Who is eligible for a Direct Consolidation loan?
To be eligible for a Direct Consolidation loan, you must have graduated, left school, or dropped below half-time enrollment. Your loans must be in repayment or in their grace period.
Your federal student loans must also be one of the following types:
Subsidized Federal Stafford Loans
Unsubsidized and Non-Subsidized Federal Stafford Loans
PLUS loans from the Federal Family Education Loan (FFEL) Program
Supplemental Loans for Students
Federal Perkins Loans
Nursing Student Loans
Nurse Faculty Loans
Health Education Assistance Loans
Health Professions Student Loans
Loans for Disadvantaged Students
Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans
FFEL Consolidation Loans and Direct Consolidation Loans (only under certain conditions)
Federal Insured Student Loans
Guaranteed Student Loans
National Direct Student Loans
National Defense Student Loans
Parent Loans for Undergraduate Students
Auxiliary Loans to Assist Students
Generally, you cannot consolidate a Direct Consolidation loan unless you are adding an additional loan into the consolidation.
How much can you consolidate with a Direct Consolidation loan?
Currently, there are no set limits on the amount you can consolidate with a Direct Consolidation loan.
Types of Private Student Loans
Private student loans are provided by private entities such as financial institutions and banks. They come in a variety of forms, designed for nearly all academic programs.
Undergraduate Student Loans
Private undergraduate student loans cover undergraduate degrees such as Associate’s and Bachelor’s degree programs.
Who is eligible for private undergraduate student loans?
Each individual private lender will have its own unique set of eligibility requirements. In general, most private lenders require you to:
Attend an eligible, degree-granting program
Be a U.S. citizen, permanent resident, or eligible noncitizen
Meet certain income requirements
Meet certain credit history requirements
There are a handful of private lenders that offer future-income-based student loans. These loans allow you to skip over most financial criteria many lenders require. To check your eligibility with 15+ top lenders, start here.
How much can you get in private undergraduate student loans?
How much you’re able to borrow in undergraduate private student loans depends on the lender you’re borrowing from. Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received.
For example, if your school’s cost of attendance is $30,000, and you accepted $5,000 in scholarships, you would be eligible to borrow up to $25,000 in private undergraduate student loans.
Graduate Student Loans
Private graduate student loans cover graduate degree programs such as Master’s programs.
Who is eligible for private graduate student loans?
Similar to undergraduate student loans, each individual private lender will have its own unique set of eligibility requirements for graduate student loans. In general, most will require you to meet the same set of criteria as you would need to for undergraduate student loans.
How much can you get in private graduate student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Medical School Student Loans
Medical school student loans cover traditional school expenses such as tuition, room and board, and fees. Most medical school student loans also offer benefits designed specifically for medical school students such as residency deferment, interest-only repayment options for residency, and longer repayment periods to make payments smaller during residency.
Who is eligible for medical school student loans?
Each individual private lender will have its own unique set of eligibility requirements for medical school student loans. In general, most will require you to be enrolled in an eligible program and completing medical school or residency at least half-time.
How much can you get in medical school student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Law School Student Loans
Law school student loans cover traditional school expenses such as tuition and fees. But, law school loans can also support law students during the period of time between graduating and passing the bar exam.
Most law students spend roughly three months studying for the bar, and most do it right after graduation. As a recent graduate, many law students take out an additional student loan to pay for the bar course itself and living expenses for those three months of studying.
Who is eligible for law school student loans?
Each individual private lender will have its own unique set of eligibility requirements for law school student loans. In general, most will require you to be enrolled in an eligible J.D. program, completing it at at least half-time status. Recent graduates preparing for the bar may also be eligible depending on the lender.
How much can you get in law school student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Dental School Student Loans
Dental school student loans cover traditional dental school expenses such as tuition and fees. Most dental school student loans also offer benefits designed specifically for dental school students such as deferment and flexible repayment options should you choose to pursue a dental residency program.
Who is eligible for dental school student loans?
Each individual private lender will have its own unique set of eligibility requirements for dental school student loans. In general, most will require you to be enrolled in an eligible dental school program, completing it at at least half-time status. Recent graduates pursuing a dental residency program may also be eligible for additional post-graduate student loans to cover costs associated with residency.
How much can you get in dental school student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Non-Cosigned Student Loans
Non-cosigned student loans are designed for borrowers with little to no credit score.
Who is eligible for a non-cosigned student loan?
If you have at least two years of credit history, you may qualify for a non-cosigned credit-based student loan. If you do not have two years of credit history, you may want to pursue non-cosigned outcomes-based student loans.
While both are non-cosigned options, outcomes-based student loans are ideal for borrowers with no credit history. Most lenders offering non-cosigned loan options base the interest rate and terms you receive on other factors instead, such as your future income potential based on your major.
You must be enrolled in an eligible program and meet basic eligibility requirements.
How much can you get in non-cosigned student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received.
International Student Loans
International student loans are a type of private student loan available to non-U.S. citizens studying in the United States. International student loans can help you cover expenses such as tuition, room and board, books, travel expenses, health insurance, and more.
Who is eligible for international student loans?
Non-U.S. citizens studying in the United States are eligible for international student loans. As with other student loans, you must meet a lender’s basic eligibility requirements to qualify. In general, lender’s look for individuals with a U.S. citizen or permanent resident cosigner, however, there are exceptions.
How much can you get in international student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received.
Refinance Loans
Refinance loans allow you to take out a new student loan, often with better terms and interest rate, to replace your previous student loan(s). By doing so, you may pay less overall by lowering your interest rate or shortening your repayment period.
Who is eligible for a refinance loan?
Each individual refinance lender will have its own unique set of eligibility requirements. In general, most will require you to:
Have graduated or left school
Have attended an eligible, degree-granting program
Be a U.S. citizen, permanent resident, or eligible noncitizen
Meet certain income requirements
Meet certain credit history requirements, usually with a credit score of 650 or higher
Have a debt-to-income ratio of 65% or less
How much can you get in a refinance loan?
Most lenders will allow you to refinance up to your outstanding balance, some reaching up to $500,000.
State Loans
Many U.S. states have private student loan programs available to their residents. The program requirements, borrowing limits, and how it generally functions will vary by state.
Who is eligible for state student loans?
Each individual state will have its own unique set of eligibility requirements that may include:
Specific income limits
Age requirements
Credit requirements
Dependency status requirements
Pursuing college in that specific state
Demonstrating financial need
Demonstrating sufficient academic progress
How much can you get in state student loans?
Each individual state will have its own borrowing limit for state loans.
Institutional Student Loans
Institutional student loans are provided by your college or university. With institutional student loans, the terms are set by the school. Thus, they vary by institution.
Who is eligible for institutional student loans?
Each individual college or university will have its own unique set of eligibility requirements. Schools may, however, require you to meet certain academic requirements such as having a certain GPA.
How much can you get in institutional student loans?
Each individual college or university will have its own borrowing limit for institutional loans.
Final Thoughts from the Nest
There are many different types of student loans. Each one will offer something slightly different, so be sure to compare your options closely.
As a reminder, financial aid should always be accepted in the following order:
When you do arrive at the student loan phase of financing your college education, be sure you understand what all of your options are. To search and compare private student loan offers in one easy application, use Sparrow.
First off, congratulations on graduate school! That’s an amazing accomplishment. Getting accepted to graduate school might mean having to go through the loan process. Again.
Now, they’re graduate student loans, which can sound more intimidating. The good news is they don’t have to be. The better news? This article will help you on the topic of graduate student loans. So, let’s get into it.
What Is A Graduate Student Loan?
A graduate student loan is a type of loan that pays for school expenses that go with a graduate degree program. Usually, you can get a lot more money with graduate loans than you would with undergraduate loans. That’s definitely a perk. On the flip side, most graduate loans will require a credit check of some kind, regardless of the type of loan. No matter the type of loan you decide on, it’s important to secure free aid like scholarships and grants first. It’ll help you out a lot in the long run.
Now, there are two basic types of graduate loans that you can get.
Federal Graduate Loans
Federal student loans are a great source of loan money for many reasons. For one, you’ll get benefits like flexible repayment options and possible loan forgiveness. Additionally, you’ll also get a six-month grace period after you graduate.
There are federal student loans for any kind of student, including graduate students. The two types of federal loans you’ll be able to get as a graduate student are Direct Unsubsidized Loans and Direct PLUS Loans.
Direct Unsubsidized Loans are available to undergraduate, graduate, and professional students. There is no need to prove financial need. As long as you are enrolled in a school or program at least half time, then you are eligible to receive this. The most amount of money you can borrow each year as a graduate or professional student is $20,500. The interest rate, as of April 2022, is 5.28%.
Direct PLUS Loans are available to graduate or professional students. They’re also available to parents of dependent, undergraduate students. As a grad student, you’d be getting a grad PLUS loan. There is a credit check for this type of federal loan, but it’s only to check for adverse credit history. An adverse credit means things like bankruptcy, delinquent accounts, and defaults. As long as you don’t have any of that, you’re good. If you do have an adverse credit history, you’ll probably need to add a cosigner to qualify. The most that you can borrow with your grad PLUS loan is the cost of attendance minus other aid received. The interest rate, as of April 2022, is 6.28%.
Private Graduate Loans
There are many lenders that offer student loans for graduate students. Like undergraduate private loans, each lender will have their own terms. So, it’s important to look around and inform yourself of the terms of each loan option.
You’ll want to pay close attention to aspects such as the repayment terms, interest rates, and fees. Always ask lenders if they offer borrower protections or loan perks such as an autopay discount. An autopay discount might lower your interest rate if you sign up for auto payments.
Because private lenders give out the money, there will be a lot more requirements. Some factors considered are your credit score, current income, and potential future earnings. Your current income, especially, may play a big role. You may have to start repayment as soon as it’s disbursed, which is when you’re in school. So, you want to make sure that you afford it.
The maximum amount you can borrow depends on each lender. Generally, you want to only borrow any remaining cost you have after accepting other forms of aid. And, always be conscious of how much you are borrowing. Remember that while borrowing $10,000 for one year may not seem like a ton, you will likely need to borrow following years as well. Make sure you are thinking of your overall debt, not just the amount you’re borrowing each individual year.
How to Apply for Graduate Student Loans
Each type of graduate loan has a different process when it comes to applying. For federal student loans, you have to fill out the FAFSA. Fill it out as soon as it’s available on October 1st. The earlier you fill it out, the better your chances are of getting money. The FAFSA alone is enough to apply for Federal Direct Unsubsidized Loans. Federal Direct PLUS Loans, on the other hand, require an extra application. Check with your school for the application and information on eligibility requirements.
Now, for private student loans, you’ll generally have to apply with each lender individually. I know. I know. It’s a lot of work. Lucky for you, Sparrow helps make this process easier. With Sparrow, you can fill out a single application. This will match you to what loans you qualify for at 15+ top lenders. Save the ones you like and compare them before deciding. Using Sparrow will save you a lot of time, money, and sanity. All you have to do to get started is create a free account.
Final Thoughts from the Nest
This phase of your educational career is no doubt exciting and stressful all at the same time. Let us help you by providing guides such as these and making the loan searching process easier. Take a deep breath, create an account, and let some of the weight fall off your shoulders.
Okay, so you probably already know about federal and private student loans, right? Well, let us introduce you to another type of loan: the institutional loan. Like with any type of loan, institutional loans have their own little ins and outs that you need to know about. Before we go over them, though, let’s answer an important first question.
What Is An Institutional Loan?
An institutional loan is a type of private student loan where the lender is a college or institution. These are only offered to students already enrolled in the school.
Institutional loans function a little differently than traditional private student loans. For example, there are no standardized interest rates or terms across institutional loans.
This means that the terms of each loan will vary a lot more than usual from school to school. This includes repayment terms, and financial, cosigner, and eligibility requirements. The differences in these terms can be impactful. For example, some schools may not have flexible repayment plans, or they may not have as many borrower protections. Talk with your school’s financial aid office to understand all the terms and conditions clearly. Those terms and conditions should be ones you agree to and can follow.
Do Institutional Loans Have Interest?
Yes. Like with any loan, lenders have to make money somehow. They do this by charging interest, which is the amount of money you pay for borrowing the loan. When it comes to the interest rate, each school will set its own. Generally, though, long-term institutional loans can range anywhere from 3% to 10%. Short-term institutional loans will usually be close to around 1%. If you’re particularly lucky, you may go to a school that offers a 0% interest rate.
Should I Get An Institutional Loan?
The answer to this question is completely up to you. As always, you want to look at other forms of aid first. Start with free aid like scholarships and grants. Then, look at federal loans. While you do have to pay back federal loans, they often come with a lot of benefits and flexible plans. After that, you can start looking for private loans like institutional loans. These should only be considered after you’ve accepted other forms of aid.
When taking out loans, you can typically borrow up to your school’s cost of attendance minus any financial aid you’ve already received. Try to limit what you borrow to what you think you can reasonably pay back.
How Do I Apply for An Institutional Loan?
To be considered for an institutional loan, you’ll need to have filled out the FAFSA. Also, remember that you can only get these types of loans at the school you’re enrolled in. Go through the enrollment process if you haven’t otherwise and you know what school you’re going to already. Finally, talk to your school’s financial aid office. They’ll inform you on things like documents you need, any requirements you have to meet, and the terms of the loan.
Final Thoughts from the Nest
As with any student loan, institutional loans can be a great help. But, they’re not the only type of private student loans. Always compare several student loan options prior to accepting any one offer. Other private lenders may have great loans to offer you that match what you need.
And, you don’t have to scour the internet to find them. When you’re ready to compare private student loan offers, fill out Sparrow’s application to get matched with lenders. Then, save the ones you’re interested in and compare them before making a decision. It’s that easy.
Qualifying for student loans on your own is already hard because chances are you have too limited of a financial history. Now, imagine that you don’t have a cosigner to help with that. It’s even harder. Let’s go through how to find the best student loan for people without a cosigner:
What Is A Cosigner?
Before getting into it, let’s define what a cosigner is and who that can be. A cosigner is someone who agrees to be legally and financially responsible for the loan, just like you. In the event that you can’t make your monthly payment, your cosigner will have to handle it. That’s why it’s important for your cosigner to be someone you can trust and who has good finances. This means having a good credit score and a steady income. They don’t even have to be a parent or family member. Your cosigner can be a friend or someone else you trust.
But if you’re reading this, chances are you weren’t able to find someone who is both willing and able to be a cosigner for you. In that case, you want to look for non-cosigned student loans.
Yes! You can get both federal student loans and private student loans without a cosigner. Let’s do a quick overview of how you can do so with each.
Federal Student Loans
Most federal loans don’t require a cosigner, so they’re a great option if you don’t have one. Most students need a cosigner because they usually don’t meet the minimum credit score. However, federal student loans don’t look at your credit score. So, there’s not much need for a cosigner in most cases. Normally, as long as you’re enrolled in college and have filled out the FAFSA, you’ll be eligible. An exception to this is the Direct PLUS Loan. To receive a Direct PLUS Loan, they’ll run a credit check for adverse credit history. If you do have an adverse credit history, you’ll need a cosigner to qualify.
There are loans for undergraduate students, graduate students, professional students, and parents of students. They all have their own predetermined, fixed interest rates and loan limits. Federal student loans are especially helpful because they come with benefits. Some of the most notable benefits are flexible repayment plans and loan forgiveness programs. Each loan also comes with a grace period of about six months before you start repayment. Repayment usually starts after graduation.
You can get a private student loan without a cosigner, but it can be a bit harder. There are two ways of doing this. The first is qualifying for a loan by yourself. Because lenders are funding part of your education, they need to be sure that you are a good investment. They do this by setting certain criteria borrowers have to meet. As long as you meet all the eligibility requirements, you won’t need a cosigner. To do this, make sure you have a good credit score. It needs to be at least in the high 600s. Also, verify that you have enough income to support your current lifestyle plus the monthly payment. There are other requirements that will vary from lender to lender. You’ll need to inform yourself of this. But, having good credit and a steady income is a good place to start.
If you are in a position where you think you can qualify on your own, then great! The problem is that’s not everyone. The good news is there are financial institutions that offer non-cosigned student loans. These will also have certain requirements set forth by lenders. They may be easier to meet, so you’ll have a better chance of qualifying. Yet, these loans do tend to have higher interest rates than other private student loans.
With all private student loans, the terms are going to be different depending on the lender. Typically, though, they’ll have higher interest rates than federal student loans. Private student loans may have less flexible repayment options or borrower protections. Before agreeing to accept a loan, make sure you know the:
Assuming you’ve already accepted free aid (scholarships and grants), then you’ll first want to complete the FAFSA. If you haven’t, then this is your sign to go apply for some free aid right now. Completing the FAFSA allows you to apply for federal student loans. After you’ve taken a look at and accepted any federal student loans you may have been offered, you can shop around for private lenders. If you don’t qualify on your own, you’ll want to look for lenders that offer loans without needing a cosigner. Interest rates will probably be higher, but it’s a good option if you still need more money with no cosigner to help.
With all loans, it’s important to look over the terms and conditions carefully. Only use loans to cover the remaining cost of attendance you have after accepting other forms of aid.
Where to Find the Best Student Loans with No Cosigner
To help get you started, here are our best picks for student loans with no cosigner. You can use Sparrow to find the best student loan rates for no cosigner and compare across multiple lenders in minutes.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. To qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you live in Texas, have a strong credit history, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a student loan with College Ave without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5 or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. An Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA, and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at least 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. To qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates and flexible repayment options.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. They do not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. Nonetheless, if you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
Final Thoughts from the Nest
Shopping for student loans can be a pain, especially if you don’t have a cosigner. The good news is that it doesn’t have to be! After accepting other forms of aid, fill out the FAFSA and consider federal loans first. If you still need money after that, use Sparrow to help you look for private student loans. This will make your student loan experience a lot easier. Happy loan shopping!
Studying in the United States is an exciting opportunity. When it comes to funding this new chapter, there are various options including scholarships, grants, and student loans.
While helpful, scholarships and grants may not cover your entire cost of attendance. If so, a private international student loan may be your next step.
To get you prepared, let’s dive into everything you need to know about student loans as an international student.
What are International Student Loans?
International student loans are a type of private student loan available to non-U.S. citizens studying in the United States. International student loans can help you cover expenses such as tuition, room and board, books, travel expenses, health insurance, and more.
Why International Student Loans?
On average, international students pay between $20,000 and $40,000 in tuition per year to study in the United States, according to the International Education Specialists. Note that this is strictly tuition and does not include any additional fees, housing, meal plan, travel expenses, insurance, phone plan, etc.
Because of this, most international students are unable to pay for college out of pocket. Even with scholarships and grants, there still tends to be a remaining balance. To cover that remaining balance, many international students opt for a private student loan.
What Types of Loans are International Students Eligible For?
As an international student, you are more than likely eligible for private international student loans. To be eligible for federal student loans, however, you must meet certain criteria.
Are International Students Eligible for Federal Student Loans?
As an international student, you are only eligible for federal student loans if you are an eligible noncitizen. An eligible noncitizen is someone who:
Is a U.S. national, such as a citizen of American Samoa or Swains Islands
Is a U.S. permanent resident with a permanent residence card or “green card”
Has an Arrival-Departure Record (I-94) from the Department of Homeland Security showing any of the following statuses:
Refugee
Asylum granted
Indefinite parole
Humanitarian parole
Cuban-Haitian entrant
Holds T-nonimmigrant status
If you are an eligible noncitizen, you should complete the FAFSA to apply for federal student aid. Be sure to complete the FAFSA and pursue any federal aid prior to exploring private international student loans.
Are International Students Eligible for Private Student Loans?
If you are not an eligible noncitizen, and therefore ineligible for federal student loans, private international student loans will be your best option.
Most international students will be eligible for a private student loan due to the wide variety of eligibility criteria. Each individual lender will require that you meet a unique set of criteria. Whether you meet that eligibility criteria depends on how the lender chooses to evaluate borrowers.
In general, private student lenders will ask you to provide information such as:
Proof of enrollment
Your student visa
Your tuition bill
Proof of identity
Then, private student lenders will use this information in combination with your credit history to determine your eligibility. Having a U.S. citizen or permanent resident cosigner may help you secure a private student loan.
Importance of a Cosigner
Around 92% of all undergraduate student loans are cosigned. As an international student, most lenders will ask you to have a U.S. citizen or permanent resident cosigner. Having a cosigner will not only help you secure a student loan as an international student, but help you secure better interest rates and terms.
What is a Cosigner?
A cosigner is an individual who would sign onto the loan alongside you. By signing the loan with you, the cosigner takes full responsibility for the loan if you are unable to repay it. While not required, having a creditworthy cosigner can help you secure lower interest rates and better terms on your student loan.
Why Does Having a Cosigner Help?
When you borrow money from a lender, the lender evaluates you based on the level of risk you may bring to them. Lenders want to know that you’re going to pay them back. So, they typically use your credit history to evaluate your past financial performance to determine how likely you are to pay them back, and on time.
If your financial history demonstrates responsibility, you pose less risk to the lender. If your financial history demonstrates irresponsibility, you may be a riskier borrower for a lender.
As an international student, you likely won’t have a financial history in the United States. This makes you challenging to evaluate from a lender’s perspective. Having a U.S. citizen cosigner allows lenders to review their financial history, determine their responsibility, and set the terms of the loan based on that.
So, if you don’t have a financial history in the United States, but your U.S. citizen cosigner does, you can score significantly better rates and terms than if you took on the loan without the cosigner. When possible, you should pursue cosigned loan options before non-cosigned options.
Can You Get Loans Without a Cosigner?
If you don’t have a U.S. citizen cosigner, you aren’t out of luck. You can still get an international student loan without a cosigner. There are lenders that work with students just like you.
First, make sure that you meet the basic eligibility requirements of most private student lenders:
Go to an approved school
Come from a qualifying country
Be enrolled at least half-time in an eligible program
Live in the United States while attending school
Verify your identity
Qualify for a student visa to study in the United States
Each individual lender will have their own unique set of eligibility requirements. Starting with meeting the basics is a good first step.
Can I Get a Student Loan as an International Student with No SSN?
When it comes to private student loans, lenders typically check your credit score. In order to do so, lenders typically need your SSN. As an international student, you likely won’t have an SSN, but don’t worry. There are various lenders that don’t require SSNs.
The easiest way to get a private student loan as an international student with no SSN is to have a U.S. citizen cosigner. If you don’t have access to a cosigner, there are lenders that work with students without cosigners or SSNs.
How Much Can You Get in International Student Loans?
Typically, international student loans will cover up to the cost of attendance minus any other aid you’ve already received. This level of coverage is crucial as an international student because expenses can be higher due to travel and getting settled in your new country.
For example, let’s say you are attending a university for the 2022-2023 academic year with the following expenses:
Tuition: $50,000
Room and Board: $12,000
Campus Health Insurance: $3,000
Books and Supplied: $1,500
Miscellaneous Fees: $750
Transportation: $500
Total Expenses: $67,750
In this example, your total cost of attendance would be $67,750 for the academic year. If you received $30,000 in scholarships, your remaining balance would be $37,750. You would be eligible to borrow up to $37,750 in student loans to cover that remaining balance.
Best Student Loans for International Students
The best student loan will always be the one that works best for you. However, these are our top picks for international student loans.
MPOWER offers non-cosigned student loans to international students. MPOWER does not require borrowers to have a credit history or a cosigner. Instead of using your credit history to determine your eligibility, MPOWER uses information such as your future income potential.
Prodigy Finance offers non-cosigned student loans to international students. Prodigy Finance does not require borrowers to have a high credit score or a cosigner. Prodigy Finance uses information such as your credit history and future income potential to determine your eligibility.
Ascent offers traditional cosigned credit-based loans for international students. With a qualifying U.S. cosigner, international students can be eligible for Ascent private student loans.
College Ave offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with College Ave, borrowers must have a Social Security Number and a U.S. citizen or permanent resident cosigner.
Earnest offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Earnest, borrowers must apply with a creditworthy U.S. citizen or permanent resident cosigner. The borrower must also have a physical address in the United States and a Social Security Number.
Sallie Mae offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Sallie Mae, borrowers must apply with a creditworthy U.S. citizen cosigner.
How to Apply for International Student Loans
To apply for an international student loan, you’ll need to know when you plan to enroll, how much it’s going to cost, and if you’ll have a cosigner.
When you plan to enroll.To apply for a student loan, you’ll need to know where you’re going to school and how much it will cost. Some private lenders have restrictions on what schools they work with and how much they allow you to borrow.
How much it’s going to cost.To apply for a student loan, you’ll need to let the lender know how much you want to borrow. Your school will provide you with the overall cost of attendance, but be sure to factor in additional costs such as travel expenses, transportation, health insurance, and more.
If you’ll have a cosigner.Before applying for a student loan, ask around to see if you can secure a cosigner. If you can, make sure to know all of the individual’s information so you can input it into the lender’s application.
Should I Take Out An International Student Loan?
Whether you decide to fund your education with a private international student loan is ultimately up to you. Before accepting any loan, however, you should exhaust all scholarship and grant opportunities first.
If, after accepting scholarships and grants, you are unable to pay your remaining balance out of pocket, a private student loan may be the next best option. When you’re ready, know that Sparrow has your back the whole way.
Final Thoughts from the Nest
Whether you decide to take out a student loan to fund your international education depends on your unique circumstances. Regardless, know that Sparrow is here to help.
When you’re ready to start the student loan process, start the Sparrow application. Sparrow’s student loan search and comparison process allows you to see all of your student loan options in one place. We’ll even help guide you to the best loan option so you can be confident in your lending decision.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
According to the Institute of International Education, 73% of international students in the United States depend on resources outside the country to pay for their college education. This sentiment is true when it comes to cosigners, too.
Most international students only have access to a cosigner outside the U.S. However, many private student lenders require international borrowers to have a U.S. citizen cosigner.
But what if you don’t have a cosigner in the United States, or a cosigner at all? Don’t worry. There are lenders that work with students just like you. Let’s break down how to get an international student loan without a cosigner.
Options for an International Student Loan Without a Cosigner:
A cosigner is an individual who signs onto a loan alongside a borrower. By signing the loan with you, the cosigner takes full responsibility for the loan if you are unable to repay it.
While not required, having a creditworthy cosigner can help you secure lower interest rates and better terms on your student loan. When possible, you should pursue cosigned loan options before non-cosigned options.
Cosigners are typically a parent or guardian, but if that isn’t an option for you, consider asking a(n):
Extended family member (aunt, uncle, grandparent, cousin, etc.)
Friend
Spouse
That said, don’t ask just anyone. Make sure that you are confident they would be a good cosigner, not just any cosigner.
What Makes an Individual a Good Cosigner
A good cosigner is someone who is trustworthy, financially stable, and creditworthy.
Trustworthy. For someone to cosign your loan, they are doing you a favor. Any missed payment on your end becomes a bad mark on their end, too. So, for the cosigner, they need to be able to trust you to make payments on time and be transparent with them when you can’t.
Likewise, it’s important that you can trust them, too. You may need to talk to your cosigner about a missed payment. Being able to trust your cosigner makes these conversations much easier.
So, there must be a mutual trust between you and your cosigner, regardless of who they are. Only ask someone to cosign your loan if you are confident they would be trustworthy throughout the entire life of your loan.
Creditworthy. A cosigner can provide you with access to better interest rates and terms. On a cosigned loan, the lender looks at your cosigner’s credit history to determine your interest rate. On a non-cosigned loan, the lender is looking at your credit history to determine the interest rate.
If your cosigner doesn’t demonstrate creditworthiness, having them sign onto the loan won’t necessarily help you.Creditworthy cosigners typically have a credit score of 670 or above. In general, the higher their credit score the better.
Financially stable. When signing onto a loan, the cosigner is taking full responsibility to repay the loan should you be unable to repay it. Make sure that the cosigner you select would be able to make these payments if necessary.
Can a Cosigner be a Non-US Citizen?
If you are an international student, your cosigner typically needs to be a U.S. citizen or permanent resident, although there may be a few exceptions. In general, look for a U.S. citizen or permanent resident to serve as your cosigner.
How to Get an International Student Loan Without a Cosigner
If you don’t have a cosigner, don’t worry. There are lenders that work with students just like you. To secure a student loan as an international student without a cosigner, there are a few things you can do.
Meet the Basic Qualifications
To qualify for any international student loan, with or without a cosigner, you need to meet basic eligibility requirements. The basic requirements may include:
Go to an approved school
Come from a qualifying country
Be enrolled at least half-time in an eligible program
Live in the United States while attending school
Verify your identity
Qualify for a student visa to study in the United States
Each individual lender will have their own unique set of eligibility requirements. Make sure you meet this basic list of eligibility requirements first.
Find a Lender that Gives International Student Loans without a Cosigner
MPOWER is an online student lender that offers non-cosigned undergraduate and graduate student loans for international, domestic, and DACA students. When determining your borrowing eligibility, MPOWER will not take into account your credit score. Instead, MPOWER will consider a variety of data points such as your future income potential to determine your creditworthiness.
MPOWER offers student loans with fixed interest rates ranging from 7.52% to 14.98%. MPOWER offers a wide variety of bonuses for borrowers such as their three unique scholarship opportunities:
Global Citizen Scholarship: (1) $5,000 scholarship and (4) $3,000 scholarships.
Women in STEM Scholarship: Scholarships ranging from $2,000 to $5,000 for female international and DACA students at eligible full-time STEM degree programs.
Central America Scholarship Program: Scholarships ranging from $1,000 to $3,000 for students from Central America.
Prodigy Finance is an online student lender that offers non-cosigned undergraduate and graduate student loans for international students. Similar to MPOWER, Prodigy Finance will not take into account your credit score when determining your borrowing eligibility. Instead, Prodigy Finance will consider information such as your future income potential and credit history to determine when making their lending decision.
Prodigy Finance offers student loans with variable interest rates ranging from 7.52% to 12%. Prodigy Finance offers a wide variety of bonuses for international student borrowers such as:
Referral bonuses
Help with moving to the United States
Assistance in securing a visa
Help setting up a United States phone number
Assistance navigating your new home in the United States
To check your eligibility with both MPOWER and Prodigy Finance, complete the free two-minute Sparrow application.
Final Thoughts From the Nest
Navigating the loan process as an international student can be confusing, but Sparrow is here to help. There are high-quality lenders ready to help you through the process of finding a student loan that works for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
As an international student, navigating the U.S. financial aid process can be tricky and stressful. You may have questions about whether, as an international student, you are eligible for certain types of aid.
In this article, we’ll talk about federal student aid and the eligibility criteria for international students.
Are International Students Eligible for Federal Student Aid?
American students receive federal and state financial aid through the FAFSA in order to fund their education. In most cases, international students will be unable to receive federal student aid, but there are exceptions. If you are an international student and an eligible noncitizen, you can receive federal aid.
Eligible noncitizens include:
U.S. nationals, such as citizens of American Samoa or Swains Islands.
U.S. permanent residents with a permanent residence card – also known as a “green card.”
Others with Arrival-Departure Record (I-94) from the Department of Homeland Security showing any of these statuses: refugees; asylum granted; indefinite parole; humanitarian parole; Cuban-Haitian entrant.
Those holding T nonimmigrant status
In order to fill out the FAFSA, you must have a Social Security Number (SSN) or an Alien Registration Number (ARN). This is why only U.S. citizens and eligible noncitizens can fill out the FAFSA and receive federal aid through this method.
What International Students Do Need To Know About Federal Aid
Most international students can’t apply for federal aid through the FAFSA. However, some colleges might ask you to fill out a manual version of the FAFSA anyway. Colleges can use this information to determine what kinds of institutional aid students are eligible for.
When it comes to federal aid, there are a few other resources for you such as Fulbright grants for non-U.S. students wanting to study in America. These resources are great if you are a student interested in graduate school, conducting graduate research, or in becoming a foreign language teacher assistant at a college.
Can International Students Get Pell Grants?
The federal Pell Grant program is the largest federal grant program offered to undergraduate students. This grant is designed to support students from low-income families. To qualify for the program, a student must demonstrate financial need by filling out the FAFSA.
What Financial Aid Can International Students Get?
Even though you might not be eligible for federal student aid, there are other forms of aid that can help you cover the cost of attending college.
Institutional Aid
Colleges and universities can decide if international students receive financial aid on their behalf. It’s important to keep in mind that not all colleges and universities will offer aid for international students. Making a list of prospective colleges and making a note of whether or not they offer aid for you will help you find a school that covers your needs.
If the colleges you’re interested in offer financial aid for international students, they might require you to fill out certain forms to determine financial need and eligibility under their guidelines.
Examples of financial aid eligibility forms include:
International Student Financial Aid Application (ISFAA): Individual applications for different schools will be required.
CSS Profile: Participating colleges/universities use this form so you can fill out a one-time form and submit it to select schools.
Manual FAFSA form:. Because the online application requires an SSN or an ARN, the manual version reduces the need for one if you’re an international student. Filling the form out manually helps colleges/universities determine your eligibility for institutional aid.
Aside from need-based aid, some colleges might open up merit-based scholarships to international students that have excelled in their coursework. Reach out to the financial aid office of your prospective colleges to learn more about what their requirements are for these types of scholarships.
Financial Aid From Your Home Country
Many foreign governments might have financial aid programs that help international students study in the United States. Speak to your home country’s department of education to learn more about the types of aid that they could offer you. If possible, speaking to your country’s embassy or consulate in the United States might help you find government-backed scholarships.
Tuition Waivers
A tuition waiver allows you to not pay a portion of all of a college’s tuition for a certain amount of time. Not all schools will grant tuition waivers to international students but there are a significant amount of schools that do. Some schools will set requirements that you’ll need to meet in order to be granted a waiver, such as academic performance or involvement in a fellowship program. Speak to your prospective school’s financial aid office to see if they offer tuition waivers.
Student Loans
If you need further assistance to pay for college, an international student loan might be something worth considering. Lenders can offer assistance based on your individual situation.
Final Thoughts
Applying for financial aid as an American student is already difficult enough. International students face major challenges in order to receive financial aid as well. However, there are schools in the U.S. that understand your needs and will work with you. Speak to the financial aid office of colleges/universities to determine what aid is available to you.
So, you’ve done your research on international student loans. You feel a little better knowing everything that you do now. All that’s left is to apply, but how do you do that? Let’s get into it.
When to Apply for International Student Loans
Before you can officially start applying, you need to have a couple of things worked out first.
Know what program or university you’re going to attend
You’ll need to know what school you’re going to. Usually, you’ll want to be accepted. Remember that your international student loans are going to be private student loans. This means you’ll deal with private lenders who will want to make sure that their money is in good hands. Having a concrete plan for your education tells lenders that their money will be safe with you.
This step is especially important because most international student loans have school restrictions. They’ll only offer loans to students of certain schools. And which schools depend on the lender. Knowing where you’re going will narrow down which loans you qualify for.
Know how much it’s going to cost
Once you’ve picked where you want to go, you need to find out how much it’s going to cost you. There are the typical school-certified expenses such as tuition, books, and room and board. But you’ll also need to account for travel expenses, health insurance, recreation, and more. So, take the time to sit down and calculate the cost of living. Doing this will help you know what type of loan is good for your situation. For example, this will help when it comes to knowing how much you’ll need to take out or if it’s smarter to go for a fixed or variable interest rate.
Before applying for any loan, look for money in other places first. This means applying for scholarships and grants, collecting money you saved on your own or got from your parents or a job, or any other way you can save up money. Loans, while helpful, can take a long time to pay off. They’ll stick with you for years, so you want to take out only what you absolutely need after exhausting other options first.
Know who can be your cosigner
You are more than likely going to need a cosigner. While there are non-cosigned loan options, those have even more restrictions. Additionally, you may get a higher interest rate. So, you’ll want to try and stick to finding a cosigner if you can.
Your cosigner will have to be either a U.S. citizen or a permanent resident and have been in the U.S. for at least 2 years. Additionally, they must have good credit, stable income, and good overall financial status.
How to Apply for International Student Loans
Once you know where you’re going, how much it’ll cost, and who can be your cosigner, you can move on to applying. Here’s some information you’ll need for the application process.
Basic information
You’ll need basic information about yourself, which shouldn’t be too hard. For example, you’ll need your full name, date of birth, address, and contact information such as your phone number. Also, provide the name of the school you’re taking out the loan for. You’ll need proof of enrollment at the school, too.
Financial Information
Lenders will also ask for proof of income and details of your current job or place of employment. Provide your employer’s current contact information. Do the same for other references you have. This includes both phone numbers and emails. Finally, include information about your debts (if applicable) and your gross annual income.
Citizenship Status
You’ll need to show proof of your current citizenship status. Usually, this will be in the form of a visa that you’ll have already secured. If you don’t have a visa yet, take some time to apply for one before you start applying for loans.
Cosigner
You’ll need basic information such as their full name, date of birth, and permanent address. You also need their social security number and financial information. This includes proof of income, credit score, employment information, and debts.
Where to Apply for International Student Loans
Normally, you’d have to apply for each loan individually. However, this way of applying can be tedious and make the process longer than it needs to be. Use Sparrow instead! With Sparrow, you can compare real student loan offers by filling out one application. If you’re not ready to officially apply yet, use Sparrow’s search and comparison feature. This lets you compare existing lenders and save the ones you’re interested in for later. Get started by clicking here!
Final Thoughts from the Nest
Becoming an international student can be scary, but it’s also exciting! As long as you prepare everything in advance, the process shouldn’t be too hard. Besides, now you have a secret weapon: Sparrow. And here at Sparrow, we know that you’ll do just fine.
As an international student, attending college in the U.S. can be exciting. It can also be expensive. Since many U.S. students take out student loans to pay for college, you might be wondering if you can too.
In this post, we’ll dive into the student loan eligibility of international students and the availability of student loans.
Are International Students Eligible for Federal Student Loans?
As an international student, you are eligible for federal student loans if you are an eligible noncitizen. Eligible students can apply for federal student loans by filling out the FAFSA.
U.S. nationals, such as citizens of American Samoa or Swains Islands.
U.S. permanent residents with a permanent residence card – or “green card.”
Others with an Arrival-Departure Record (I-94) from the Department of Homeland Security showing any of these statuses: refugee; asylum granted; indefinite parole; humanitarian parole; Cuban-Haitian entrant.
Those holding T nonimmigrant status
Are International Students Eligible for Private Student Loans?
If you are unable to secure federal student loans because you are not an eligible noncitizen, you can still apply for private student loans.
Private lenders will request proof of enrollment in an eligible program to lend to you. You’ll want to make sure that you have proper documentation, such as your student visa and tuition bill. Keep in mind that each private lender is unique, so they will each have their own requirements.
As an international student, it can be a challenge to secure loans on your own. While not impossible, having a cosigner can help you meet the requirements you otherwise wouldn’t by yourself. A cosigner typically has to be a U.S. citizen or permanent resident with good credit. This will help you secure private student loans with lower interest rates.
However, if you don’t have a cosigner, you can still apply for private student loans. There are many lenders that offerprivate student loans specifically for international students.
How Much Can an International Student Get in Student Loans?
Typically, you can borrow up to the total cost of attendance, minus other aid received, depending on your school. However, each lender will have its own borrowing limits.
To verify the cost of attendance at your respective school, talk to your school’s financial aid office. If your student loans are approved, the financial aid office will certify the loan amount.
How to Find an International Student Loan
It might be hard to figure out where to start if you’re navigating student loans for the first time. However,Sparrow is a great resource to help you find the best student loans for you.
International students can use Sparrow to receive personalized rates on student loans. Many lenders allow international students to borrow if they have a U.S. citizen as a cosigner.
Did you know that two of our lending partners focus primarily on international student loans? This puts your needs first! To compare international student loans side-by-side, Sparrow will be the best option for you!
Final Thoughts
You might have a lot of questions and worries about studying in the United States. Paying for college is a big part of the conversation, too. The good news is that you don’t have to go through it alone. With these resources on-hand, you are a step closer to studying in the United States. It’s a matter of finding the student loan that is right for you as an international student!
While studying in the United States can be incredibly exciting, paying for it as an international student without a Social Security Number (SSN) can be confusing. But don’t worry. In this article, we’ll break down the student loan process for international students with no SSN. That way, you can feel confident in your borrowing decisions.
A Social Security Number, or SSN, is a nine-digit number used by the United States Social Security Administration to identify citizens and legal residents. SSNs were once used strictly to track citizens’ employment income to gauge their eligibility for retirement benefits. Now, SSNs are used for a variety of additional purposes such as taxes and banking.
You may see Social Security Numbers referred to as “taxpayer identification numbers.” These two terms are often used interchangeably because SSNs are used to identify individuals on all tax-related documents.
What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a ten-digit number used to identify taxpayers who do not have a Social Security Number. ITINs are intended to be used for federal tax purposes, but are useful during the student loan process.
The IRS will assign you an ITIN regardless of immigration status. The IRS uses information you provide such as drivers licenses, immigration papers, passports, and birth certificates to confirm your identity before issuing you an ITIN. The ITIN you receive can be used to apply for student loans without an SSN.
Why Do Most Student Loans Require an SSN?
Federal student loans are issued by the United States Federal Government. Thus, the aid is intended for U.S. citizens, permanent residents, and eligible non-citizens. In order to qualify for federal aid, the government uses SSNs to ensure borrowers do in fact belong to one of these categories.
When taking out a private student loan, lenders typically check your credit score. In order to check your credit score with the three major credit bureaus, lenders need your SSN. Because the majority of private student lenders use credit scores to determine borrowing eligibility, the majority do require SSNs. However, there are lenders that don’t require SSNs.
Can International Students Get Student Loans Without an SSN?
International students with no SSN can get student loans. In order to qualify for federal student aid, you must meet specific eligibility criteria. For a private student loan, you will have several options.
How to Get Federal Aid with No SSN
You must be considered an “eligible noncitizen” to qualify for federal student aid without an SSN. You are an eligible noncitizen if you identify with one of the following categories:
U.S. National (including natives of American Samoa or Swains Island)
U.S. Permanent Resident with a Green Card (Form I-551, I-151, or I-551C).
You have an Arrival-Departure Record (I-94) from the United States Citizen and Immigration Services (USCIS) that designates you as a:
Refugee
Asylum Granted
Cuban-Haitian Entrant
Conditional Entrant (if issued before April 1, 1980)
Parolee (with specific conditions)
You or your parent hold a T-Visa (for victims of human trafficking)
You are a Battered Immigrant-Qualified Alien (for victims of abuse by your citizen or permanent resident spouse)
You are a citizen of the Federated States of Micronesia, the Republic of Palau, or the Republic of the Marshall Islands.
Undocumented students, including DACA recipients, are not eligible for federal student aid.
When filling out the FAFSA as an eligible noncitizen, you will be asked for your Alien Registration number. The number you provide will be run through the Department of Homeland Security’s database to verify your identity. If they do not have your number on record, they will ask you to provide additional documentation to prove your identity and your student status. You will not be able to receive federal student aid until this process is complete.
If you are an international student who does not identify as an eligible noncitizen, you are not eligible for federal student aid.
Most private student lenders require borrowers to be U.S. citizens or permanent residents, and thus, require an SSN. However, there are several lenders that don’t.
The easiest way to get a private student loan as an international student with no SSN is to have a U.S. cosigner. A cosigner is an individual who signs onto the loan with you. By doing so, the cosigner takes responsibility for the loan should you be unable to make payments.
Having a U.S. cosigner will provide you with a wider selection of lenders to choose from and typically, lower interest rates. If you do have access to a U.S. cosigner, pursue cosigned loan options first.
That said, most international students do not have access to a U.S. cosigner. The good news? There are international student loan options that do not require a cosigner. Non-cosigned international student loans may ask for your ITIN in lieu of an SSN.
Ascent offers traditional cosigned credit-based loans for international students. With a qualifying U.S. cosigner, international students can be eligible for Ascent private student loans.
College Ave offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with College Ave, borrowers must have a Social Security Number and a U.S. citizen or permanent resident cosigner.
Earnest offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Earnest, borrowers must apply with a creditworthy U.S. citizen or permanent resident cosigner. The borrower must also have a physical address in the United States and a Social Security Number.
Sallie Mae offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Sallie Mae, borrowers must apply with a creditworthy U.S. citizen cosigner.
MPOWER offers non-cosigned student loans to international students and does not require borrowers to have a credit history or a cosigner. Instead of using your credit history to determine your eligibility, MPOWER uses information such as your future income potential.
Prodigy Finance offers non-cosigned student loans to international students and does not require borrowers to have a high credit score or a cosigner. Instead, they use information such as your credit history and future income potential to determine your eligibility.
Final Thoughts from the Nest
There are various loan options for international students with no SSN. While federal aid may not be an option for you, private student loans are a great way to fill in the gaps.
To check your eligibility with each of these private lenders, complete Sparrow’s application. Sparrow allows you to search for and compare loan options side-by-side. We’ll show you all of the lenders you qualify with, regardless of whether you have an SSN or a cosigner.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Student loans cover the gap between the cost of college and what you’re able to pay out of pocket. While student loans can cover quite a bit, they do have limits.
There are two main types of student loans: federal and private. The borrowing limit for each type of loan will depend on various factors.
A dependent student is one who relies on another, typically a parent(s), as another source of income. If your parent(s) claim you as a dependent, their income is factored into your Expected Family Contribution. Thus, you may receive less financial aid than if you filed as an independent student.
An independent student is one who does not rely on another person as a source of income. There are specific conditions a student needs to meet to be considered an independent. The student must be at least one of the following:
At least 24 years old
Married
A veteran or member of the armed forces
A graduate or professional student
An orphan
A ward of the court
An individual with legal dependents other than a spouse
An emancipated minor
An individual who is homeless or at risk of becoming homeless
Independent students tend to receive more financial aid than dependent students.
Undergraduate Federal Student Loan Limits
There are two types of undergraduate federal student loans: subsidized and unsubsidized. Federal subsidized loans are given out based on financial need. Federal unsubsidized loans are given out based on the overall cost of attendance (COA) minus any financial aid the student has already received.
How Subsidized Loan Amounts are Determined
When you complete the FAFSA, your financial information will help determine your Expected Family Contribution (EFC). Financial aid staff will subtract your EFC from the overall cost of attendance (COA) at your respective school to determine your financial need. The result of this equation will determine how much need-based aid you are eligible for.
For example, if the COA at the school is $20,000 and your EFC is $9,000, your financial need is $11,000. Thus, you won’t be eligible for more than $11,000 in need-based aid.
How Unsubsidized Loan Amounts are Determined
After need-based aid is given, your eligibility for non-need-based aid will be determined. To do this, financial aid staff will subtract the amount of financial aid awarded so far from the overall COA.
For example, if the COA at the school is $20,000 and you’ve been awarded a total of $9,000 in need-based aid and scholarships, you are eligible for up to $11,000 in non-need-based aid.
While dependent and independent students can borrow both subsidized and unsubsidized loans, independent students are typically able to borrow more in unsubsidized loans.
The borrowing limits for federal undergraduate student loans are as follows:
Dependent Undergraduate Students
First Year: $5,500 ($3,500 subsidized, $2,000 unsubsidized)
Second Year: $6,500 ($4,500 subsidized, $2,000 unsubsidized)
Third Year and Beyond: $7,500 ($5,500 subsidized, $2,000 unsubsidized)
Total Limit Over the Course of Your Entire Education: $31,000 ($23,000 subsidized, $7,000 unsubsidized)
Independent Undergraduate Students
First Year: $9,500 ($3,500 subsidized, $6,000 unsubsidized)
Second Year: $10,500 ($4,500 subsidized, $6,000 unsubsidized)
Third Year and Beyond: $12,500 ($5,500 subsidized, $7,000 unsubsidized)
Total Limit Over the Course of Your Entire Education: $57,500 ($23,000 subsidized, $34,500 unsubsidized)
Graduate Federal Student Loan Limits
As of July 1, 2012, the Department of Education no longer offers subsidized loans for graduate students. Graduate students are, however, eligible for unsubsidized loans.
Graduate students can borrow up to $20,500 in unsubsidized federal loans per year. There is a lifetime limit of $138,500 for borrowing which includes undergraduate loans.
So, let’s say that as an undergraduate student, you borrowed $30,000 in federal student loans. As a graduate student, you would only be eligible for up to $108,500 in graduate student loans.
Important Notes
In order to be eligible for any federal student loan, regardless of year or dependency status, you must complete the FAFSA. For a complete guide on how to complete the FAFSA, check out this article.
Private Student Loan Borrowing Limits
Because each private lender is its own individual entity, each one will have its own unique borrowing limit. Most private student lenders will cover the total cost of attendance. Others have specific limits, some reaching $500,000.
To see what you qualify for with each lender, complete the Sparrow application. The following are the lenders we partner with and their respective borrowing limits:
Refinance limit: up to the total outstanding balance
Final Thoughts from the Nest
Depending on what type of student loan you need, your year in school, and your dependency status, the borrowing limit will vary. To see what you’re eligible to borrow from top private student lenders complete the Sparrow application.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Federal student loans are only available to United States citizens and eligible noncitizens. Thus, many international students have fewer student loan options when studying in the United States.
For many international students, a private student loan is the best way to pay for college. Many lenders offer loans to international students, but most require a U.S. citizen cosigner in order to be eligible. Luckily, there are a few exceptions.
Let’s break down what makes an international student loan good and the top lenders you can choose from.
What Makes an International Student Loan Good?
When looking for an international student loan, there are several factors to consider. The most important factors are the cosigner policy, the interest rate, and the repayment options.
Cosigner vs No Cosigner
A cosigner is an individual who signs onto a loan alongside the borrower. By signing onto the loan, the cosigner takes full responsibility for the loan should you fail to pay it back. Having a creditworthy cosigner can help you secure a lower interest rate and better terms.
Many international student lenders require borrowers to have a U.S. citizen or permanent resident as their cosigner. However, most international students don’t have access to a U.S. citizen willing to cosign, so they opt for a non-cosigned student loan instead.
Before selecting any loan, you should look for a creditworthy cosigner. Cosigned international student loans tend to have lower interest rates than non-cosigned loans. Thus, you should pursue cosigned private student loan options before non-cosigned options.
Regardless of which loan you select, you should always read lenders’ cosigner policies carefully.
Interest Rate
Each international student loan will have its own unique interest rate and terms. If borrowing a loan with a cosigner, your interest rate will likely be lower. If borrowing a loan without a cosigner, your interest rate will likely be higher.
Because international student borrowers tend to not have a cosigner, the interest rates can be higher. As of March 2022, the interest rates for international student loans from Sparrow’s lending partners ranged from 1.13 percent to 14.98 percent. This range is fairly wide due to various factors such as the type of APR (variable or fixed), whether the loan was cosigned, the country the borrower is from, the borrower’s credit history, and more.
Compare interest rates carefully to select the one that is best for you.
Repayment Options
Similarly to interest rates, each international student loan will have its own selection of repayment terms. While some international student loans don’t require you to make payments while in school, others require immediate repayment.
It’s important to consider whether you will be able to afford to make payments immediately after the loan is taken out. Many students are unable to make payments while in school and prefer a repayment option that doesn’t start until after graduation.
Before selecting an international student loan, read up on the lender’s repayment options. Make sure that the lender’s options align with your desired timeline for repayment.
Our Picks for International Student Loans
The best international student loan is ultimately the one that works best for you. However, the following are our top picks for international student loans.
International Student Lenders That Require a Cosigner
Ascent offers traditional cosigned credit-based loans for international students. With a qualifying U.S. cosigner, international students can be eligible for Ascent private student loans.
College Ave offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with College Ave, you must have a Social Security Number and a U.S. citizen or permanent resident cosigner.
Earnest offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Earnest, you must apply with a creditworthy U.S. citizen or permanent resident cosigner. You must also have a physical address in the United States and a Social Security Number.
Sallie Mae offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Sallie Mae, you must apply with a creditworthy U.S. citizen cosigner.
International Student Lenders That Don’t Require a Cosigner
MPOWER offers non-cosigned student loans to international students. MPOWER does not require borrowers to have a credit history or a cosigner. Instead of using your credit history to determine your eligibility, MPOWER uses information such as your future income potential.
Prodigy Finance offers non-cosigned student loans to international students. Prodigy Finance does not require borrowers to have a high credit score or a cosigner. Prodigy Finance uses information such as your credit history and future income potential to determine your eligibility.
How to Apply for an International Student Loan
To apply for an international student loan:
Check your eligibility. In order to qualify for any student loan, you will need:
Proof of identity
Proof of citizenship status
Certification of enrollment at your school
Proof of the cost of attendance
Compare loan options. When selecting an international student loan, it’s important to compare your options side-by-side. Comparing loans allows you to be confident that you’re selecting the one that’s best for you. To see which international student loans you qualify for and compare them side-by-side, complete the free Sparrow application.
Wait to hear back. Verifying an international student borrower can take longer than a U.S. citizen borrower. Most lenders take anywhere from a few days to a few weeks, depending on the time of year and your school’s response time.
Ensure the funds were disbursed. After your school certifies the loan, the lender will let you know. Then, the money will be sent to your school. Be sure to follow up with your school to confirm that the funds were disbursed.
Final Thoughts from the Nest
Private student loans are a great option for international students unable to access federal student loans. By comparing your options, you can select a loan that supports your educational journey.
To find the best international student loan, start here.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
There are about 20 million students in the U.S., including international students. When figuring out how to pay for your education, you’ll come across student loans. Yet, international student loans work differently than private student loans for students from the United States. Here’s your guide to navigating the world of international student loans.
What Are International Student Loans?
An international student loan is a type of loan available for non-U.S. citizens studying in the United States. Usually, these students are already accepted into a school or program.
You’ll find that international student loans are always going to be private student loans. This is because federal student loans are usually reserved for citizens, permanent residents, and eligible non-citizens. Never fear! The international student loan business is growing. There are plenty of private lenders willing to lend, so you’ll have options.
Like most private student loans, you may need a cosigner. If you do decide to have a cosigner, they’ll need to be either a U.S. citizen or permanent resident and have lived in the United States for at least 2 years. They also must have a good credit score as well as a steady income. Having a cosigner can help you get approved for a lower interest rate on the loan. A lower interest rate will lower the interest and thus, the overall cost of the loan.
Having a good cosigner will also allow you to be able to use the money to attend a wider range of schools. However, there can still be limitations on what schools or programs you can attend. There are loans that don’t need cosigners but these may limit your options in terms of what schools they work with. So, there’s a chance your school may not be on the list. But, if the school you chose is on your lender’s list, then it’s a great option if you can’t get a cosigner. Regardless of your cosigner status, make sure that lenders allow loans for your school before applying.
Why Do International Students Pursue Student Loans?
Like all students, paying for college can be a struggle. International students may face extra stress because of international travel. So, many students turn to loans to help them cover the costs. Loans can help pay for books, room and board, health insurance, travel, living expenses, and more.
Although international student loans can be a big help, they can also cost a lot over the life of the loan. You want to make sure you exhaust all other options available to you. This includes scholarships, grants, and personal funds. If you still need more, then start looking for loans. You’ll want to look for loan amounts that can cover any of the remaining costs after factoring in other aid you have.
Is Getting An International Student Loan a Good Decision?
It really depends on the student. If you can afford to pay your tuition bill out of pocket, you shouldn’t pursue a student loan. If not, pursuing an international student loan is likely a good decision.
The best piece of advice we can give is to sit down, calculate the costs, and see what you have. Talk to your parents or guardian. If you come to the agreement that you can afford it on your own, great! If you realize you’ll need some help, also great! There are plenty of lenders willing to lend money out to you. Just focus on your personal situation and figure out what’s best for you.
Final Thoughts from the Nest
College is already hard without the added factor of being an international student. It’ll be okay, though! There are plenty of resources ready to help you accomplish your educational goals. One of them is Sparrow! With Sparrow, you can compare real international student loan offers by filling out just one application. This simplifies the whole process for you and your family.
Not ready to apply for loans just yet? It’s fine. You can also use the search and comparison feature to compare existing lenders, then save your loan offers to come back to later. Get started by clicking here.
There are two types of student loans: private and federal. While private student loans are provided by private entities such as banks and financial institutions, federal student loans are provided by the federal government. If you think you may need a student loan to pay for college, check your student loan eligibility ASAP.
How to Check Your Eligibility
Private Student Loans: Each private student lender has its own unique eligibility requirements. Therefore, the easiest way to check your eligibility for multiple private student loans at once is to use the Sparrow application. Sparrow will show you the lenders you’re eligible to borrow from and the exact interest rate you’d qualify for with each one.
Federal Student Loans: To check your eligibility for federal student loans, you must complete the FAFSA.
Who is Eligible for a Student Loan?
Private Student Loans
Private student loans are provided by a lender such as a bank, credit union, state agency, or a school. Each lender has different rates and eligibility requirements. However, in just two minutes, you can check your student loan rate and eligibility with 17+ lenders by using the Sparrow application.
The latest rates from Sparrow’s partners
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While each private student lender will have its own unique eligibility, there are a few that tend to be the same across the board:
Enroll in an eligible program:Private student loans can only be used for education costs. Therefore, you’ll need to enroll in an eligible academic program to be considered for private student loans.
Be a U.S. citizen, permanent resident or eligible international student. Most private student lenders will require you to be a U.S. citizen or permanent resident with a Social Security number.
If you are an international student, you’ll be eligible with many lenders if you have a cosigner who is a U.S. citizen or permanent resident. If not, MPOWER and Prodigy also provide student loans to international students without an SSN or credit history.
Federal Student Loans
To qualify for federal student loans, you must:
*Demonstrate financial need (for most programs). Whether or not you must prove financial need depends on the type of student loan. Specifically, to qualify for Federal Direct Subsidized Loans, you’ll need to show financial need. To receive Direct Unsubsidized or PLUS Loans, you do not need to demonstrate financial need.
*Your financial need is calculated based on the information you provide on the FAFSA.
Be a U.S. citizen or *eligible noncitizen. In general, you must be a U.S. citizen or eligible noncitizen to qualify for federal student loans. However, in some cases, legal U.S. residents without citizenship may qualify.
* An eligible noncitizen is a U.S. national, U.S. permanent resident, or an individual holding an Arrival-Departure Record from U.S. Citizenship and Immigration Services under one of the following titles: Refugee Asylum Granted Cuban-Haitian Entrant Conditional Entrant (valid if issued before April 1, 1980) Victims of Human Trafficking (T-Visa -2, -3, or -4 holders) Parolee (with certain conditions)
Have a Social Security number. In most cases, you need a social security number to be eligible. However, there are a few U.S. territories in which you would not need a Social Security number.
Enroll in an eligible academic program. Federal student loans can only be used for accredited or recognized, degree-granting programs. Therefore, if you aren’t attending one of these schools, you won’t be able to receive federal student loans.
Have satisfactory academic progress. Each individual school will have its own academic requirements. Accordingly, if you do not meet those, you can be denied federal financial aid including federal student loans.
Enroll at least half-time (for Federal Direct Loans only). For Federal Direct Loans, you must be enrolled at least half-time.
Complete the FAFSA. The FAFSA collects and processes your financial information to determine your eligibility for need-based aid. In order to qualify for any federal student loans, you must complete the FAFSA.
Meet all qualifications for your specific program. To be considered a student at your respective school, you must meet their enrollment requirements. Generally, this may mean having a high school diploma or GED. You must meet all of your school’s requirements in order to be eligible for federal student aid.
Note: Selective Service registration is no longer required to qualify for federal student loans.
How is Student Loan Eligibility Determined?
Eligibility for private student loans depends on the lender. Each lender looks at your application against a different set of criteria. Check your student loan eligibility across multiple lenders at once. In general, here are the main factors that determine your eligibility:
Eligibility for federal student loans will depend on whether you meet the FAFSA criteria. After filling out the FAFSA, your information will be used to determine if you qualify for federal student loans. Then, it will determine what type of loans you are eligible for and how much aid you are eligible for overall.
What Disqualifies You From Getting a Student Loan?
Student loan applications can be denied for a variety of reasons. The most common reasons are not meeting the basic eligibility criteria for the respective loan. However, there are other ways you can be disqualified from obtaining a student loan.
Private Student Loans
Each private lender has their own unique requirements to qualify for a student loan. Lenders will look at a variety of factors to determine whether you are eligible to borrow from them. This includes, but is not limited to:
Your employment history
Your credit score
Your debt-to-income ratio
Your enrollment status at a qualifying school
If you do not meet the basic eligibility criteria within these categories, you may not qualify for a private student loan with that specific lender.
Federal Student Loans
If you do not complete the FAFSA, you will not be able to receive federal student loans.
Additionally, being convicted of certain crimes can also be cause for disqualification. Drug-related crimes, such as sale of illegal drugs or drug possession, can disqualify you from receiving federal aid in the future.
Is There an Age Limit for a Student Loan?
For many private student loans, you must be at least 18 years old to take out a loan. This number can vary from state to state.
For federal student loans, you must submit the FAFSA. In order to submit the FAFSA, you need an FSA ID. Applicants must be at least 13 years old to obtain an FSA ID. However, there is no upper age limit for federal student loans.
Final Thoughts from the Nest
Federal and private student loans each have their own eligibility requirements. Before submitting the FAFSA or applying for a private student loan, make sure you meet the basic eligibility requirements.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. Accordingly, this may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
You’ve exhausted all of your scholarship, grant, and work-study options. Now, it’s time to start considering student loans to cover that last mile of financial need.
When you look at your student loan options on paper, they may seem suspiciously similar. However, there are various elements to loans that can make them drastically different.
In this article, we’ll break down the key components that make up student loans and provide some helpful tips to ensure you’re getting the best loan possible.
What Is the Difference In These Loan Offers?
If you’re comparing multiple loan offers with the same principal balance, consider the following:
Federal student loans are issued by the federal government. Private student loans are issued by banks and other financial institutions.
When comparing a federal loan against a private student loan, it’s important to consider elements beyond their interest rate. For example, federal student loans typically have greater benefits than private student loans.
No Cosigner vs. Cosigner
Federal student loans do not require a cosigner whereas private student loans often do.
Loan Forgiveness vs. No Loan Forgiveness
Federal student loans have the potential to be forgiven through federal loan forgiveness programs. Private student loans, however, do not have loan forgiveness options. If you opt for a private student loan, you will forgo loan forgiveness benefits.
Greater Repayment Options
Federal student loans typically have greater repayment options than private student loans. While private student lenders do offer a wide variety of repayment options, there are some that are exclusively offered for federal student loans. For example, federal student loans have various income-driven repayment options. It’s important to consider how you plan to pay back your student loans when choosing between a federal and private student loan.
Eligibility Requirements
There are a variety of ongoing eligibility requirements when it comes to both federal and private student loans. For example:
SSN Requirements
In order to be considered for federal student loans, you must have a Social Security Number or an Alien Registration Number. If you are concerned about your Alien Registration Number expiring, you may want to select a private student loan that does not require proof of this information. You may be asked to recertify your Alien Registration Number year over year to secure more financial aid.
State Requirements
Some private student lenders require borrowers to live in specific geographic areas. If you anticipate moving or do not have a residential address in that specific area, you may want to select a different loan option. Be sure to read the fine print about state requirements when comparing two loan offers.
Enrollment Status
Different lenders require different levels of enrollment to be an eligible borrower. Federal student loans require borrowers to be enrolled at least half-time to receive aid. On the other hand, some private lenders require at least half-time enrollment while others require borrowers to be enrolled full-time. If you anticipate dropping below full-time status, you will want to compare lenders’ policies for eligibility based on enrollment status.
Annual Percentage Rate (APR)
APR, or Annual Percentage Rate, is the annual rate of interest charged to borrowers including any fees and additional costs. Note that APR is different from interest rate as it includes the fees and additional costs, as where interest does not.
APR is written as a percentage and represents the amount of the principal you will pay each year. In other words, this is the amount you would be “charged” each year for borrowing the money.
APR is typically perceived as one of the most, if not the most, important element of a loan. However, before simply choosing the loan with the lowest APR, be sure to compare other aspects of the loan such as fixed vs variable rates, the repayment term, and monthly payments.
If you’re getting caught up on the student loan lingo, check out our Glossary as it might help you understand this article better.
Fixed vs. Variable Rate
Interest rates on private student loans will either be fixed or variable.
Fixed interest rates will remain the same throughout the life of the loan. This means that the “cost of borrowing” the money will always remain constant throughout the lifetime of the loan. For example, if you choose a fixed interest rate loan with a 5% interest rate, it will stay at 5% until you’ve paid it off.
Variable interest rates will adjust over time in response to changes in a financial market index known as the London Interbank Offer Rate, or LIBOR. (Don’t get too caught up in what LIBOR is or how it works. Just know that changes in LIBOR result in changes to your loan’s variable interest rate.) This means that the cost of borrowing may shift over time and is totally out of your control.
There are pros and cons to both fixed and variable interest rates.
Fixed Rate
Pros
Remains the same each month allowing you to budget accordingly
Best for people with stable but tight finances
Cons
Can start higher in comparison to variable interest rates
Variable Rate
Pros
Tend to start lower in comparison to fixed interest rates
Good for people who plan to pay their loan off quickly
Cons
Riskier for borrowers since the rate can change every month
If you’re willing to stomach the month-to-month volatility, a variable interest rate could be a good option for you. If not, we recommend sticking with the more predictable option, a fixed interest rate.
Principal
Principal is the amount of money you borrow when you take out a loan. While you’re in school, you cannot borrow more than the total cost of attendance. Your school’s financial aid office will certify the loan to ensure that your loan does not exceed the cost of attendance.
When comparing loans, you’ll want to pay close attention to how much the lender is willing to offer you. For example, if you need $30,000 to pay for the remainder of your tuition bill, but the lender only approved you for $20,000, that loan may not be the best fit.
Repayment Options
Federal and private student loans will have different repayment options. If you are deciding between taking out more in federal loans or private loans, consider how the repayment options differ and how you plan to pay back your loans.
Remember that the sooner you start making payments, the sooner you will be out of debt. Interest on student loans accrues daily, meaning the longer you wait to start repaying, the higher your total cost. (Note that some federal student loans do not accrue interest while you’re in school, so waiting until you graduate to start making payments may be okay. In general, it’s good practice to start paying them off as soon as you can, but again, always read the terms and conditions!).
Monthly Payment
Before you take out a loan, use a student loan calculator to see what your future monthly payment may be. Depending on the interest rate and repayment period, your monthly payments could differ significantly between loans. Calculating this before you even select a loan will help you in the long run.
Our platform is a great place to start. When you submit a Sparrow application, we’ll show you all of your loan options side-by-side. With each option, we’ll help you compare the predicted monthly payments based on the principal balance and interest rate.
Be realistic about how much money you expect to make after graduating, and ask yourself what would actually make sense financially when weighing your options.
Repayment Terms
Repayment terms include all of the conditions involved in borrowing money from that lender. This can include anything from the repayment period to the interest rate to the penalty fee cost. It’s important to review the loan terms carefully for every single loan you look at. You may discover that one loan would require you to pay back your debt in 5 years which may be a dealbreaker for you.
Pay extra attention to the fees and additional costs. While these are typically reflected in the APR, that may not always be the case. If the additional fees are not included in the APR, they may come as a surprise later on. Thus, be sure to check if these additional fees are included before deciding if one is better than the other.
(You know when you sign up for something and it asks if you’ve read the Terms and Conditions? And you just check it off and go? Yeah, this is one of those times you should really read all the terms and conditions.)
Grace Period
A grace period on a student loan is a time when the borrower isn’t required to make payments. The majority of private student lenders do not require payments while in school or for 6 months after you graduate or leave school. On the other hand, some lenders have a 9-month grace period, and others have no grace period.
Be sure to check if the lender offers a grace period, and if so, how long it is.
Cosigner Release Policies
Because federal student loans do not require a cosigner, this element won’t apply if you are comparing federal student loans. If you are comparing private student loans, however, understanding the cosigner release policy is important.
A cosigner is an individual who agrees to sign onto a loan alongside the borrower. Cosigning a loan can provide the borrower with a lower interest rate or better terms. However, cosigning a loan signifies agreement to pay back the loan in the event that the primary borrower does not.
Thus, many cosigners prefer the option to later be released from the loan, and therefore relinquished from their responsibility to pay back the loan. A cosigner release policy allows the cosigner to be released after certain conditions have been met.
The vast majority of private student lenders have a cosigner release policy, but some do not. If you are comparing cosigner release policies, here are a couple things to look out for:
Income Requirements
Having someone cosign your student loan helps you qualify based on their income, credit history, and financial profile. If you hope to remove the cosigner, you will need to meet those income requirements on your own. Thus, you will need to make sure your credit score is up to par and that you have great enough income to afford your loan payments and other expenses.
Number of On-Time Payments Required
Many private student lenders require the primary borrower to have made a specific number of on-time payments before cosigner release is an option. For example, many lenders require 12, 24, 36, or 48 on-time payments before the cosigner release application is even available. Additionally, fixed and interest-only payments made during school may not count towards this overall number of payments. So, if you plan to release your cosigner after graduation, you may need to wait at least a year to be able to do so.
Forbearance
Loan forbearanceoccurs when the borrower requests to pause or reduce loan payments for a limited period of time due to economic hardship or other unforeseen circumstances.
Different lenders offer different options for forbearance, ranging anywhere from 12 to 24 months.
While putting your loan into forbearance isn’t ideal and probably not something you plan to do, it’s important to consider when comparing loan options just in case you need it down the line.
Lender Benefits
Some lenders offer exclusive membership benefits to their borrowers. While lender benefits shouldn’t take precedence over elements such as interest rate, it can be a nice added benefit.
For example, some lenders offer free financial planning, referral bonuses, and member discounts to their borrowers. If it isn’t clear what the lender offers, don’t be afraid to ask. Not all benefits will be clearly advertised.
Autopay Discounts
One of the most common lender benefits is an autopay discount. An autopay discount typically provides borrowers with a small interest rate discount for opting in to automatic debit payments. This means that each month, payments will come out of the borrower’s bank account automatically.
Most lenders offer a 0.25% discount, but some offer up to 0.50%. While it may seem small, a 0.25% interest rate discount can save you quite a bit over the life of your loan.
For example, with a loan of $50,000 at a 5% interest rate and a 10-year repayment period, you would pay $63,639 total by the end of the repayment period.
With the same loan and the same repayment period but a 0.25% interest rate discount, you would pay $62,909. While not a massive difference, the $730 saved could be an extra rent payment or vacation.
Total Cost
Because of interest, you will almost never pay back the exact amount you borrowed; you will almost always owe more.
With most private loans, interest accrues even while you’re in school. This means that even if you took out a loan for $10,000 your freshman year, you will be paying back more than $10,000 by the time you graduate or leave school.
Calculating the total cost, or the amount you can expect to have paid at the end of your repayment period, is a very helpful exercise. It will help you see how much you will end up paying in the long run with each of your loan options.
Where to Compare Student Loans
If you’re looking to compare private student loan options side-by-side, Sparrow is the perfect place to start. Simply fill out our Find My Rate form, and we’ll take it from there. After automating your search, we’ll help you compare the options to select the student loan that works best for you.
Final Thoughts from the Nest
The importance of each of these elements will vary from person to person. For example, repayment options might be most important to you, and that may cause you to take a loan with a higher interest rate. On the other hand, securing the lowest interest rate might be most important to you, and that may cause you to take a loan without a grace period.
Taking these elements into consideration will help you find the loan that works the best for you and your educational journey.
When you’re ready to start comparing offers, start here.
Every student’s biggest fear when it comes to private student loans is not qualifying. Having a cosigner can help prevent that. The thing is you may not want a cosigner for the entire life of the loan. In that case, you’ll want to check with different lenders to see who offers a cosigner release policy. But what is a cosigner release policy? Glad you asked. Let’s get into it.
What Is A Cosigner?
First off, let’s define what a cosigner is. A cosigner is someone who takes on the financial and legal responsibility of the loan along with you. If you miss a payment, it’s up to the cosigner to make it up. Additionally, any missed payments will not only affect your credit but theirs as well.
You’ll typically see cosigners for private student loans. This is because most students don’t meet the credit score requirement. For that same reason, you won’t see federal student loans with cosigners. Since they don’t have a credit score requirement, there is no need for cosigners.
When choosing a cosigner, make sure that it’s someone you trust and who has good finances. This would mean having a good credit score and stable income.
Cosigner release policies free cosigners from legal and financial responsibility to the loan. Hence, releasing them. While each lender has their own set of requirements for the policy, there are some that overlap. The most important thing is that you demonstrate financial responsibility. Normally if you can do that, you can apply to release your cosigner.
Why Might You Want to Release Your Cosigner?
There are many reasons to want to release your cosigner. On your end, it’ll be one step closer to being financially independent, which is a pretty big deal. For your cosigner, it’ll release them from your debt. It’ll also help with their credit since they will no longer have an open account on their credit report.
Also, releasing your cosigner will lessen any tension there is as a result of sharing debt. Finally, it can help avoid messy situations later on. For example, sometimes if a cosigner passes away, the loan will enter default. If the roles were switched, then the loan would become the responsibility of the cosigner. To avoid these complicated scenarios, releasing your cosigner is a good idea.
How to Release Your Cosigner
So, we know the what and the why, but what about the how? How do you release your cosigner? Here’s what you have to do:
You have made at least 12 consecutive payments on time
There has to be a history of you making the payments on time. The exact time frame can range from 12 months to 48 months, or even 5 years! It depends on the lender. Apart from this, the payments need to be consecutive. In other words, without any forbearance or deferment. So, if you’ve experienced that recently, you’ll have to set the clock back to zero.
This is extremely important. Remember, the whole point of a cosigner is having a safety net in case you can’t make a payment. So, to release them, you have to prove to lenders that they can trust you to make your payments on time.
You have good credit and a stable income
Most private lenders require that you meet a minimum credit score. You also have to show that you have the finances necessary to make payments. This means having enough money to afford your current lifestyle and pay back the loan. If you now meet the credit and finance requirements, then you’re in good shape to move on.
Submit an Application
Of course, you’ll want to check with your lender for any other requirements they may have. Once you meet all of them, you can request an application from them. Some may even have them available online. Check with your lender to see where you can get one.
After receiving the application, fill it out and gather any documents that you’ll need. You’ll mostly need documents about your finances. You’ll be able to find out exactly what you need from your lender. Make a copy of everything and save every interaction that you have with your lender. This will help protect you in case something comes up down the line. It’ll also make the process easier.
It’s important to note that the process may be long and lenders can reject you. Talk with your cosigner and make sure this is what you want to do before applying.
What to do if your cosigner release is not approved
If you’re struggling to get approved for your cosigner release, a great option is to consider refinancing your student loan under just your name.
A cosigner release policy is a great option to have for the future. But like all financial decisions, they require some thought before moving forward. If you and your cosigner decide this is the right move for you, then it’s time to submit the cosigner release application with your lender.
To find private student lenders with cosigner release policies, sign up with Sparrow for an easier process. To get started, click here.
Before even starting college, you’ll imagine all the things that you can do with your degree. But then it hits you: student loans. The great news is that student loans include grace periods that give you time to plan before it’s time to pay.
In this article, we’ll dive into what a student loan grace period is, their length, and their flexibility.
What’s a “Grace Period”?
A grace period is a portion of time after graduating where you don’t have to make any payments on your student loans. Instead, you start paying once the grace period is over.
How Long is a Student Loan Grace Period?
Typically, student loan grace periods last six months after graduating or leaving college. However, your grace period depends on whether you took out a federal loan or a private loan.
Federal Direct subsidized & unsubsidized loans: Six months
Federal Stafford subsidized & unsubsidized loans: Six months
Federal PLUS loans: NONE (but there is a six month deferment period)
Can You Pay Student Loans During Your Grace Period?
Fortunately, you can begin to pay off your student loans during the grace period.
You can begin making monthly payments as if there isn’t a grace period. It might help you budget for your student loans adequately if you start paying sooner. If you have federal student loans, exit counseling will show you the amount owed before graduating. At the same time, if you’re unable to make a payment as you had planned during your grace period, you’re off the hook.
You can also pay off your loan’s interest if you’re not able to make full payments. Despite having a grace period, interest can still accrue toward your student loan. Before it’s added to your monthly balance, paying off that interest can ease the amount you’ll owe on a monthly basis. If this option is available to you, your lender will reach out to you.
Can You Extend a Grace Period on Student Loans?
If the six-month grace period isn’t enough, it is possible to extend it. However, the type of student loan you have determines the route you can take.
Federal Student Loans
A grace period can be extended if you are called to active military duty for more than 30 days before your grace period has ended. You’ll get another six-month grace period once you’re finished serving.
If you return to school at least half time before the grace period ends, you’ll have another six-month grace period.
What if you’re not planning on joining the military or going back to school? You could enroll in anincome-driven repayment plan for $0 monthly payments. This option is worth considering if you’re struggling to find work after graduating. Check with your federal student loan servicer to see if you qualify. Another option could be to requestdeferment or forbearance on your loans. Depending on special circumstances, you could qualify for deferment or forbearance.
Private Student Loans
If you need an extension, lenders might extend your six-month period by three months. Deferment and forbearance might be an option to consider if your lender offers this. However it’s important to speak to your lender as soon as possible to see if they offer these options.
Final Thoughts
A grace period can ease the worry of having to pay back your student loans immediately. If you’re looking for a job or if you’re planning to move to another part of the country, take advantage of the time. You can also take this opportunity to get a head start on your student loan payments. Regardless of whatever you plan to do, it’s there to help you focus on the things that matter post-graduation.
If you’re looking for private loans that offer grace periods,Sparrow is a great place to start. With our one-time application, you can automatically find rates fit for you. At the same time, you can easily compare student loans side-by-side. This can help you determine if the grace period is right for you. Take control of your future with Sparrow!
As you enter the student loan scene, you’ll hear the terms “credit” and “credit score” thrown around a lot. But what credit score is needed for a student loan, and why does it matter?
All student loans have qualifications that you have to meet. For some, one of those qualifications is having good credit. That is why it is so important that you know about your own credit and that you build it up.
Credit Requirement for Private Student Loans
There IS a credit requirement for private student loans. However, each lender has a different credit score needed to get a student loan. Rather than searching lenders’ credit requirements one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
Here are the credit requirements for top student loans:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
To get a student loan, you’ll typically need to have good to excellent credit. To check your credit, most lenders will perform a hard credit check. This is to see how risky it’ll be to lend you the money. Unfortunately, a hard credit check can impact your credit score. To mitigate this, some lenders offer pre-qualification. This process is helpful because you’ll get to see if you qualify or not WITHOUT having a hard credit check on your record. This process makes shopping around for private loans a lot easier, so take advantage of it when you can. In just two minutes, you can check your pre-qualification rates for student loans (for free and without hurting your credit score) by using Sparrow.Thanks to its design, you can compare 17+ student loan offers at once.
Credit Requirement for Federal Student Loans
There is no minimum credit score requirement for any of the federal loans. This makes federal loans a great option for most students since they either have no credit or bad credit. But they will run a credit check for PLUS loans. This is just to check if there is any adverse credit history. Adverse credit history includes bankruptcies, foreclosures, or delinquent accounts. As long as you don’t have that, you’re good.
All this makes federal loans a great first choice when looking for loans to pay for school. Additionally, federal student loans come with flexible repayment options and other benefits. These options and benefits will make repayment easier in the long run.
What Is the Minimum Credit Score Needed to Get A Student Loan?
Typically, it’s about 670 or higher, depending on the lender. Some lenders may have the minimum a bit lower. Others, a bit higher. Keep in mind that the higher your score is, the lower your interest rate will most likely be. The opposite is also true. The lower your credit score, the higher your interest rate on the loan.
You can check your credit score for free through your bank or credit card issuer. Websites like Credit Karma or Mint also allow you to see your score for free. For a more detailed report on your credit, visit annualcreditreport.com. By law, you are entitled to one free credit report per year from each of the three major credit bureaus: TransUnion, Equifax, and Experian. This credit report won’t include your credit score.
What If I Have Bad or No Credit?
If you’re worried about your poor credit score preventing you from being able to pay for college, don’t fret. While it may be more difficult, it isn’t entirely impossible. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
Here’s is a list of the top 5 student loans for bad credit:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Nonetheless, bad or no credit might make it a little harder to get a private student loan. While there are other criteria besides the minimum credit score, your credit score is still a big one. Additionally, if you don’t meet the qualifications set out by a lender, they can deny you a student loan. Still, you’re not completely helpless. There are other options.
Federal Loans
One of the best options is taking out a federal student loan. As mentioned earlier, there are no minimum credit score requirements for any of the loans. And they come with a lot of benefits like loan forgiveness and income-based repayment plans. All you have to do is fill out the FAFSA every year as soon as it becomes available on October 1st.
Cosigner
Adding a cosigner can help out a lot. As long as they have good credit, they can help lower your interest rate and get you qualified for a loan. Most students tend to have one of their parents co-sign with them, but it doesn’t have to be a parent. A relative or even a friend works too. As long as you trust them completely and they have a good credit score, it can be anyone.
It’s important to note that your cosigner will also take on the financial responsibility of the loan. Meaning that if you miss a payment, they’ll be responsible to make up for it. Missed payments will also impact their credit score. Because of this, you want to make sure to only take out what you need and make your payments on time.
Talk to lenders to see which will allow you to take out a loan with a cosigner.
Final Thoughts from the Nest
As you enter the adult world, your credit is going to become increasingly important. This is only the first time you’ll hear about it. It’s important, then, to check on your credit score and take advantage of your free credit reports. Starting this now will make student loans and any future financial decisions easier. To check your pre-qualification rates for student loans WITHOUT HURTING YOUR CREDIT SCORE, use Sparrow.
With all that in mind, congratulations! Welcome to adulting!
Shopping around for loans is already hard enough. Then, you add in interest rates and APRs, and it’s like a whole new world. A difficult one. But it doesn’t have to be. So, what are interest rates? What is an APR? And is an APR the same thing as an interest rate?
What Are Interest Rates?
Interest is the amount of money that you are charged for borrowing the loan. It is expressed as a percentage of the principal of your loan.
For federal loans, your interest rate will be fixed, meaning that it will never change over the life of the loan. The rates are usually determined by the federal government. Because of that, they are non-negotiable. They may change from year to year but that only affects any new loans and not any that are already taken out.
For private student loans, loan terms are more negotiable. Your interest rate will depend on your creditworthiness and your financial history. The better that is, the lower your rate will probably be. The worse, the higher. Interest rates can also either be fixed or variable.
What Is An APR?
An APR or annual percentage rate also calculates the interest on your loan. The difference is it also includes any fees or charges that you may incur. Thus, the APR better represents your borrowing cost. Or, the total amount of money it’ll cost you to take out the loan.
When it comes to private lenders, APRs are like interest rates. Your financial history can also impact how high or low your APR is going to be. Keep that in mind when looking around.
Nonetheless, lenders may define their APR and any related fees in different ways. For example, some lenders will add the fees into the principal and finance it like that. Others will simply calculate it as a percentage of the principal, in which case it gets added to the APR. It just depends.
It’s also important to note that every lender has different fees. For example, most lenders charge a loan origination fee. This is a fee that is charged for processing your loan application.
But, other lenders may not charge any fees at all.
Is APR the Same As Interest Rates?
No. The interest rate is calculated based on only the interest that you are going to have to pay. But, the APR is calculated based on the interest plus any other fees and charges there might be. So, looking at the APR may give you a better idea of the borrowing cost.
It’s like the difference between the tuition and the cost of attendance when looking at colleges. The tuition gives you a basic idea of how much money it’s going to be. But, the cost of attendance gives a more comprehensive view of how much you’ll really be spending. In that same way, the APR of a loan lets you know what your real borrowing cost is. This can help you make a better financial decision.
Why Is My APR Higher Than My Interest Rate?
Since it includes other costs and charges you’ll have as a result of accepting that loan, your APR will be higher. It doesn’t mean that the interest on the loan is higher, but it does mean the borrowing cost will be higher. In other words, you’ll probably spend more money than you thought you would.
However, this doesn’t mean that if the interest rate and the APR are the same, then the loan doesn’t have extra costs. As mentioned earlier, lenders handle their APRs in different ways. This means some charges may not get added into the APR but will still be a part of your loan in other ways. Then, even though the APR and interest rate are the same, you’ll most likely still have other fees and charges. Talk to your lender about any questions you may have about how they handle this.
Final Thoughts from the Nest
Interest rates and APR can seem like they’re the same thing, but in reality, they’re not. Knowing the difference will help you make a better-informed decision.
For a more simplified process when shopping for private student loans, use Sparrow. Sparrow allows you to compare real student loan offers through a single application. So, put your new knowledge on APR and interest rates to use by signing up here.
Whether you’re just applying for a student loan or you’re trying to refinance your student loans as a way to pay them off, you’ll often get the choice between a variable vs a fixed interest rate. You might be asking yourself, “what does that mean?”
In this article, we’ll take a look at what variable and fixed rates are, how the interest rates are determined, and the pros and cons of each type of rate. By the end, you’ll be able to determine the best interest rate option for you!
What is a Variable Interest Rate?
Variable interest rates fluctuate over the course of your repayment term. This means that your monthly payments can change on a monthly basis because of the interest rates’ fluctuation. However, the interest rate tends to start a little lower than fixed interest rates, depending on your lender. Private student loans typically have both variable and fixed interest rate options.
A fixed interest rate is simply a rate that doesn’t change. The interest rate you received when you took out the loan will remain the same throughout the span of your repayment period. Federal student loans are fixed.
Lenders have a wide range of criteria that they use to determine the variable or fixed rate of your student loans. Each lender is different but this section covers the overall idea of how most determine the rates.
How are Variable Interest Rates Determined?
You might be wondering if a variable interest rate means that a lender will change the interest rate whenever it feels like it. (I know I did.)
The simple answer is no. Variable rates are determined by two things: a fixed margin and a variable index.
A fixed margin is set by your lender based on your ability to pay. They assess this by looking at your creditworthiness as well as the creditworthiness of your cosigner, if you have one. Generally, a higher credit score leads to a lower fixed margin.
The variable index is based on a benchmark in the financial market, specifically the London Interbank Offered Rate (LIBOR). This rate is the average of the interest rates banks charge each other to borrow and lend money. As such, lenders would charge a market rate as well as the LIBOR rate on your student loans on a monthly basis. However, by 2023, LIBOR will be retired and replaced by the Secured Overnight Financing Rate (SOFR). This rate calculates the cost of borrowing cash overnight collateralized by Treasury securities.
For example, let’s say you have a $20,000 student loan with a fixed margin of 4% and an initial variable index of 1.5%, meaning that your overall variable rate is 5.5%. If the LIBOR, or whatever benchmark your lender, uses increases by 1% the following month, your variable interest rate for that month will be 6.5%. However, if that benchmark’s rate decreases by 2% the month after, your variable interest rate for that month will be 4.5%.
Similarly to the fixed margin in a variable interest rate, your creditworthiness (as well as your cosigner’s creditworthiness) could determine the fixed rate. Your lender might also have a standard fixed rate for student loan borrowers.
We discussed a few of the pros of variable interest rates, such as rates typically starting lower than fixed rates. Another advantage of variable interest rates is that you could save on interest if the rate doesn’t rise too much. Luckily, the LIBOR rates haven’t been on the increase in the last few years.
However, variable interest rates are a gamble since they’re subject to change throughout the repayment period. Since the amount fluctuates, you could find yourself having a bad month in which the variable rate increases heavily. This change can make it difficult to pay. Secondly, variable rates are nearly unpredictable, meaning that your monthly payments will change from month to month. Your monthly payments and total costs will be pretty unpredictable throughout the span of your repayment terms.
Pros and Cons of Fixed Interest Rates
Fixed rates are extremely predictable, since the rates are going to stay the same throughout your repayment terms. This quality allows you to plan accordingly for the future with the interest rates in mind.
However, variable interest rates could be lower than fixed rates during your loan’s repayment period. Accordingly, you might spend more money than if you had a variable interest rate. At the same time, fixed interest rates typically start higher than variable rates.
Which is Better?
There’s really no answer for that, since it is ultimately up to you to determine the best option fit for you. Many borrowers might prefer fixed loans because it’s a safer bet and because it will help them budget and plan for the future while they pay for their student loans. However, you might determine that you are in a good position to take on a variable interest rate with the possibility of saving more if the interest rate index is low or remains the same from month to month during your repayment period.
Different factors might weigh into your decision, such as your career path and your financial situation while in college, so it’s important to think about how that will affect you.
Determining the best interest rate for your student loan is simply up to you and how your finances are looking. After weighing the pros and cons of variable vs fixed interest rates, it will be easier to relate them back to you in deciding what works for you.
You don’t have to make this decision alone. Sparrow’s application allows you to find the best student loans with the best interest rates for you. The platform makes it easy for you to compare real pre-qualified rateswithout having to apply with lenders one-by-one. Save time by finding the ideal interest rate for you with Sparrow!
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Forgetting to pay a bill, especially your student loans, can be scary. Automating your payments is an easy way to help you keep track of your student loans and never miss a payment. However, did you know that autopay can also save you money?
In this post, we’ll dive into what autopay is, the potential savings you can earn, and if automating your student loan payments is right for you.
What is Autopay?
Autopay is a convenient way to never miss a payment. On a monthly basis, autopay automatically withdraws money from the bank account your lender has on file.
Different lenders have different terms for autopay, such as auto debt, automatic debit payments, or direct debit.
There are three main ways to make automatic payments:
Standard Autopay by the Lender:Through this method, you simply give your bank account details to your loan servicer. From there, you authorize them to withdraw your payment every month.
Online Bill Pay: When using online bill pay, you enter your lender as a recipient. Then, you can select an amount that will be automatically paid to the lender each month. This method is typically offered by banks to customers who log into their accounts online or through a mobile app.
Credit Card Bill Pay: If your servicer accepts credit card payments, you will be required to make automatic monthly withdrawals. It is similar to online bill pay, but with a credit card.
Autopay can help you reduce the worry of whether or not you made a payment on time, no matter the method of making the payment.
How Much of a Discount Does Autopay Get Me?
The autopay discount varies by lender. Most lenders offer a 0.25% reduction in your student loan’s interest rate if you enroll in autopay for your monthly payments. 0.25% might not seem like a lot, but, depending on the repayment terms, it could save you quite a bit.
How Much Will an Autopay Discount Save Me?
Knowing how much the 0.25% interest rate discount will save you is important before deciding to enroll in autopay. Let’s dive into an example.
Let’s say we have a $30,000 student loan with an initial interest rate of 5% under a 10-year repayment term. Without the 0.25% autopay discount toward your interest rate, you would be paying $38,184 over the life of your loan. However, with the 0.25% autopay discount, you would be paying $37,745, saving you $439 throughout your entire repayment term.
What if we double the student loan amount to $60,000 with an initial interest rate of 5% under a 20-year repayment term? Without the 0.25% autopay discount, you would be paying $95,034 over the life of your loan. However, with the autopay discount, you would be paying $93,056, saving you $1,978 in the same time frame.
While the amount might seem small, it’s a decent chunk of money that you could use for some really cool things. $1,978 could be used to pay rent or to go on vacation, but even $439 could be used to go on a nice shopping spree, make a car payment, or invest it into the stock market.
How to Decide if Automatic Student Loan Payments are Right for You
Overall, your student loan principal and repayment terms determine the savings you can have from an autopay discount. While saving money on your student loans is appealing, it’s important to determine if opting in to autopay is a good idea for you.
Pros and Cons of Student Loan Autopay
Aside from saving you 0.25% on your interest rate, let’s look at some other pros and cons of student loan autopay.
Pros of Student Loan Autopay
You won’t miss your payments: You won’t end up in delinquency or default if you set up autopay since the payments will be made for you automatically.
Some lenders allow you to make greater-than-minimum payments: If you are in a financial situation that allows you to pay more than the monthly minimum, opting into greater-than-minimum autopay payments could allow you to pay off your loans faster.
Cons of Student Loan Autopay
Overdraft fees:You have to make sure that you have enough money in your bank account to cover the automatic payments. If you don’t, you’d have to worry about a late payment as well as an overdraft or insufficient funds fee. Make sure you are confident you won’t run into any issues with over-drafting before opting into autopay.
It’s hard to cancel:If you are having a hard time keeping up with the automatic payments, it might be difficult to cancel. Most times, you’ll have to contact your lender and do so in writing so they can stop. Not to mention that you will have to cancel well before your next repayment period if you want your automatic payments to stop sooner than later.
If you believe that it will be difficult to keep up with autopay on time, allowing your lender to make automatic payments toward your student loans might not be the best option for you.
How to Set Up Student Loan Autopay
Before you set up autopay, you’ll have to know who your loan servicer is. A loan servicer is the company that manages the loan for your lender. To find your student loan servicer, you can log in to your student loan portal to determine this information.
If you are unable to find the information that way, you can contact the lender directly to ask for the information. This will help you determine what your servicer offers when it comes to autopay discounts as well as the terms and conditions of automatic payments.
From here, make sure that you can afford to enroll in autopay. Go over your finances to make sure that you can budget enough money in your account in time for each autopay period. Some servicers allow you to choose your own repayment date, meaning that you could even set up autopay close to when your payday is, making it easier for you to know how much money you have after making a student loan payment.
Finally, enroll! As said earlier, many student loan servicers provide user-friendly online student loan portals with features that will allow you to enroll in autopay yourself. If your servicer doesn’t, you can call them so that they can set it up for you. Regardless, you will need to have your bank account information handy, such as your account number, your bank’s routing number, or your credit card if your servicer allows you to make credit card payments.
Final Thoughts
Determining whether or not to set up autopay is up to you. Everybody’s financial situation is different, and every servicer is different as well. Regardless, you can expect substantial savings on your student loans if you decide to enroll in autopay. You can use the savings to pay your student loans sooner, put it into a savings account, or even use it to invest into a company.
If you’re looking for a private lender with an autopay discount, Sparrow can help you find the best option for you. Sparrow makes it easy to find rates ideal for you and also makes it easier to configure an automatic payment schedule for each loan, saving you time (and as you now know, money!).
Figuring out how to pay for college is like walking through a minefield. You’re scared to even take a step because it may be the wrong one. But you don’t have to be! There are 3 big resources people use to help them pay for college: scholarships, grants, and loans. Let’s go over them.
What Are Scholarships?
Scholarships are usually merit-based awards, meaning that you are awarded based on your academic or extracurricular achievements. Private businesses and organizations normally give these out. Charities, non-profits, local Veterans clubs, local businesses, and big chains like McDonalds or Burger King are just some examples of places that offer scholarships.
There are a wide variety of scholarships. Because of this, the qualifications for each one are going to be different. On the upside, you can win one for just about anything such as writing an essay, making a video, being into video games, being a person of color, and more. You can look for them online through scholarship databases like FastWeb or Scholarships.com.
What Can I Use a Scholarship For?
Scholarships don’t need to be paid back. The money is completely yours to use for school. It is important to note that there can be conditions when it comes to how the money is spent. Some scholarships will give you the money and let you decide how to allocate it. Others will require that the money only be used for room and board or your books.
How to Apply to Scholarships
The variety in the different types of scholarships there are means that the application process is different for each one. Most of the time you’ll fill out an online form on their website. But, you may also need to write an essay or even do an interview. The details will be on their website, so, be sure to read and know the terms of the scholarship well.
Important Note About Scholarships
Unfortunately, there are scammers out there. It’s important then to know how to spot a scam. Some signs include:
They ask for your social security number
They ask for money
They guarantee that you’ll win
What Are Grants?
Grants are need-based awards usually given out by the government and private organizations. Because they are need-based, students have to demonstrate that they have a financial need.
Federal Grants
There are only 4 types of federal grants: the Pell Grant, the Federal Supplemental Educational Opportunity Grant, the Iraq and Afghanistan Service Grant, and the Teacher Education Assistance for College and Higher Education Grant. Each of these grants has specific requirements that you must meet in order to qualify.
Generally, grants do not have to be repaid. Though, if you drop out or change your enrollment or financial status, you will have to pay them back. If that does end up being your case, your school will contact you with details on how to start repayment.
To apply, fill out the FAFSA form every year as soon as it becomes available.
Private Grants
Private grants function a little like scholarships. Different businesses, organizations, non-profits, and other places may offer these. Because of this, the qualifications for each one will vary.
Grants also do not need to be repaid at all, so it’s good money to have for college. You can look for private grants online. Much like with scholarships, there are scammers. Keep in mind the same points about being able to tell the difference between a scholarship and a scam here, too. Details on each private grant’s application process will be on their website.
For more information on grants, feel free to read our article here.
What Are Loans?
A loan is money that you borrow. Unlike grants and scholarships, you will have to pay this money back with interest. There are both federal loans and private loans available. Depending on what type of loan you get, the terms will be different.
Federal Loans
With federal loans, there are two basic types: subsidized and unsubsidized. Subsidized loans are need-based loans typically available for undergraduate students. They usually don’t accrue any interest until after you begin repayment. During that time, the government pays interest on the loan. Unsubsidized loans are generally for both undergraduate and graduate students. Since these are not based on financial need, they are more accessible. Unsubsidized loans usually start accruing interest from the moment it’s disbursed. So, if you receive one in your freshman year, it’ll start accruing interest that same year.
Normally, federal student loan interest rates are fixed and predetermined. For both loans, repayment typically starts once you graduate or drop below half-time enrollment. The government will usually extend a six-month grace period at that time. This means you won’t have to start paying right away. The government offers different types of repayment plans and benefits to make this easier. For example, the income-based repayment plan will adjust your monthly payments based on your income to make it less of a financial strain on you. To apply for federal loans, all you need to do is fill out the FAFSA form as soon as it’s available each year.
Private Loans
Private student loans function a bit differently from their federal counterparts. They’re usually given out by banks or some other financial institution. Unfortunately, they don’t come with as many benefits as federal student loans.
Qualifying for a loan will depend on your lender and your financial situation. Factors like your credit score, your finances, or whether or not you have a cosigner can impact whether you’re approved for the loan. This is because lenders want to make sure that they will get their money back. Those same factors can also determine what kind of an interest rate you get. Unlike federal student loans, interest rates for private student loans aren’t predetermined. They can either be fixed or variable and can vary anywhere from 1% to 13%+.
The terms of repayment are up to the lender. Some may extend a six-month grace period so you don’t have to start paying right away. Others may not. Talk to your lender about the terms of repayment and see what else they offer.
Traditionally, you’d have to apply for each private student loan individually. This can be a hassle. Luckily, you don’t have to work like that anymore. Sparrow makes it easy to apply for private student loans by allowing you to compare real student loan offers through a single application. To get started, just create an account.
For more information on loans, check our article here.
Which Is Better?
Typically, you’ll want to try to get as many scholarships and grants as you can first since you don’t have to pay those back. Then, if you need more, get federal loans because they come with a lot of benefits and plans that’ll help make repayment easier. If you still need money after that, apply for private loans.
Final Thoughts from the Nest
Scholarships, grants, and loans are all great ways to help pay for college. Each one functions differently so it’s important to know the difference. Use this chart to help you as you start making decisions on how to fund your educational career!
Scholarships
Grants
Loans
Who gives them out?
Private organizations and businesses
Federal government and private organizations and businesses
Federal government and private organizations and businesses
Qualifications
Depends on the scholarship
Usually need to demonstrate financial need
Have good credit and financial history or have a cosigner with good credit and financial history
Do I have to repay?
No
No
Yes
How to Apply
Depends on the scholarship but you can use websites like FastWeb and Scholarships.com to help with finding and applying for scholarships.
Generally, all you need to do is fill out the FAFSA. If you’re looking for a private grant, it depends on the grant.
Generally, all you need to do is fill out the FAFSA. If you’re looking for private loans, use Sparrow to compare private student loans and apply.
Imagine you’re shopping around for student loans. You can’t seem to make a final decision on which to get because the interest rates are confusing. Understandably, you have a lot of questions. What are they? How does it affect your payments? And most importantly, what’s a good interest rate? Let’s go over it.
What Is Student Loan Interest?
Student loan interest is the amount of money that you pay for borrowing the loan. This interest is how lenders make a profit from giving you their money.
Does Student Loan Interest Accrue Monthly Or Daily?
It depends on the type of loan you get.
When in repayment, federal student loans accrue interest daily, whether they’re unsubsidized or subsidized. This means that they use the simple daily interest formula. How does this work? Let’s look at an example. You have a loan for $15,000 with a 6% interest rate. To figure out the daily interest, divide the interest rate by 365 and multiply it by your principal. In this case,
6% / 365 = .016%
.016% * 15000 = $2.4
So, your federal student loan will be accumulating $2.40 daily in interest.
It is important to note that this is different from compounding interest daily. If your loan was compounding daily, you’d be paying interest on the interest you accrued the day before. In this example, the interest is calculated based off of the initial principal amount of $15,000, so it’s accruing interest daily.
Interest that compounds daily would mean that on the first day the interest would be calculated based off of the $15,000. Then, on the second day, the interest would be based off of that same amount plus any interest you accrued the previous day, so $15,002.40.
Generally, your interest will accrue daily but not compound daily. Typically it’ll compound based on your payment period. For example, if you pay every 30 days, you’d have accumulated $72 in interest, so the interest will start accumulating based off of $15,072 instead of $15,000.
Similarly, private student loans accrue interest daily but they can also accrue interest monthly. It really just depends on the lender, so be sure to check with them for details on that.
5.28% for Unsubsidized Loans for graduate or professional students
6.28% for Direct PLUS loans for parents, graduate or professional students
These federal rates are actually at an all-time low and apply to any student loans disbursed between July 1, 2021, and July 1, 2022.
Where federal student loans are usually fixed and have a predetermined rate, private student loans tend to vary by lender. They are dependent on factors like your creditworthiness, your finances, and whether you have a cosigner. The rates typically range anywhere from 1% to 13% and can be either fixed or variable.
What Is the Impact of Interest Rate on Student Loans?
The most pressing matter would be the impact on your monthly payments. In that case, any interest accrued that month will be part of the payment that you’ll have to make, so it can make the payment higher. Additionally, know that your payments will pay off the interest first. Then,any money left over will be put toward the principal. As time goes on and you make your payments, there will be less interest and you’ll start to see your principal go down.
Of course, since you have to pay for interest as well, you will pay back more than you borrowed over the life of the loan. Usually, the higher the interest rate and the longer the length of the loan, the more money you’ll end up paying back. The opposite is also true. For example,
With a $15,000 loan at 6.03% over the course of 20 years, you’ll actually end up paying $25,852.80
With the same $15,000 loan at 6.03% but over the course of 10 years, you’ll pay $20,011.20
With the same $15,000 loan but now at 5.14% over the course of 10 years, you’ll pay $19,215.60
What Is A Good Interest Rate?
Because interest rates vary depending on different factors, there is no one perfect interest rate to base all of your options on. For the most part, though, any interest rate below 7% is considered good and any over 10% is high.
If you’d like to learn more about interest rates, check out this article.
Final Thoughts from the Nest
Interest rates depend on the type of loan you get, whether it’s federal or private, and your personal finances. This means that the interest rate that’s perfect for your friend may not be the best fit for your situation. Keep this in mind when looking around for loans. Be sure to exhaust your options on federal student loans first though. If you still need more money, use Sparrow to help you search for private loans. To get started, simply create an account.
If you’re considering taking out a private student loan to fund your education, it’s important to carefully review and compare the repayment terms offered by different lenders. Private student loan repayment terms can vary widely and can have a significant impact on the total cost of your loan, as well as your ability to manage your debt after graduation.
In this post, we’ll dive further into the different terms that are available depending on your private student loan, how longer terms affect monthly repayment plans, and the tools available to you to easily compare student loan repayment terms side by side.
Private Student Loan Repayment Terms
Private student loans accrue interest while you are in school. Federal student loans have the potential to accrue interest while enrolled in school, but it depends on the loan you take out, such as a federal unsubsidized loan. Regardless, most private and federal repayment plans don’t start until about six months after graduation.
Each lender is unique and as such, they will offer different repayment options. However, there are four common repayment plans.
Keep in mind that the repayment plan you select depends on your individual needs. Here’s a little more background on each one:
Immediate Repayment
With Immediate Repayment, you will be able to make monthly payments on your loan as soon as it is disbursed. Making monthly payments right after your loan is disbursed can help you minimize the amount of interest that accrues and save you money in the long run.
However, you’d be a college student while making these payments. If the stereotypes of eating ramen and pizza pockets to make ends meet tell us anything, it’s that it could be really difficult for many students to make consistent monthly payments. If you plan on having a job while in college, it might make sense for you.
Interest-Only
Your lender would allow you to only make interest-only payments while you are in school. With an interest-only repayment plan, the borrower only has to worry about paying back the interest that has accrued on the loan each month while in school. For example, if a loan of $50,000 accrued $50 in interest that month, you’d only be responsible for those $50 that month.
After you graduate, it might be easier for you to make monthly payments toward your student loans. Because interest will compound, making interest-only payments will reduce the total amount of interest that you pay over time. At the same time, it might also be more manageable to pay off the interest of your loans compared to making payments going toward your student loans and the accrued interest.
Similar to immediate repayment plans, it might be a financial burden to enroll in an interest-only repayment plan while you are in college since you would still have to pay interest on your loans while studying.
Fixed Monthly Payments
Fixed monthly payments, also known as partial interest repayment terms, allow borrowers to make fixed monthly payments while still enrolled in college. Fixed payments are typically between $20 and $50 and go toward your interest, helping you keep the overall debt amount lower by keeping the interest from accruing. For some students, this might be more manageable since they would have to pay a little bit of money that will go toward their interest rate, compared to other repayment plans.
However, by the time you graduate, you’re still going to find yourself having to pay more than you borrowed due to the partial interest that you didn’t pay with your plan. Yet, you could expect your loan balance to not grow as much thanks to at least paying some of that partial interest.
Full Deferment
A full deferment repayment plan is similar to how federal student loans work, in which students can expect to start paying off their loans post-graduation. Under this plan, you wouldn’t be responsible for paying off your student loans while you’re enrolled in school, giving you time to plan. Many lenders offer a six month grace period after graduation, making it easier for recent graduates to find employment without having to worry just yet of their student loans.
This repayment plan does have its drawbacks, particularly that your loan will accrue interest while you are studying. As such, your monthly payments may be bigger, and thus, it could take you longer to finish paying off your loans.
How is a Monthly Loan Payment Affected by a Longer Term?
Student loan repayment periods range in length, roughly between 10 to 30 years. As such, you’d think that with the long period of time you have to pay off your loans, your monthly payments will be low. While that is true, keep in mind that loans accrue interest. If you find yourself with a long-term student loan, you’ll still be paying a lot since you’ll also be paying for the interest of the loan. The longer the term, the bigger the interest. Shorter repayment periods tend to attack debt more aggressively, and thus, the monthly payments will be higher than they would be on a longer repayment period.
Compare Standard Repayment Terms Side-by-Side
How would a loan differ based on the repayment terms? Perhaps comparing terms side by side might be an easy way to see for yourself.
By using any student loan calculator online, you can determine how the standard loan repayment terms might affect your monthly payments, but also the long-term cost of the loan.
Let’s say you have a $30,000 loan with a 5% interest rate. Under a 10-year repayment term, you can expect to pay $318 a month. However, the lifetime cost of your student loan would be $38,184 paid over 10 years.
What if we use the same loan with the same interest rate but with a longer term, such as 20 years. While your monthly payments are significantly less, $198, the lifetime cost of your student loan would be $47,517 over 20 years.
What if we try one more, with the same loan, interest rate, but a shorter term, like 5 years? Your monthly payments will be $566. However, the lifetime cost of this student loan would be $33,968 paid over 5 years.
Since interest is compounded monthly, repayment plans with shorter terms will help you tackle more debt at a faster rate. Keep this in mind while you’re in the market for a student loan.
How to Figure Out Which Repayment Term Will Be Best for You
Aside from the loan simulator, there are many other resources that can help you find the best repayment plan for you.
The loan simulator, a tool created by the Office of Federal Student Aid, allows you to get a first-look at the federal student loan repayment plans you may qualify for if you’re looking to find repayment strategies, if you’re struggling with paying off your student loans, or if you want to potentially borrow more.
Sparrow, on the other hand, is a great resource if you’re looking into private student loans. Our platform gets you personalized rates and allows you to compare multiple loan offers from different private lenders side by side. Lenders on the platform offer a wide range of repayment options, such as immediate repayment, fixed monthly payments, interest-only payments, and full deferment payments.
Final Thoughts
Student loan repayment terms are complicated, regardless of whether you have public or private loans. The good news is that there are so many different options available to help you find the right repayment plans for you. It’s simply a matter of being able to compare your options and weigh out the right fit based on your needs as a college student and the loans that are available to you.
Take the next step in conquering your student loans by creating a free Sparrow account. Apply once and get real rates fit for your unique financial situation. The best part: the platform is completely free and won’t impact your credit score!
Sparrow partners with financial institutions to provide students and their families with a streamlined search and comparison process that helps borrowers find the best private student loan offers in minutes.
We believe transparency is key to earning and maintaining borrowers’ trust. That’s why we take who we partner with seriously.
The lenders that borrowers choose are very important. The right lender could save borrowers money, time and stress. The wrong lender can be predatory, usury, and misleading. We pride ourselves on working with a diverse set of fantastic lenders to ensure that our borrowers receive the most competitive offers for their unique financial situation.
How We Select Lenders to Partner With
Our lenders are evaluated against a rigorous set of criteria to ensure that they truly are the “best companies” for private student loans and student loan refinancing. In order to be eligible for onboarding onto our marketplace, a lender must pass all 15 criteria explained below. After onboarding, each lender’s eligibility is re-evaluated on a quarterly basis.
Offers private student loans and/or student loan refinancing to schools eligible for federal funding under Title IX
Complies with relevant state and federal law: TILA, ECOA, FRCA, GLBA, UDAAP, FCT Act, and CAN-SPAM Act
Services loan payments internally or through reputable third-party servicers including: FedLoan Servicing, Nelnet, Navient, MOHELA, Edfinancial Services, OSLA, Great Lakes, and GSMR among others
Loan origination receives school or self-certification pursuant to Section 155 of the Higher Education Act of 1965
Does not have outstanding or unresolved litigation with the Consumer Finance Protection Bureau (CFPB)
Maintains a strong customer satisfaction rating on either Better Business Bureau and/or Trustpilot
Qualifies borrowers with limited (less than 2 years of active credit) or no credit history
Qualifies borrowers with limited or no annual income
Maintains necessary lenders licenses for states where loan products are provided
Provides at least one repayment option: Immediate, Fixed, Interest Only, or Fully Deferred
Offers cosigned and/or non-cosigned loans
Offers e-signature option for digital loan origination
Does not include prepayment penalties
Offers robust financial literacy programs and resources
Offers death and disability discharge
How We Score Potential Lenders
Our checklist serves as a baseline. We go well beyond it to identify lenders with whom we’d like to partner. The following below is a breakdown of the methodology we apply to identify compelling partnerships.
Affordability (35%)
Interest rate (30%)
Fees (5%)
Customer service (30%)
Borrower origination experience (15%)
Borrower repayment experience (15%)
Eligibility (20%)
Loan term (5%)
Minimum and maximum loan amounts (5%)
Minimum FICO score (10%)
Miscellaneous (15%)
Product availability (10%)
Regulations and compliance (5%)
Affordability (35%)
Affordability primarily considers the interest rates and loan fees that affect borrowers’ monthly loan payments. For many borrowers, the best loan is the one that costs the least over time. The following factors determine affordability.
Interest rate (30%)
We look at how competitive a lender’s interest rates are versus other lenders’ for various types of borrowers (i.e. borrowers with different FICO scores).
Why interest rate competitiveness matters for borrowers: Choosing a loan with a competitive interest rate can result in significant interest savings over the lifetime of a loan.
Fees (5%)
Fees can tack on costs to a borrower’s loan. None of the lenders on the Sparrow marketplace have prepayment penalties.
Why fees matter for borrowers: Borrowers should shop around to find the lowest-cost lender, accounting for interest rate and any associated fees.
Customer Service (30%)
Customer service considers how borrower-friendly a lender is in the origination and repayment processes. Customer service is a heuristic for the trustworthiness and credibility of a lender.
Borrower origination and repayment experience (15%)
Borrower origination and repayment experience addresses the ease at which lenders qualify, disburse and service loans. Borrowers ought to be able to expect friendly, non-predatory servicing as they work with their lenders to repay their loans.
Why borrower origination and repayment experience matters for borrowers: Because private student loans are a credit of last resort, borrowers have to be able to rely on lenders to originate and service a loan on-time. Having the wrong origination or servicing experience can weigh on borrowers for years to come.
Customer service rating (15%)
Customer service ratings show the quality of experience a borrower can expect from a lender. Sparrow studies Better Business Bureau and Trustpilot customer service ratings for student loan companies.
Why customer service matters: Borrowers should be able to trust their lenders and expect good customer service from them.
Eligibility (20%)
Eligibility considers a lender’s flexibility to meet the various needs of different borrowers.
Loan term (5%)
We evaluate the term options that lenders provide borrowers to repay their loans.
Why loan term matters: A broad range of loan terms offers flexibility for every borrower’s unique financial situation.
Minimum and maximum loan amounts (5%)
We assess the minimum and maximum loan amounts offered by lenders.
Why maximum and minimum loan amounts matter: A lender’s loan amount should be large enough to meet borrowers’ needs and small enough so that borrowers do not take on unnecessary debt.
Minimum FICO score (10%)
We look for lenders with low or no credit score minimums.
Why minimum FICO score matters: If borrowers’ credit score falls below the threshold, they will have trouble qualifying for a loan.
Other Factors (15%)
Sparrow looks at a range of other factors to determine a lender’s overall rating.
Product availability (10%)
Product availability describes the coverage lenders provide to students studying for different degrees (i.e. undergraduate, graduate, pre-professional, etc.) or coming from different circumstances (access to a cosigner).
Why product availability matters: Borrowers may benefit from borrowing loan products tailored specifically to their degree (i.e. JD, MD, BA, MS, etc.) or economic background (cosigned vs. non-cosigned loans).
Compliance and regulations (5%)
We ensure that all lenders on the student loan marketplace are legally compliant with federal and state law. We work with each of our lending partners in order to comply with requirements related to loan disclosures and terms, credit discrimination, credit reporting, and unfair or deceptive business practices.
Why regulations and compliance matter: Borrowers should have the confidence that Sparrow and its partnered lenders are compliant with federal and state law and will not be subject to usury or deceptive lending practices.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
You got accepted into your dream school. You’re so excited you can hardly contain it. A few days go by and the reality sets in. How am I going to pay for this?
You log into your school’s payment portal and look at the total cost of attendance. Before you panic, let’s break down all the steps you’ll need to take to pay for college.
Before College
Step 1: Complete the FAFSA
Each year, the U.S. Department of Education offers financial aid to college students. The FAFSA, or Free Application for Federal Student Aid, is a form you will need to fill out to be considered for this aid.
The FAFSA determines which students receive financial aid and how much they get. The information you provide in the form is also used by colleges and universities to determine eligibility for their scholarships and aid programs.
The FAFSA opens each year on October 1st. Students should fill out the FAFSA the year before they plan to start school. For example, if you plan to be in school by October of 2022, you’ll want to fill out the FAFSA in October of 2021.
We recommend that prospective students fill out the FAFSA as soon as they can after it opens. Note that you do not need to know exactly where you plan to enroll to fill out the FAFSA. In fact, you will likely fill out the FAFSA before you even apply to some schools.
Most people elect to fill out the FAFSA online, although there are other ways to complete it. For a more in-depth guide to the FAFSA, check out 6 Simple Steps to Fill Out the FAFSA.
Step 2: Apply for Grants and Scholarships
Grants and scholarships are also known as “free money” because they don’t need to be repaid. They tend to be merit-based, need-based, or a combination of both.
What does that mean?
Merit-based → awarded based on academic achievement or excelling in an interest, trait, or talent
Need-based → awarded based on financial need
The amount of money you can get in scholarships and grants ranges quite a bit. Some grants and scholarships will cover the cost of books, and others will cover the entire cost of tuition. According to Education Data, students receive $7,500 worth of scholarships and grants, on average.
To find college scholarships and grants, you can do the following:
Ask your high school guidance counselor for local resources. Local organizations such as Veterans Clubs, Rotary programs, and small businesses may offer scholarships.
Look to your employer or your parents’ employers. You’d be surprised how many companies offer scholarships!
Research organizations that cater to identities you hold, such as:
Ethnicity-based organizations
Women’s/Men’s Clubs
Volunteer or Service-based organizations (nonprofits, community organizations, civic groups)
Note that deadlines for each scholarship will be different. We recommend making a Google Sheet to track each scholarship or grant you plan to apply to, the deadline, and the materials required to apply.
Step 3: Get a Work-Study Job
After filling out the FAFSA, you may qualify for work-study. Work-study is a federal aid program that provides part-time jobs to college students with financial need. Qualifying for this program doesn’t guarantee you will receive a job, but it does open the door to various job opportunities not all students have.
To read more about work-study, check out this article.
Once you’ve selected which school you want to attend, look through their job portal online to find work-study jobs available to you.
Note: Again, not all students will qualify for work-study. Only those who demonstrate significant financial need based on their FAFSA will be eligible. If you are not eligible for work-study, there will still be other job opportunities you can take advantage of on or off campus.
Step 4: Examine Your Savings
Taking out private student loans is part of the average person’s college experience. But, as much as you can, you want to minimize how much you need to take. Examine your savings and see how much you can put towards paying for college.
Additionally, be smart about what you spend leading up to college. Maybe you just had a high school graduation party and received generous gifts. Instead of spending that money, consider putting it towards paying for college. (Trust me, your 22-year-old graduated self will thank you.)
Step 5: Take out Federal Student Loans
After filling out the FAFSA, you will receive a financial aid package from the schools you applied to. Within these aid packages, you may see grants and federal student loans.
Federal student loans tend to have lower interest rates and more favorable terms in comparison to private student loans. Thus, many students opt to take whatever federal loans are offered to them.
You should remember to accept federal financial aid in the following order: grants/scholarships (free money) → work-study (earned money) → loans (borrowed money)
Loans should always be accepted last after any scholarships, grants, or work-study.
Step 6: Borrow Private Student Loans
The average college student will take out private student loans to cover their remaining balance. But, private student loans should always come after federal loans as they need to be repaid and tend to have higher interest rates.
Each private loan will offer different elements that will vary in importance depending on the person. This means that there isn’t a single best private loan option; it varies by person.
Finding the best private student loan for you is a seamless process on Sparrow. Create an account, and in under 3 minutes, you can compare all your loan options in one place.
Payment Deadline Reminder
May 1st is the deadline for accepting a college’s offer for fall admission and for paying the tuition deposit to enroll.
This deadline is crucial to keep in mind because it impacts other parts of the process of paying for college. Be proactive and do things earlier than you think you may need to.
Every Summer While in College
Register and Pay for Classes
To be considered a full-time student and pay the same tuition rate, you need to make sure you enroll in classes. Try to register for classes as soon as your university will allow you to.
Before enrolling, consult with an advisor to ensure you’re taking the right classes to stay on track to graduating on time. If you plan ahead, you may be able to graduate early which would save you a lot of money in the long run.
Universities will typically send out tuition bills in July or August with the expectation that they are paid by the fall. If you have questions or concerns about when your tuition will be due, reach out to your university’s financial aid office.
Submit FAFSA for Next Year
If you’re using the FAFSA for any financial aid or loans, it will need to be resubmitted every year that you’re in college. This is because your financial situation may change from year to year, thus impacting the amount of money you qualify for.
If you submitted the FAFSA previously, you may be eligible to submit a Renewal FAFSA rather than having to fill out the entire form again. To reapply, simply log into the FAFSA portal online and click FAFSA Renewal.
Find a Job or Work-Study
If you previously qualified for work-study but haven’t accepted a position, check for opportunities for the next school year. If you didn’t qualify when you initially filled out the FAFSA, but your financial situation has changed, you should resubmit the FAFSA as you may qualify now.
If you aren’t eligible for work-study, looking for an on or off campus job may help you pay for college or manage expenses such as books or food.
After You Leave School
Review Your Loan Repayment Plan
Regardless of whether you have federal or private student loans (or both!), you’ll want to review your repayment plan options. Find one that works for you and stick with it!
This is also a good time to determine how you want to allocate funds to make payments. We recommend using the Debt Avalanche method as it is most effective, but this won’t be for everyone. Do some research on the different methods and again, find one that works for you and stick to it!
Find a Job
Most of us attend college with the hopes of finding a job we love. Of course, we hope that it can financially support us as well. You will likely start the job search before graduating, but if you haven’t, post-grad is a great time to start looking.
Use sites like LinkedIn and Indeed to find roles that both suit you and will help you pay off your loans.
Consider Refinancing Your Loans
If your interest rates seem out of this world (and not in a good way), you may want to consider refinancing. Refinancing would allow you to take out a new loan with a lower interest rate to cover all of your initial loans. If the concept of refinancing sounds overwhelming, check out our guide.
Summary
There is no one-size-fits-all solution to paying for college. You may end up with enough scholarships and grants to completely cover your college costs. Or, you may not get as much through the FAFSA as you expected, leaving you to take out more in private student loans.
Either way, there is no one solution to paying for college. This means that however you decide to pay for school, as long as it works for you, you’re making the right decision.
With rising college costs, student loans are placing a strain on more and more people’s lives. Student loan refinancing can help with that. This is what you need to know about when to refinance your student loan:
What is Refinancing?
Refinancing is when a lender agrees to pay off your current loan(s) in their entirety. You’ll then take out a new loan to pay this lender back. A big reason why refinancing is popular is that you can change the terms of this new loan. For example, you can secure a lower interest rate or change the repayment plan.
How Does Student Loan Refinancing Work?
When you refinance your student loans, you combine one, some, or all of your current loans into single a new loan. You can do this with both federal and private loans. By doing this, you can choose new terms for the loan such as:
Changing the length of the loan
Getting a new interest rate
Switching from variable to fixed rates
How to Find the Best Student Loan Refinance Option
Finding the right refinancing option should be a simple. Use Sparrow to find the best student loan refinance option for you. Sparrow shows you the most important information and simplifies the entire process.
There are certain aspects that lenders look at to see if you’re qualified for refinancing. The main things you want to keep in mind are having a steady income, a good credit score, and a good payment history.
Steady Income
Lenders look at your income to ensure you’ve got enough money coming in each month to pay off your monthly payments. You want enough to be able to support your current lifestyle in addition to making payments on your loan. A good way to determine this is by looking at your debt-to-income ratio. Take your monthly debt and divide it by your monthly income. The lower the number, the better condition you are in.
Good Credit
Your credit score is another important factor that lenders use to access whether or not you qualify for student loan refinancing. You want to have a credit score at least in the high 600s. The higher, the better. A high credit score helps lenders know that they can trust to make timely payments on the loan. On top of that, a good credit score will allow you to access lower interest rates.
Lenders want to make sure that they can trust you to make payments on time. Because of that, you’ll want to make sure that you maintain a strong payment history on all debts, particularly your student debt. For example, if your record shows that you’ve always made payments on time, you’re more likely to qualify. On the other hand, a record of missed payments might make lenders think twice about letting you borrow money.
How Much Will I Save?
The amount of money you’ll save depends largely on your personal situation and the terms of your new loan. However, people can save anywhere between hundreds to tens of thousands of dollars over the life of the loan.
Borrowers who usedSparrow to refinance reduced their interest rate by 2.29 percentage points on average, saving them around $17k over the life of their new loan.
When should I refinance my loans?
There are certain factors to look at to see if now is the right time to refinance your loans. Here are some of them:
Good Financial Situation
Has your financial situation improved since you got your loans? Do you have a better income or credit score? Are you currently in a good financial position? If so, now would be a good time to refinance your student loans.
You Have Private Student Loans
Refinancing when you have private student loans has little to no downsides, as long as you can secure better terms. If you have private student loans, it might be a good move to refinance.
Student loan interest rates can change based on the Federal Reserve’s actions. When the Federal Reserve cuts interest rates, it might be a good time to refinance your student debt while rates are low. Similarly, if you’ve been waiting to refinance and it looks like the Federal Reserve will be hiking interest rates in the near future, you may want to take advantage of the current situation by refinancing. Assuming you can get a lower rate and better terms, refinancing is typically a smart move since you are almost guaranteed to save money over the lifetime of your loan.
If your current interest rate is high or variable, refinancing is a good option. You may be able to switch over to a lower fixed rate, which can help make handling your monthly payments a lot easier.
Can I Refinance My Student Loans More Than Once?
Yes. There is no limit to how many times you can refinance your loans. Additionally, there are typically no fees for refinancing your student loans. So, if your credit score or income has recently improved, you can consider refinancing as many times as you want until you’ve got the best student loan for your financial situation.
Why Shouldn’t I Refinance My Student Loans?
Just like there are many reasons why you should refinance, there are just as many for why you shouldn’t. Here are some of them:
You plan to use federal loan benefits
If you refinance your federal loans, you’re turning them into private loans. This means giving up the option to participate in programs that come with having a federal loan such as federal student loan relief or income-based repayment plans. If you would still like to take advantage of those benefits, then don’t refinance.
You are Pursuing Loan Forgiveness
People who refinance their loans don’t qualify for federal loan forgiveness programs such as the Public Service Loan Forgiveness Program. If this is something you’re hoping to do, then don’t refinance your loans.
You Recently Declared Bankruptcy
It’s not impossible to refinance after declaring bankruptcy, but it can be harder. Most lenders won’t consider lending to you until 4-10 years have passed since you went bankrupt.
You Don’t Have a Good Financial Situation
If you don’t have a steady income or good credit, then it’s not a good idea to refinance your student loans now.
There’s a lot to think about when deciding to refinance your student loans. At the end of the day, though, if you’re in a good position to make this move, then do it. Refinancing could save you a lot of time and money over the lifetime of the loan.
Sparrow is a great place to get started. Sparrow is the fastest way to compare real, personalized student loan rates. Complete the Sparrow application to get prequalified offers from 15+ lenders through one application.
The bad news: Unfortunately, there’s several mistakes we see students make when dealing with their student loans.
The good news: We’ve compiled them into a list with steps on how to avoid those mistakes so you don’t make them.
Here we go!
1. Borrowing Too Much Money
These aren’t in any specific order, but this one definitely deserves to be first. Borrowing too much money is a classic student loan mistake.
Just because you can borrow it, doesn’t mean you should. Borrowing money may be a quick fix to pay for your dream school, but it’s important to consider the reality that that money will have to be paid back eventually.
How to Avoid:Think realistically about what it would look like to pay this amount back after you graduate. Always look for grants and scholarships first before even considering student loans.
2. Not Looking Around for The Best Rates
All too often, college students take out a loan at the first lender they find after a Google search. (you can’t see us right now, but we’re screaming)
Once you commit to taking out a loan somewhere, you can’t really back out. So, if you decide to borrow $10,000 from Lender A at an 8% interest rate, only to find Lender B five minutes later who would offer you $10,000 at a 4% interest rate, you’re locked into Lender A. This is why searching for the best rates is crucial.
How to Avoid:We usually save our shameless plugs for the end, but we’re putting it here, upfront: Use Sparrow. In less than 5 minutes, we’ll find the lender with the best interest rate for you, without you having to do the search yourself.
3. Relying on Student Loans for Unnecessary Expenses
Student loans are intended for school-related expenses such as tuition, textbooks, and campus housing. However, students often pull from their available student loan funds to pay for spring break vacations or shopping trips.
While tempting, this isn’t a great use of debt.
How to Avoid:Only use your student loan debt for school-related expenses.
4. Going to Private Loans Before Federal Loans
Private student loans tend to have both higher interest rates and less favorable terms and conditions than do federal loans. While the private loan route may be a bit more simple than the federal route (we get it, the FAFSA is an absolute animal), it ultimately isn’t where you want to start.
How to Avoid:Always exhausted your federal loan options before dipping into private student loans. Be sure to fill out the FAFSA before the deadline, and always examine your aid package carefully to decide which aid you want to accept.
5. Thinking the Federal Aid Options are The Only Options
While exhausting federal aid options first is incredibly important, it’s important to understand that federal aid isn’t the only option. Always pursue aid in the following way:
When looking at your federal student loan options, it’s also important to consider their interest rates and terms. While rare, some private student loan options may have lower interest rates than some federal loan options. Most private student loans, however, will accrue interest while you’re in school. Federal student loans tend to not accrue interest while you’re in school. So, if you opt for a private student loan over the federal student loan that’s offered to you, be sure to check both the interest rates and the terms to determine which option will be better for you in the long run.
Again, be sure to use Sparrow to confirm before making any move to commit to one lender over another.
How to Avoid:Before accepting federal aid, students should apply for any and all scholarships and grants they can get their hands on.
6. Not Taking Advantage of Opportunities to Save Money
Many lenders offer ways to save money on your student debt, but they can be easy to miss. These opportunities come in a variety of forms such as automatic payment discounts and GPA rewards.
For example, Sallie Mae, a large private lender, offers a 0.25% discount on student loans if the borrower opts in to automatic payments.
Similarly, Discover Student Loans offers a one-time cash reward for new borrowers who earned a 3.0 GPA in college or graduate school.
While these may be small bits of money here and there, we don’t miss ANY free money in this house.
How to Avoid:Actively look for opportunities to save money. Contact your lender and ask if they provide any discounts or rewards to borrowers.
7. Never Looking into Refinancing
The idea of refinancing can be scary, but that doesn’t mean you shouldn’t look into it. If your interest rate seems a bit high, or if your credit has improved greatly since you took out the loan, you may be able to secure a refinance loan at a much lower interest rate which would save you money over time.
How to Avoid:Consider refinancing if it makes sense for you. Don’t sit with a loan at a super high interest rate if you feel like you may be able to get lower! Looking into refinancing can’t hurt.
8. Postponing Payments When it Isn’t Necessary
There are options to delay repayment, but you shouldn’t use them if you don’t absolutely need them. Even with a deferment or forbearance, interest will still continue to accrue on some loans. Delaying repayment will only put you in more debt.
How to Avoid:If you can afford to make payments, keep making them. Only request a deferment or forbearance where absolutely necessary.
9. Never Making Extra Payments/Only Paying the Minimum
If you make only the monthly payment, it will take you the full repayment period to pay off your student debt. While that technically works out in the end, you’ll end up paying a lot more in the long run, especially if your interest rate is on the higher side.
How to Avoid:Make more than the minimum monthly payment when possible. Any extra money you can throw at your loans will help hack away at the interest, and eventually the principal balance, saving you money over time.
10. Not Considering the Bigger Picture
When looking into student loans, remember to think about them as a real part of your future. If you choose to accumulate $50,000 in student loan debt, you will eventually have to pay that back. It’s important to be realistic about how this will impact your future self.
Many students blindly agree to student loans year after year without actually knowing how much debt they are agreeing to or how they will actually pay it back.
How to Avoid:Always think about the future and consider how student debt will factor into that.
While it’s a lot to think about, you should ask yourself:
What career do I plan to pursue? Will the average salary for that career support me in making loan payments?
Do I plan to move out immediately after school? Will my career support both rent and loan payments?
Summary
While some of these mistakes are fixable, others aren’t that simple. Thinking ahead when it comes to these mistakes will help prevent you from making them.
Looking at your student loan balance is like biting into a chocolate chip cookie only to realize it’s actually oatmeal raisin. Can be really shocking when it isn’t what you expect.
With the way interest compounds on student loans, the total debt can increase pretty rapidly before your eyes. Refinancing your student loans could be a viable option to lower your interest rates, monthly payment, and overall money spent. That said, there are several things to consider before making the jump to refinance your student debt.
What Does it Mean to Refinance Your Student Debt?
Put very simply, refinancing your student debt means replacing your current student loans with a new loan with a lower interest rate.
Refinancing could look like this [note: this is a very basic example]:
Loan 1: $10,000 at 7.5% interest rate
~insert magical refinancing here~
New Loan: $10,000 at 5.25% interest rate
Notice that the new loan is for the same amount of total debt, however, the interest rate is lower. This would save you money in the long run as less interest would accrue.
Is Refinancing a Good Idea?
Based on our example, refinancing may seem like a perfect route for you. Still, you should consider the following circumstances about when you should and should not refinance.
When You Should Refinance Your Student Debt
If the savings will be significant. If you can qualify for a better interest rate, it’s a good idea to refinance. A lower interest rate can save you money in the long run as less interest will accrue over time. Note: Contrary to popular belief, you don’t need to have a perfect credit history to qualify for a lower interest rate.
If you have student loans with high variable interest rates. Variable interest rates are just as it sounds – they vary. It is challenging to predict what payments will be with a variable interest rate because it’s always changing. Whether your variable interest rate is currently high or low, it may be a good idea to refinance if you can secure a lower fixed rate.
If the economy supports low interest rates. Interest rates are impacted by economic factors. If the rate environment is good, rates may be lower, and it may be a good idea to take advantage of that.
If your finances have improved. If your financial situation has improved since you first took out your loans, you may qualify for a better interest rate on a new loan. This could be in the form of a higher paying job or improved credit score — both of which will help you secure a lower interest rate.
When You Should Not Refinance Your Student Debt
Believe it or not, there are situations where it isn’t a good idea to refinance your student loan debt.
If you’re planning to pursue student loan forgiveness. If you are pursuing a program such as Public Service Loan Forgiveness, you should not refinance your student debt as it would make you ineligible for the program.
If you have Federal Loans and may experience a drop in income. When you refinance federal student loans, you lose the option to participate in federal repayment programs such as income-driven repayment and federal loan relief options. These may be important to you if you have volatile income or are planning to be unemployed.
If you’ve declared bankruptcy recently. It is significantly more difficult to refinance your student debt if you have declared bankruptcy. While not impossible to refinance under these conditions, many lenders will require around 4-10 years to have passed since the bankruptcy filing before lending.
If you’ve had to default on student debt. Defaulting on a student loan is a red flag to private lenders as it tells them that you may not be able to make consistent loan payments. This may make it more challenging to find a lender to refinance with.
Questions to Ask Yourself Before Refinancing
With that in mind, you should ask yourself the following questions before deciding to refinance your student debt.
1. What is my current interest rate, and what could I qualify for?
Take a good look at the interest rates assigned to the loans you currently have, and compare them to the interest rates you’re likely to qualify for. Is there a big difference?
While there’s a chance that the interest rate might be the same, or maybe even worse, recent data has shown that refinance rates for well-qualified borrowers are hitting all-time lows. In the beginning of May 2021, borrowers with credit scores of 720 or higher were seeing interest rates of 3.6% on a 10-year fixed rate refinance loan1 [hint: this is a good rate!].
Borrowers refinancing at such low rates are likely saving thousands of dollars over time. If you think you’d qualify for a lower interest rate, refinancing may be a good decision!
2. Is my income stable?
Financial stability is important for a few reasons:
Credit evaluation
Available repayment options/Ability to make payments
Credit Evaluation
If you’re looking to refinance your student debt, you will be seeking a new loan entirely. Part of the process of securing that new loan is being evaluated by the lender to determine your interest rate and loan terms. Your credit score and financial history will factor into those elements of your loan. If this area isn’t up to par, you might not be able to receive a better loan than what you already have.
Available repayment options/Ability to make payments
If part of your plan to refinance your student debt involves federal loans, you will want to make sure that you’re able to make payments without the federal repayment options. Plans like income-driven repayment aren’t available with private student loans. If that is a necessity to you and your financial health, you may want to reconsider refinancing federal loans.
3. What is my reason for refinancing?
Knowing your goals and intentions with refinancing is important so that you can ensure your new loan aligns with these goals. Most often, people refinance to reduce the overall amount paid over time. Others are more focused on securing a lower monthly payment and don’t mind a longer repayment period.
Either way, it’s important to make sure that you’re clear on your goals for refinancing so your new loan can help support those goals.
4. What does my credit history look like?
When you go to get a new loan, lenders will review your credit score, income, and any other outstanding debt to develop an idea of your likelihood to pay back the loan. The stronger you look to the lender, the more likely you are to get a competitive interest rate and loan terms. If you don’t look so hot (financially, of course) to the lender, you may not be able to refinance with the terms you were hoping for or without a cosigner – neither of which are ideal.
Final Thoughts
Refinancing certainly has its pros and cons, and ultimately, isn’t for everyone. Before refinancing, make sure you are clear on why you’re doing it. When you’re ready to go ahead and refinance, check out Sparrow’s application to simplify the process.
The longer your loans sit, the more interest accrues. The more interest that accrues, the more your overall debt grows. The more your overall debt grows, the larger your payments. (You see where this is going…)
Here’s a comprehensive list of things you can do to pay off your student debt faster, helping you save money over time.
Consolidate and Refinance
Refinancing your student loans means replacing your current student loan(s) with a new loan with a lower interest rate. When you refinance more than one student loan, you can also consolidate them into one loan, meaning one monthly payment.
This can look like:
Loan 1: $10,000 at 6% interest rate
Loan 2: $24,000 at 7.25% interest rate
– refinance and consolidate –
New Loan: $34,000 at 3.25% interest rate
Note that the overall loan amount is still the same, however, the interest rate is significantly better and thus, will accrue less interest over time, meaning less money spent.
You should only refinance loans where you can secure a lower interest rate. If you can get a lower interest rate, refinancing can be one of the most effective ways to reduce student debt.
Apply Raises and Bonuses
As you establish yourself professionally within your career, you may receive a raise or bonus. Oftentimes, this extra chunk of change is put towards a physical object like a TV or better car. Putting this money towards your student loans will likely be a better option in the long run.
Think of it this way: If you’ve been fairly comfortable financially under a $50,000 salary, continue operating under a $50,000 salary even if you get a raise to $60,000. Putting the extra $10,000 a year towards your student loans can make a massive dent in your student debt over time.
Cut Back on Extra Expenses
Take some time to think about where all of your money goes each month. Creating a simple expense tracker in Excel or Google Sheets can be a great way to see this information all in one place. Then, think critically about the necessity of each of these expenses.
Does coffee 5 times a week make sense and align with my financial goals? Can I cut that back to 2 times a week?
A $3 coffee 5 times a week is $15 a week. If you did this 50 of the 52 weeks in a year, you’d be spending $750 a year on coffee.
Do I need cable TV or can I live comfortably with just Netflix?
The majority of adults living in America pay $51-$100 a month on cable television1. This amounts to $612-$1200 per year.
Let’s say you did both of these and cut out coffee and cable. You’d save a potential $1,950 per year. If your loan payment was $200/month, this could quite literally take over half a year off your repayment period.
Reminder: If getting coffee 5 times a week brings you immense joy, you don’t have to remove it from your life! Think of what doesn’t bring you joy and try to reduce how much you spend in those areas first. Or, simply adjust your habits to support your financial goals, too. You might love getting coffee 5 times a week, but if changing that to 2 times a week still brings you joy and supports your financial goals, it may be the best option.
Make More Than the Minimum Payment
Take whatever your monthly payment is and add a little bit more to it. Even if you can only afford an extra $20-$30 a month, it all adds up over time.
A tip for doing this without even thinking? Set up your bank account for an automatic transfer to savings that aligns with when you get paid. Then, every time your paycheck hits your bank account, this extra bit will be taken out as if it was never there. (Out of sight, out of mind, right?)
Utilize a Chunk of Cash
This won’t be accessible to everyone, but occasionally we get a cash windfall from picking up a side hustle, a refund, or a generous gift. You may be tempted to spend it on the pair of shoes you’ve been eyeing or a vacation with your friends, but putting it towards your student loans could help keep you on the fast track to financial freedom.
A fairly common example of a cash windfall is our yearly tax refund. While this amount varies for everyone, this can be a great chunk of change to throw down on your student loans. Fact of the matter is, it might not be money you were relying on or factoring into your monthly budget as it’s challenging to know just how much you’ll be getting in tax returns. This makes it a prime bit of money to direct right to your student debt.
Pick Up a Side Hustle
The amount of money you generate from a side hustle will vary depending on what side hustle you pick up and how much time you’re able to put towards it.
This can be anything from:
Selling old clothes on sites like Poshmark, Curtsy, Mercari, and Facebook Marketplace
Dog walking
Babysitting
Working for InstaCart or DoorDash
To:
Starting a side business on Etsy
Starting a seasonal landscaping business
Flipping furniture
USA Today found that the average side hustle generated between $507 and $746 per month3. This is massive when thinking about student loan payments. Being able to throw an additional $750 a month towards your student loans will make a great impact over time.
Make Payments Every 2 Weeks
Interest on student loans accrues daily. So, by the time you get around to your monthly payment, your loan has already accrued quite a bit of interest.
Making your payments biweekly instead of monthly can help you get ahead of the interest. Simply divide your monthly payment in half, and then pay that amount twice per month.
Summary
While you may not be able to do all of the strategies we listed above, at least 1 should apply to you. Even throwing 1 strategy into the mix can help you pay off your student debt faster.
If you feel ready to refinance your student debt, we’re here to help.
You may be wondering what the difference is between scholarships, grants, work-study programs, and loans. The four main types of financial aid differ in terms of structure and eligibility. Here is the basic information you need to know about the different types of financial aid:
The Basics: Comparing Financial Aid Options
Scholarships: Financial aid you don’t need to pay back. Based on academic or other achievement.
Grants: Financial aid (generally offered by the government) that you don’t need to pay back. Based on financial need or specific criteria (underrepresented demographics or specific academic interests).
Work Study: Program that allows students to work part-time to earn money for educational expenses. Based on financial need and availability of positions.
Loans: Borrowed money that must be repaid with interest. Based on lender and type of loan.
Which Type of Financial Aid is Best?
When considering financial aid offers, you may be comparing all of these types of aid at once. What we always recommend is accepting aid in the following order:
Scholarships and/or Grants (free money)
Work-Study (earned money)
Loans (borrowed money)
Scholarships and grants are the best option as they don’t need to be repaid. However, it’s unlikely that you’ll cover the entire cost of college with just scholarships and grants.
If offered work-study, it’s a great idea to accept that second. This money is earned, meaning that you don’t need to repay it over time.
Loans should always be accepted last, with federal loans accepted first before dipping into private loans. This is because private loans will need to be repaid with interest, which could rack up the principal balance quite a bit. Your eligibility and rates vary based on lender and type of loan. Find the best student loan rates.
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Scholarships come from a variety of sources such as local organizations, charities, businesses, colleges and universities, the government, and various foundations.
Who is Eligible for Scholarships?
Eligibility for scholarships vary based on each scholarship’s specific criteria.
Some scholarships are strictly merit based, meaning that you don’t need to demonstrate any level of financial need to be considered. Others are strictly need-based and ask applicants to prove financial need in order to qualify.
That said, there are scholarships for nearly everything you could imagine. From the Asparagus Club Scholarship to the National Potato Council Scholarship, there’s something for everyone.
Each scholarship will require a different application process. Some may require you to complete an application or write an essay, and others may just require you to submit basic demographic information.
Grants
Grants are a similar type of financial aid to scholarships. They both typically don’t need to be repaid and they can come from a variety of sources. Oftentimes, when going through the college financial aid process, most students see grants come up when examining their federal aid.
So, while grants can come from your college or a local nonprofit, we’ll frame this section around federal grants as the non-federal grants don’t differ too much in nature from scholarships.
Where Do Grants Come From?
Federal grants come from the U.S. Department of Education in the following forms:
We won’t dive deep into each one because that could be its own blog in itself.
Who is Eligible for Grants?
Similar to scholarships, the eligibility requirements for grants vary for each specific one. While some non-federal grants may be awarded strictly for merit, almost all grants from the federal government require you to demonstrate some level of financial need.
There may also be things you need to do to maintain your eligibility if the grant is intended to be renewed every so often. For example, a grant that issues $5,000 per academic year for tuition costs may ask you to resubmit your financial information to determine whether you still demonstrate the financial need necessary to be eligible.
Work-Study
Work-study is a federal aid program that provides part-time jobs for undergraduate and graduate students with financial need. The money they earn from these jobs allows them to pay for educational expenses.
While qualifying for work-study does not guarantee a student a part-time job while in school, it does mean that there are federal funds dedicated to paying that student should they decide to participate in a work-study job.
Where Does Work-Study Come From?
Work-study is provided by the federal government via federal student aid. After filling out the FAFSA, students may see work-study as part of their financial aid package.
Who is Eligible for Work-Study?
To be eligible for this type of financial aid, you must first plan to enroll in a college or career program. Additionally, you must submit the FAFSA and demonstrate financial need.
Work-study is available to both part-time and full-time students, as well as undergraduate, graduate, and professional students.
Loans
The last type of financial aid is a loan. They are often referred to as “borrowed” money. With loans, you borrow an amount from a source and must pay it back over time with interest. Your eligibility and rates vary based on lender and type of loan. Discover the best loan option for you.
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See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Federal loans come from the federal government and generally have lower interest rates, better terms and conditions, and more flexible repayment plans.
Private student loans come from a private lender such as a bank or other financial institution. Private loans generally have higher interest rates, less favorable terms, and a less flexible repayment plan, however, they are valuable because they can fill in any gaps where the cost of attendance isn’t covered by other aid.
Who is Eligible for Loans?
Student loan eligibility varies based on your lender and type of loan. Submit one personalized form and find out what loans YOU qualify for in minutes.
A scholarship is a form of financial aid given to a student to support paying for their education. Scholarships are typically awarded based on academic or other achievement.
Scholarships come in a variety of sizes and structures. For example, some scholarships may award students $100 to pay for books while others may award $10,000 for tuition costs. Sometimes scholarships are one-time checks, and other times they provide funds on a more consistent basis.
Scholarships, unlike loans, do not need to be repaid. However, it is always important to read the fine print when accepting a scholarship. Some scholarship programs require additional work, engagement with the program, or service after the program concludes.
Summary
This was a LOT. *virtual high-five for getting to the end of this*
It may be overwhelming attempting to absorb all of this information about the various financial aid options. The good thing is that there are various options. Of course, start with seeking out scholarships and move up the ladder until private loans are the remaining option.
And when/if you do get there, know that we’ve got your back here at Sparrow, where you can compare loan rates in the click of a button!
The academic year is the portion of the year while classes are in session, typically from around August to May.
Acceleration
Loan acceleration is when your lender demands immediate repayment of the outstanding balance of your loan. This can happen in circumstances such as:
If you receive loan money, but do not attend any classes at the school where the loan was disbursed.
If you use the loan money to pay for things other than educational expenses at the school you agreed to attend.
If you default on your loan.
If you make a false statement which allows you to receive loan money you are not actually eligible for.
Age of Majority
The age of majority is the age at which a minor is considered an adult. The age of majority will vary based on the country and state you are located in. In most cases, the age of majority is 18.
Aggregate Limit
An aggregate limit, also called a cumulative limit, is the total amount you can borrow from a lender or loan program. For example, if a lender has an aggregate limit of $100,000, you cannot borrow more than $100,000 total from that lender.
Amortized
When a student loan is amortized, it means that a portion of the monthly payment is put towards the loan principal, while the other portion is put towards the interest. An amortization schedule is a record of loan payments that shows how the loan balance will decrease over time with regular payments.
Annual Taxable Income
Annual Taxable Income is the amount of gross income the Internal Revenue Service (IRS) deems subject to taxes.
Application Fee
An application fee is a one-time, up-front fee you pay to apply for a loan. Application fees are usually non-refundable.
APR
An Annual Percentage Rate, or APR, is the interest rate applied to a student loan, plus additional fees. APR is expressed as a percentage and is calculated on a yearly basis.
APR Cap
An APR cap is a limit on how high an interest rate can rise on a variable rate loan. For example, an APR cap may read, “18.00%.” This means that during the duration of your loan, your interest rate will never rise above 18.00%. APR caps provide borrowers with protection.
Autopay Discount
An autopay discount is a discount on your student loan interest rate for opting into automatic payments.
Award Year
An award year is the school year in which financial aid can be applied to fund your education. In most cases, the award year is July 1st to July 30th of the following year.
Borrower
A borrower is an individual who has taken out some type of loan (i.e. private student loan, federal student loan, etc.).
Borrower Benefits
Borrower benefits are cash “give-aways” sponsored by lenders. Scholarships, referral awards, or cash-back upon graduation are all types of borrower benefits. The terms of eligibility for the benefit are set by the lender.
Collection Agency
A collection agency is a company used by student lenders to collect debt that is in default or past due.
Collection Costs
Collection costs are fees incurred when your debt is recovered by a collection agency.
College Application
A process by which prospective students apply for acceptance at a college or university.
Consolidation
In terms of student loans, consolidation is the process of combining multiple student loans into one. This can be done through either a federal Direct Consolidation Loan or a private student loan refinance.
Cosigner
A cosigner is someone who agrees to sign a loan alongside the borrower, taking legal responsibility for paying back the loan if the borrower does not. A cosigner is often a family member or friend but can be anyone who is willing to cosign.
Cosigner Release
A cosigner release allows a cosigner to be removed from a loan after you prove you’re capable of making payments on your own. Lenders specify their own criteria of how you qualify for a cosigner release. If a cosigner is released from your loan, the loan will be removed from the cosigner’s credit report.
Cost of Attendance
The cost of attendance is the total amount it will cost to attend a school.
Credit Bureau
Companies that collect credit ratings on individuals from various creditors and make that information available to financial institutions. The three main credit bureaus are Experian, Equifax, and TransUnion.
Credit Check
A financial institution or company may examine a person’s credit history and financial behavior through a process called a credit check. The purpose of the credit check, in terms of student loans, is to determine an applicant’s eligibility for private loans as well as the interest rates they qualify for.
There are two types of credit checks: hard and soft. A soft credit check doesn’t affect your credit score. A hard credit check does affect your credit score. Soft credit checks occur when a borrower checks their rates with a lender. Hard credit checks occur after a borrower has seen their pre-approved rates and submits a formal application for approval.
Credit History
A record of an individual’s credit usage, activity, and bill payments. Credit history is used to indicate whether or not someone can responsibly make payments on their debt.
Credit Report
Credit bureaus prepare credit reports which contain a detailed description of a person’s credit history. This information is used by lenders to determine an individual’s overall creditworthiness.
Credit Score
A credit score is a number between 300 and 850 that represents an individual’s credit worthiness. Credit worthiness is used to describe the willingness of a lender to trust you to pay back your debts. The higher your credit score, the more a lender will consider you able and responsible enough to repay them back.
Creditworthiness
Creditworthiness is a lender’s ability to trust you to pay back your debt. A borrower deemed creditworthy is one that lenders deem able and responsible enough to may loan payments until the debt is paid off.
CSS Profile
When applying to college or university, you will likely utilize the College Board website. A CSS profile is an account with the College Board that includes all of your student information, family finance information, and more. This profile can help you qualify for institutional aid (aid that comes directly from the school you want to attend).
Debt Consolidation
Debt consolidation is the process of combining some or all of your student loans into one new loan. You can consolidate federal student loans through a Direct Consolidation loan or through student loan refinancing. You can consolidate private student loans through student loan refinancing.
Debt-to-Income Ratio (DTI)
An idea of how much monthly income goes towards debt. The DTI is typically calculated by adding up the monthly debt payments and dividing by the total pre-tax monthly income (gross).
Default
Default occurs on a student loan when payments are missed for 270 days (around 9 months). There are consequences associated with default such as the entire unpaid loan balance being due immediately, the default being reported to credit bureaus which can damage your credit score, and the lender pursuing legal action against you.
Deferment
When loan payments are postponed. Borrowers must apply for federal loan deferment, and it typically can only last for up to 3 years. If eligible for a deferment, the borrower may also not be responsible for paying the interest that accrues in the meantime while they are not making payments.
Delinquency
If a single student loan payment is missed, student loan delinquency occurs. The status will remain until the past-due balance is paid completely including any late fees.
Dependency Override
A process by which a dependent student can request to be classified as an independent student for financial aid purposes, given certain circumstances such as, but not limited to:
An abusive family environment (ie. sexual, mental, or physical abuse)
Incarceration or institutionalization of both parents
Abandonment by parent(s)
Parents lacking the mental or physical capacity to raise the child
Parents location is unknown and they cannot be located
Parents are hospitalized for an extended period
An unsuitable household (ie. child is removed from the household and placed in foster care)
A married student’s spouse dies
A married student gets divorced
Dependent
Dependent students are those that rely on a parent or guardian for financial support.
Direct Consolidation Loan
A Direct Consolidation Loan is a federal loan consolidation option that combines multiple federal loans into one big loan and payment. These loans have fixed interest rates determined by averaging the interest rates on the loans being consolidated, rounded up to the nearest ⅛ of one percent.
Direct PLUS Loan
Direct PLUS Loans are broken into two categories: Grad PLUS Loans and Parent PLUS loans. A Direct PLUS Loan is commonly referred to as a Grad PLUS loan when made to a graduate student or Parent PLUS loans when made to a graduate student’s parent.
Disbursement/Disbursed
Disbursement occurs when student loan funds are sent to your school.
Disclosure
A disclosure is intended to reveal information about terms, lenders, rates, and more. A disclosure may inform prospective borrowers about how rates are calculated for a specific lender they are looking into.
Discounts
A discount is a benefit that lenders provide you to lower your monthly payment. Lenders provide discounts to encourage good borrowing behavior.
For example, some lenders offer a discount (0.25%) if you turn on ACH automatic payment. For you, this discount is great because it results in loan savings. For a lender, an automatic payment provides them with a greater guarantee that they’re going to get their payment on-time.
Discretionary Forbearance
Forbearance can also be referred to as a general forbearance or a discretionary forbearance.
Discretionary Income
In general, discretionary income is the amount of money you have left after taxes and necessary expenses.
When used to describe income-based repayment plans, the PAYE plan, and loan rehabilitation, discretionary income refers to the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.
When used to describe income-contingent repayment plans, discretionary income refers to the difference between your annual income and 100% of the poverty guideline for your family size and state of residence.
Early Action
Early action allows you to apply well before a school’s normal application deadline, thus receiving a decision earlier than the traditional response date. Applying early action is not binding.
Early Decision
Early decision allows you to apply well before a school’s normal application deadline, thus receiving a decision earlier than the traditional response date. Applying early decision is binding. This means that if you apply early decision and are accepted, you are agreeing to commit to that school.
Educational Expenses
Educational expenses are school-related expenses such as tuition, enrollment fees, room and board, meal plans, etc.
Eligible Program
In terms of federal aid, an eligible program is one with organized instruction that meets the length requirements necessary to lead to an academic, professional, or vocational degree or certificate.
Eligible Noncitizen
You are considered an eligible noncitizen if you fall into one of the following categories:
You’re a U.S. National or lawful permanent resident with a green card.
You’re a conditional permanent resident.
You have an Arrival-Departure Record from the U.S. Citizenship and Immigration Services, showing one of the following statuses:
Refugee
Asylum-granted
Parolee
Conditional entrant
Cuban-Haitian Entrant
You hold a T-nonimmigrant status or your parent holds a T-1 nonimmigrant status.
You are a “battered immigrant-qualified alien” who is a victim of abuse by your citizen or lawful permanent resident spouse or parents, or you are the child of a person designated under the Violence Against Women Act.
You are a citizen of the Republic of Palau, the Republic of the Marshall Islands, or the Federated States of Micronesia.
Eligibility
Eligibility refers to the requirements that a borrower must meet to be approved for a loan from a private lender. If the borrower meets the requirements, they may be eligible.
FICO score is an example of an eligibility requirement. Most lenders require that borrowers have above a certain FICO score to be eligible for a loan.
Emancipated Minor
An emancipated minor is someone who has been legally deemed an adult by the court of their state. Emancipated minors are considered independent students for student loan purposes.
Employment History
An employment history is a record of an individual’s past and current employment. Some private student lenders use employment history to determine eligibility for a loan.
Endorser
An endorser, sometimes required for federal PLUS loans, is someone who signs onto the loan alongside the borrower, agreeing to pay it back if the borrower fails to do so.
Enrollment Status
Enrollment status, often reported by the school you attend, indicates whether you are (or were) full-time, three quarter-time, half-time, less than half-time, withdrawn, graduated, etc.
Entrance Counseling
A federal program designed to ensure that borrowers understand the responsibility that comes with borrowing a student loan. The online program teaches borrowers what a loan is, how interest works, what the repayment options are, and how to avoid delinquency and default. Entrance counseling must be completed before loan money can be disbursed.
Exit Counseling
A federal program designed to ensure that borrowers understand their loan repayment obligations and are prepared for repayment. Exit counseling must be completed upon leaving school or dropping below half-time.
Extended Repayment Plan
An extended repayment plan includes a repayment term of up to 25 years. This can lower your monthly payments substantially, however, you will pay more in interest over time than you would with a shorter repayment plan such as a 10-year plan.
FAFSA
FAFSA stands for Free Application for Federal Student Aid. It is a form that the federal government and colleges use to determine how much aid a prospective college student is eligible for.
Federal Financial Aid
Federal financial aid is provided to you after completion and submission of your FAFSA. This aid can include grants and scholarships, work-study programs, and loans.
Federal Student Loans
The U.S. Department of Education is the government body overseeing all federal student loans. Federal student loan eligibility is determined by your FAFSA.
Federal Student Loans
Federal student loans are those issues by the U.S. Department of Education. These loans are granted after a prospective or current student fills out the FAFSA.
Federal Student Loan Repayment Plans
Federal student loans have 4 main repayment options:
Standard Repayment
Graduated Repayment
Extended Repayment
Income-Driven Repayment (IDR)
Federal Student Loan Servicer
A loan servicer is a company assigned to handle the billing on federal student loans on behalf of the federal government. There are 9 servicers that are most commonly used:
Nelnet
Great Lakes Educational Loan Services, Inc.
Navient
FedLoan Servicing
MOHELA
HESC/EdFinancial
CornerStone
Granite State
OSLA Servicing
Financial Aid Award Letter
A financial aid award letter provides details on the monetary assistance a prospective student can receive, specifically in the form of federal aid. This letter comes from each specific institution that the student has applied to.
Financial Need
In general, financial need is the difference between the cost of attendance and your ability to pay. For federal aid, financial need is calculated by subtracting your Expected Family Contribution (EFC) from the overall cost of attendance (COA).
Fixed Rate
An interest rate that does not change over the life-time of your loan. Fixed rates remain the same for the entire length of a loan.
Forbearance
Forbearance allows borrowers to postpone student loan payments, however, it differs from deferment as the borrower is still responsible for paying the interest that accrues in the meantime. Borrowers can pay the interest as it accrues or allow it to be capitalized and added to the loan balance overall.
FSA ID
A username and password combination used to log in to U.S. Department of Education systems online.
Grad PLUS Loans
Grad PLUS Loans is a type of federal student loan for graduate or professional students.
Graduate Student Loans
Both federal and private student loans have options for graduate students. Federal loans for graduate students include Direct Unsubsidized Loans and Direct PLUS Loans. Eligibility for federal student loans is needs based. Eligibility for private student loans is credit based.
Graduated Repayment Plan
A graduated repayment plan starts your loan payments off at a lower amount and slowly increases them every 2 years. A graduated repayment plan will still land you with your loans completely paid off after 10 years, but you will pay more in interest over time in comparison to a Standard Repayment Plan.
Grant
Financial aid that doesn’t need to be repaid. Federal grants are given out based on financial need and a list of other requirements. State and school based grants are available as well, but vary by state and institution.
When you are enrolled in half of the expected course load, often 6 credit hours per semester.
Income
The amount of money you make per year. Household income includes the amount married couples make together.
Income-Based Repayment Plan
IBR is an option for federal student loan borrowers who took out loans after July 1, 2014. It sets monthly payments at 10% of the discretionary income with a repayment term of 20 years.
Income-Contingent Repayment Plan
ICR sets payments at the lesser of either:
20% of discretionary income OR
Whatever your fixed payment would be with a 12 year repayment period
Income-Driven Repayment Plan
Income-driven repayment options depend on your income and family size. This can reduce your monthly payment significantly if your income is low.
Independent Student
When used in terms of federal student aid, an independent student is someone who is at least one of the following:
Born prior to January 1, 1999
Married
A graduate or professional student
A veteran
A member of the armed forces
An orphan
A ward of the court (an individual who is deemed by the courts to be unable to manage their own affairs and has been placed under the legal control or protection of a guardian by the courts)
An individual with legal dependents other than a spouse
An emancipated minor
An individual who is homeless or at risk of becoming homeless
Interest
Interest is the amount of money a lender charges you for borrowing a loan. It is the “extra” money you pay the lender for the opportunity to use their funds.
Interest is typically expressed as an annual percentage rate (APR). You may see a lender differentiate between interest rate and APR. There is a subtle difference. APR is the annual cost of a loan to a borrower, including fees. Interest rate is the annual cost of a loan to a borrower, excluding fees.
Interest-Only Payment Plan
Under this payment plan, you’ll only pay the interest that accrues while you’re in school. After graduation, you’ll make full monthly payments. This plan saves you money in interest over time.
Interest Rate
Federal and private student loan interest rates are calculated differently.
Federal loan interest rates are set by Congress each year. Private lenders set their interest rates based on a variety of factors, typically including the creditworthiness of the borrower.
Iraq and Afghanistan Service Grant (IASG)
Iraq and Afghanistan Service Grant is a federal grant that provides money to students whose parent(s) or guardian(s) died as a result of military service in Iraq or Afghanistan.
Legal Guardianship
A court designation that authorizes an individual to care for someone in place of parents. If you have a legal guardian, you qualify as an independent for federal aid purposes, meaning you do not need to report your parents’ income on the FAFSA.
Lender
The organization or company you borrow money from.
Loan
Money given to an individual in exchange for repayment of the money, usually with interest.
Loan Discharge
Removal of the obligation to repay a loan, often granted for extenuating circumstances.
Loan Forgiveness
Removal of the obligation to repay a loan, often granted after working in a particular industry.
Loan Limits
The minimum and maximum student loan debt that private lenders are willing to refinance.
Loan Originator
Someone who takes a prospective student loan borrower’s application, reviews it, handles the approval process, provides the loan agreement, and disburses the funds. Lenders work with third-party loan origination services to provide borrowers digital lending experiences.
Loan Principal
Principal, also known as the principal balance, is the amount still owed on a student loan or refinance loan.
Loan Rehabilitation
The process by which a borrower can bring their student loan out of default by abiding by certain repayment requirements.
Loan Servicer
The company who handles loan collection, customer service, and loan maintenance.
Master Promissory Note
The Master Promissory Note (MPN) is a legal document in which borrowers agree to repay their federal student loans, including any interest that accrues, to the U.S. Department of Education.
Merit-Based
Merit-based aid is aid that does not factor in a student’s financial need. Rather, it is based on factors such as academic performance, extracurricular achievements, etc.
Monthly Payment After Graduation
After graduation, you’ll be expected to begin making full monthly payments on your student loans. The size of these monthly payments depends on your loan term, APR and principal balance. Some lenders provide a six month “grace period” before full payments begin. During the “grace period” payments aren’t due but interest accrues.
For loans with a fixed interest rate, monthly payments after graduation are set ahead of time. For loans with a variable interest, monthly payments after graduation are estimates, as the interest rate may increase or decrease during the duration of your loan.
Monthly Payment During School
During school, you may be expected to make payments on your student loans. The size of these monthly payments depends on your payment plan. If you don’t make monthly payments during school, your loan balance will rise. There are three popular types of in-school monthly payments.
You may only pay the monthly interest on your loan while you’re in school. This plan is called “Interest Only.” You may pay a fixed amount while you’re in school that only covers part of the monthly interest that you owe. This plan is called “Partial Interest.” You may pay full monthly payments while you’re in school. This plan is called “Immediate.”
Origination Fee
Fee charged by a lender to cover the cost of processing the loan. The fee is usually expressed as a percentage of the loan size. You will not have to explicitly pay the lender the origination fee. The fee is deducted from the amount of money the lender disburses to you.
For example, if a loan has a 1.00% origination fee and you’re looking to borrow $10,000, your origination fee will be $100. Assuming no other expenses, you’ll receive $9,900 ($100 deducted for the origination fee) but have to pay back the full $10,000.
Out-of-State Student
A student who is attending school outside of their state of legal residence.
Parent PLUS Loan
Student loans offered by the federal government to parents who want to borrow money for their child’s education.
Parent PLUS Loan Refinancing
Borrowing a private loan at a lower interest rate to cover the cost of your current Parent PLUS debt. The new loan, with a lower interest rate, allows you to save money.
Payment Plan
A payment plan is a way to pay back a loan over an extended period of time. For private student loans, there are four common payment plans: Deferred, Immediate, Interest Only, Partial Interest.
Deferred payment: You’ll pay nothing during school but your loan balance grows.
Immediate: You’ll make full monthly payments while in school.
Interest Only: You’ll only pay the interest on your loan while you’re in school.
Partial Interest: You’ll make a fixed monthly payment while you’re in school that only covers part of the interest that you owe.
As a guiding rule, the more you pay toward your loan today, the less you’ll pay in the future.
Pay As You Earn (PAYE)
A repayment plan in which your monthly student loan payments are reduced to 10% of your discretionary income and never more than your payment on a standard 10-year repayment plan.
Prepayment Penalty
Prepayment refers to paying off your full student loan balance earlier than scheduled. Some private lenders have a prepayment penalty, a fee charged for paying off debt faster than agreed upon. Note that student loan lenders are not allowed to charge a prepayment penalty.
Prequalification
The process a lender takes to determine if a borrower is eligible for a loan. If the borrower is eligible, the prequalification process will determine at what rates the borrower qualifies. Prequalification requires a soft credit check which does not impact a borrower’s credit score.
Principal
The amount you initially borrow and agree to pay back.
Private Student Lender
Banks, credit unions, or other financial institutions that lend money to students.
Private Student Loans
Loan funded by private lenders. Private student loans typically require a soft credit check to determine eligibility, as where federal loans do not.
Public Service Loan Forgiveness
A loan forgiveness program designed for people who pursue a career with the federal, state, local, or tribal government or for an eligible not-for-profit organization. Those who qualify and are accepted will receive forgiveness for their entire remaining balance after they’ve made 120 qualifying monthly payments on their loan.
Refinancing Student Loans
Refinancing is a process in which you take out a new private loan at a lower interest rate to replace all of your other loans. This typically also comes with a more favorable repayment term.
Repayment Term
A repayment term is the length of time a borrower has to repay their debt in full.
Revised Pay As You Earn (REPAYE)
Under REPAYE, the term of a borrower’s loan is extended. This typically means extending to a 20 year repayment term for undergraduate loans and a 25 year repayment term for graduate loans. Under REPAYE, the monthly payment is also usually capped at 10% of the discretionary income.
Satisfactory Academic Progress (SAP)
Successful completion of the coursework necessary to progress toward an eligible certificate or degree.
Scholarship
A type of financial aid that you don’t have to pay back. These can be based on merit, financial need, or a combination of both.
Spouse Loan Consolidation
A process that involves combining all of you and your spouse’s loans together into one new loan instead of keeping separate loan accounts. PenFed Credit Union is the only lender that offers this option of Spouse Loan Consolidation.
Standard Repayment Plan
Standard Repayment Plans are the default repayment plan for federal student loans that require a fixed monthly payment with the goal of paying off the loan in full in 10 years.
Student Loan Consolidation
Consolidation involves combining multiple student loans into one loan, typically through a Direct Consolidation Loan or a student loan refinance.
Student Loan Grace Period
When you initially take out a loan, you typically don’t have to start making payments on it immediately. Oftentimes, payments will be automatically deferred until 6 months after graduation, however, this grace period varies depending on the loan you have and your specific lender.
Student Loan Interest Tax Deduction
A tax deduction for student loan borrowers that allows them to deduct all or some of the amount they paid in interest on their student debt from their income.
Subsidized Student Loan
Direct Subsidized Loans are federal student loans available to students with financial need. There is no credit check for these loans, and interest does not accrue while you are in school and for the first 6 months after you leave school.
Total and Permanent Disability (TPD) Discharge
A form of student loan forgiveness given to borrowers who are unable to repay their debt due to a permanent mental or physical disability.
Total Interest Expense
Total interest expense is the amount of interest that accrues across the entirety of a borrowing period. It is the total cost of borrowing a loan, excluding one-time fees (i.e. origination fee).
For a fixed rate loan, total interest expense is set to a specific monetary amount (assuming the borrower makes minimum monthly payments on-time during their payback period). For a variable rate loan, total interest expense is an estimate. Because the interest rate of a variable rate loan either increases or decreases over time, it’s impossible to know exactly how much interest will accrue over a borrowing period.
Tuition
Fees associated with learning at a college or university.
Type of Interest Rate
There are two types of interest rates for student loans: fixed and variable. A fixed rate loan has the same interest rate for the entirety of the borrowing period, while variable rate loans have an interest rate that changes over time.
Borrowers who prefer predictable payments generally like fixed rate loans, which won’t change in cost. The price of a variable rate loan will either increase or decrease over time, so borrowers who believe interest rates will decline tend to choose variable rate loans.
In general, variable rate loans have lower interest rates and can be used for affordable short term financing.
Undergraduate Student
A student pursuing a degree at their first level of higher education. In other words, a student at a college or university who has not yet earned a degree.
Unsecured Loan
Unsecured loans are those that don’t require any form of collateral. These loans tend to have higher interest rates as they are riskier to the lender. Student loans are a type of unsecured loan.
Unsubsidized Student Loan
Direct Unsubsidized Loans are sponsored by the Department of Education and available to both undergraduate and graduate students. These loans are not needs based. There is no credit check requirement for these loans, however, the government does not cover the interest for you at any point. Interest starts accruing immediately after the loan is originated.
Untaxed Income
Income excluded from taxation by the Internal Revenue Service (IRS).
U.S. Department of Education
A Presidential cabinet-level department of the U.S. government that is administered by the U.S. Secretary of Education. The budget of this department supports the grants, loans, and work-study programs provided to students and families to pay for college education.
Variable Rate
Variable rates are interest rates that fluctuate over the life of a loan. The rate typically changes on a monthly, quarterly, or annual basis.
Work-Study Programs
Work-study programs are provided to students with financial need based on their FAFSA. The programs provide job opportunities to these students that are typically part-time and flexible, specifically designed to be easier to manage alongside a college education.
Even thinking about your student debt can be overwhelming, but knowing how you’re going to pay it off is important.
Let’s review the 3 main strategies for paying off debt and their general effectiveness.
1. (Least Effective) The Shotgun Approach
The Shotgun Approach is where you pay just a bit more than the minimum payment each month on all of your debts. When you think about it, this may seem quite effective because you’d be making progress on all of your debts at once.
In reality, this isn’t as effective of a strategy, and frankly isn’t recommended, because it will take you much longer to get rid of any single debt. Additionally, your loans are likely not all at the same interest rate. With the Shotgun Approach, you’d be throwing money towards your loan with a lesser interest rate when you could be throwing larger chunks of money towards your loan with a higher interest rate.
Pros:
You would make progress on all of your loans.
Cons:
It will take you a lot longer to pay off any one debt.
You won’t be throwing as much money as you could towards your debt with the highest interest rate.
You will likely pay more over time.
Bottom Line: This isn’t a very effective method, and we don’t recommend it.
2. (Medium Effectiveness) The Debt Snowball Approach
The Debt Snowball Approach is the second most effective method and operates under the following steps:
Look at all of your debts, and find the one with the lowest balance.
Calculate your monthly minimum payments.
Pay that minimum monthly payment on every loan you have.
Put all extra money you have into the smallest debt you owe until you pay it off. Once you pay off that loan, the monthly payment you’ve allotted for it is now “extra” money in your pocket.
Roll over that “extra” money to your next smallest loan.
Continue this process until all debt is paid off from smallest balance to biggest balance.
Source: Moolanomy, Dave Ramsey’s Snowball Approach
The Debt Snowball approach is ranked at medium effectiveness because it is a proven method for paying off student debt, however, it isn’t the best. Your largest student loan will accrue interest rapidly as it compounds. So, you could save yourself some money over time by opting for the Debt Avalanche method which we’ll discuss next.
Pros:
The initial psychological boost from paying off a loan in full could help you with paying off the others.
This method is effective for people who might not have as much money right after graduating. You can start small with payments on your smallest loan and work your way up as your career stabilizes financially.
Cons:
Your largest debt will be accruing interest while you pay off your smallest debt, which could increase fairly rapidly depending on your interest rate.
Bottom Line: It’s okay, but we wouldn’t recommend.
3. (Most Effective) The Debt Avalanche Approach
The Debt Avalanche approach has been deemed the most effective strategy for paying off student loan debt. It operates with the following steps:
Look at all of your debts, and find the one with the highest interest rate.
Make the minimum monthly payment on each debt you have.
Pay extra on only the highest interest rate until the debt is paid off. This will allow you to get rid of the highest interest rate first.
Source: JackieBeck.com
Pros:
Your loan with the highest interest rate would be paid off first, saving you a decent amount of money in the long run.
You will save more money in the long run with the Debt Avalanche approach in comparison to other repayment strategies.
Cons:
This method isn’t the best habit-former.
This method can be intimidating and less motivating. Starting with paying off your largest balance could leave you feeling like you aren’t making much progress.
Bottom Line: This is by far the best option for debt repayment due to its ability to save you money in interest.
The Difference Between Debt Snowball and Debt Avalanche
The Debt Snowball and Debt Avalanche approaches might sound pretty similar. So what is the difference?
In very simple terms, the Debt Snowball method is focused on lowering the number of loans you have and the Debt Avalanche method is focused on lowering the overall amount you will owe. While both are useful strategies and effective in their own regard, one method might be easier or more effective for you personally.
The Debt Snowball method focuses more on maintaining motivation and the overall balance size as where the Avalanche Method focuses on saving money on interest.
Source: Art of Thinking SMART
Which Method Should I Use?
It might be confusing trying to decide which method to use, and ultimately, it comes down to which one fits your financial goals best. While we definitely recommend the Debt Snowball or Debt Avalanche methods over Debt Shotgun, there are pros and cons to each one. You may find that you need the psychological boost of Debt Snowballing, or that saving money on interest with the Debt Avalanche method makes most sense for you.
With both the Debt Snowball and Debt Avalanche methods, there are free worksheet templates online to help you break down the payments over time. This can help you visualize what each method would look like to decide whether one fits your financial goals better.
Either way, having a strategy in general and sticking to it will set you up for success.
Forbearance, deferment, and forgiveness all have some element of not making payments on your student loan. If deciphering the difference seems a bit challenging, read on as we break it down!
What is Loan Forbearance?
Loan forbearance provides you the opportunity to suspend loan payments temporarily for no more than 12 months at a time. Typically, people choose to do so in times of severe financial stress.
While payments are postponed, you will not be responsible for paying the interest that is accruing. When the forbearance period ends, you will be responsible for that interest however.
Federal Student Loan Forbearance
With a federal loan servicer, you can request a general forbearance for up to 12 months for a Direct, FFEL, or Perkins loan. If your financial hardship continues after the 12 month period, you can request an additional forbearance of up to 12 months. Borrowers are allowed 12 months of forbearance at any given time, but can only request forbearance up to 3 years total.
Whether or not you are granted a forbearance is at the discretion of the loan servicer. Oftentimes, for situations such as unexpected major medical expenses, unemployment, or intense financial difficulty that prevents the borrower from making loan payments, forbearance will be granted.
You can request a general forbearance by calling the loan servicer or filling out a form online, however, the specific process may differ from lender to lender.
Private Loan Forbearance
Private lenders are generally less flexible when it comes to forbearance. This makes sense with what we know about private lenders (less favorable loan terms, higher interest rates, etc.) in comparison to federal loans.
Some private lenders will grant you forbearance for similar circumstances that prevent you from making loan payments. However, these forbearance periods typically come in 2 month increments and cannot exceed 12 months total (quite different from federal forbearance!). Additionally, private lenders may charge a fee for each month you are in forbearance.
What is Loan Deferment?
Similar to loan forbearance, loan deferment allows you to temporarily postpone loan payments.
The difference between loan forbearance and deferment is that in deferment, you may be responsible for still paying the interest that accrues during the deferment period.
For example, even if you aren’t paying your typical $125/month loan payment, you will still be required to keep paying the $25/month in interest. (random numbers just for example’s sake!)
Federal Student Loan Deferment
Some federal loans will require you to pay interest during the deferment period, and others will not. Here’s a full breakdown1:
Federal Loan Types That Will Not Require You to Pay Interest in Deferment:
Direct Subsidized loans
Subsidized Federal Stafford loans
Federal Perkins loans
Subsidized portion of Direct Consolidation loans
Subsidized portion of FFEL Consolidation loans
Federal Loan Types That Will Require You to Pay Interest in Deferment:
Direct Unsubsidized loans
Unsubsidized Federal Stafford loans
Direct PLUS loans
Federal Family Education Loan (FFEL) PLUS loans
Unsubsidized portion of Direct Consolidation loans
Unsubsidized portion of FFEL Consolidation loans
With a federal loan deferment, there are various circumstances that would make a borrower eligible, such as:
Cancer treatment deferment
Economic hardship deferment
Graduate fellowship deferment
In-school deferment
Military service and post-active duty student deferment
Parent PLUS borrower deferment
Rehabilitation training deferment
Unemployment deferment
You can request a federal loan deferment by submitting a request form to your loan servicer.
Private Loan Deferment
Private student loan deferment is a bit more complicated. Many lenders do offer some form of deferment, although it doesn’t look quite like it does for federal loans.
Many private lenders will offer assistance programs first such as relief while in school. Even with that, the interest on the loan will continue to accrue and capitalize at the end of the deferment period. You can lessen this interest by paying interest-only payments while it accrues, however, this isn’t always accessible if deferring for financial reasons.
To defer a private student loan, you’ll need to contact your individual lender as the process varies. Typically, it will require the submission of a form to see if you are eligible.
What is Loan Forgiveness?
Loan forgiveness has become an especially hot topic ever since President Joe Biden announced his desire to forgive a portion of the federal student loan debt.
Loan forgiveness means that you are no longer required to repay some or all of your loans. (Yup, free of student debt.)
Loan forgiveness programs have existed well before Biden’s announcement of such and come in a variety of forms, typically via federal student loan programs such as:
We won’t do a deep dive into each one of these as some are fairly uncommon in comparison to the others. One of the most common forgiveness programs, however, is the Public Service Loan Forgiveness Program (PSLF).
Public Service Loan Forgiveness Program (PSLF)
The Public Service Loan Forgiveness Program offers loan forgiveness for borrowers with federal Direct Loans that pursue employment by a government or not-for-profit organization. Borrowers that are accepted will only be responsible for making 120 qualifying monthly payments on their loan while working full-time for their qualifying employer. After those payments, PSLF forgives the remaining loan balance.
It’s important to note that not everyone who applies will be granted loan forgiveness. Some resources state that only 2.41% of applicants are granted forgiveness through the PSLF program2.
Federal vs. Private Loan Forgiveness
When discussing loan forgiveness, people are often referring to federal loan forgiveness. At this time, there aren’t many, if any, systems in place for private loan forgiveness.
Summary
While we all certainly hope that moves are made in regards to forgiving our student debt, forbearance or deferment might be the most viable option if experiencing financial hardship that prevents you from making loan payments.
Neither deferment nor forbearance will impact your credit score as both are done with the approval of your lender. So, know that whatever decision you make, it will be okay. We’ve got your back.
You make a loan payment. The total debt goes down.
Then you come back the next day. The loan amount is back up to where it was before your payment.
Having some deja vu?
This is because of interest. Let’s break down what interest is, how it works, and why your total loan balance may be going up so quickly.
What Is Interest?
Interest is essentially the amount you pay a lender to use their money to pay for college. When a lender decides to give you money, they make a profit off of the interest paid over time on top of the original loan amount.
Most lenders understand that students will not be able to make loan payments while in school and often don’t require payments until a few months after you leave school. However, this does not mean that interest isn’t accruing on the overall debt amount. This means that the amount you owe can go up, and fairly rapidly if you don’t pay close attention to it.
How Does Interest Work?
It’s one thing to understand the concept of interest, but it’s another thing to really understand how it’s calculated. Let’s break it down.
(As a refresher before we get started, principal is the initial amount you agreed to pay back. Interest is the price you pay to borrow that money. For example, if you borrowed $30,000 to pay for college, and your loan balance is currently $40,000, $30,000 of that is principal, and $10,000 of that is interest.)
When you make a required monthly loan payment, you’re making a payment on the interest before any money goes toward reducing your principal. Whatever is left over after paying the interest is then put towards the principal balance. Over the life of your loan, the interest paid will go down each month, which subsequently allows you to put more towards your principal.
To break this down even further, we’ll use an example with some simple numbers.
Say you borrowed $100 from a lender some years ago, and your balance is now $120. You owe $100 in principal and $20 in interest. If you make a $10 payment towards your debt, you will be paying $10 towards the interest on your debt, bringing your overall total debt down to $110. However, the amount you just paid hasn’t chipped away at actually paying back what you initially borrowed. You simply paid part of what the lender is charging you to borrow that money.
How Does Interest Compound?
Interest is typically compounded daily. So what exactly does that mean?
The annual interest rate is divided by 365 (the days in the year) to get your daily interest rate. That is how much your interest will compound daily. The kicker is that if you aren’t making loan payments, the interest is compounding on a larger and larger amount.
This is what that can look like: (Get ready for some *quick maths.*)
Let’s say you borrowed $10,000 from a lender with a 5% interest rate.
Your daily interest rate would be roughly 0.014% (5% ÷ 365).
On day 1, your total loan debt would be $10,000.
On day 2, it would be $10,001.40.
For day 3, your interest would be calculated based on this new amount of $10,001.40, meaning…
Day 4, your total loan debt would be $10,0002.80.
At the end of a year, you would have accumulated a decent chunk in interest.
This compounding takes place when you are in school and beyond, so, you can imagine how this number can increase so rapidly if you aren’t making payments while in school.
How Much Interest Will I Pay?
This will vary from person to person depending on your total loan amount and the interest rate.
The average student loan accrues $26,000 in interest over the course of 20 years1. This interest ends up being around 67.1% of the average borrower’s total cost of repayment. This means that over half the amount paid over time is strictly from interest.
For a specific calculation based on your individual loan information, we recommend using Sallie Mae’s Accrued Interest Calculator.
What is Considered a High Interest Rate?
This might lead you to ask about what is considered to be a good interest rate. The reality is, interest rates vary greatly by lender and type of loan. So, it’s hard to say what is good and what isn’t.
Generally speaking, anything at or above 10% is considered a very high interest rate for student loans. Interest rates at 7% and below is a much better place to be.
Between 2006 and 2021, the average federal student loan interest rates were:2
4.66% for undergraduates
6.22% for graduate students
7.27% for parents and grads who take out PLUS loans
In May 2018, the average private loan interest rates were:3
6.17% for borrowers with 5-year variable-rate loans with a cosigner and beginning repayment immediately
7.64% for borrowers with 10-year fixed-rate loans with a cosigner beginning repayment immediately
How Can I Lower the Amount of Interest that Accrues?
The best way to prevent your total debt amount from rising so rapidly is to make at least the minimum monthly payments. On top of that, you can also save on interest by making biweekly and surplus payments.
If possible, you should always aim to pay off the interest that has accumulated to keep the loan at its initial amount.
Final Thoughts from the Nest
Interest is almost always part of taking out a student loan. Making educated decisions about what loans you take out and the interest rates associated with them is the most important piece to this equation. Always be sure to compare your loan options before agreeing to any one lender.
If you already have a student loan and struggling to make payments or think you may be able to get a lower interest rate, it may be time to consider refinancing.
For the 2021-2022 academic year, the average interest rate for federal student loans was 3.73% for undergraduates, 5.28% for graduate students, and 6.28% for parents and graduate students taking out PLUS loans. While it’s challenging to determine the average for private student loans simply due to how much the interest rates vary, they tend to be even higher.
Finding ways to lower your student loan interest rate could lower your overall monthly payment and save you money over time. Here’s how to lower your student loan interest rate for both federal and private student loans.
Can I Get a Lower Interest Rate on My Federal Loans?
Interest rates on federal student loans are set by Congress each year and are technically considered law. Unfortunately, this means that borrowers of federal student loans can’t negotiate their way into a better interest rate.
However, you may be able to get a small reduction on your interest rate by opting into automatic payments. If you agree to make payments on your loan through autopay, a system that automatically takes the monthly payment amount straight from your bank account, you may be able to secure around a 0.25 to 0.50 percentage point reduction in your interest rate.
If you’re confident this method wouldn’t send you into a spiral of overdraft fees, it may be a good option to enroll in auto-debit payments to save you a bit of interest.
Note: Be sure to check with your federal loan servicer to see if they offer interest rate discounts for setting up autopay.
Can I Get a Lower Interest Rate on My Private Loans?
Interest rates on private loans are set by the lender themselves and based on a variety of factors such as your credit score and income. This means that the rates are not set in stone as with federal student loans. Private lenders may be open to negotiation or reevaluating your interest rate.
Proactive Steps to Lower Your Private Loan Interest Rate
If you’re thinking about taking out a private student loan, there are a few things you should do beforehand that will help you secure a lower interest rate when you apply:
Take a Look at Your Credit Score
Interest rates are calculated based on a variety of factors, one of which being your credit score. Ensuring you have a solid credit score before applying for a private loan will help you get a lower interest rate.
Although each lender is different, in general, private lenders look for credit scores around 660 or above. While you can still get a private loan with a bad credit score, your interest rates will be higher. If your credit score isn’t great, don’t worry. There are things you can do to raise it.
Find Someone Willing to Cosign
A cosigner is someone who signs onto the loan alongside the borrower, agreeing to pay back the loan if the borrower doesn’t. Having a cosigner with a good credit score can help you secure a lower interest rate on your private loan because lenders will assume less risk. Given that most young people have a limited credit history, cosigners are very common for private student loans. In fact, around 90% of undergraduate students use a cosigner for their student loans.
The only “risk” to having someone cosign is that they are technically equally responsible for the loan, meaning that if you fail to make payments on the loan, it could hurt their credit score.
Compare Interest Rates Carefully
As always, before jumping into any private loan, it’s important to compare multiple private lenders to find the lowest rate. Complete Sparrow’s application to compare real rates from more than 10 different lenders to make sure you’re getting the best rate possible.
Lowering Your Interest Rate If You Already Have a Loan
If you already have a private student loan, you can lower your interest rate by:
Opting Into Automatic Payments
As with federal loans, many private lenders also offer a discount for opting into an autopay system. While the rate may only drop by 0.25 to 0.5 percent, every bit makes a difference.
Even if you only saved $10 a month from this decrease in interest, that would be $1,200 over the course of a 10-year repayment.
Refinancing Your Student Loans
If you have a stable income and plan to pay off your student debt quickly, you should consider refinancing for a lower interest rate.
Refinancing your loan is the process of taking out a new loan with a lower interest rate to pay off the loan you currently have. By doing this, you can reduce your payments and save on interest.
Borrowers can also choose to consolidate their federal student loans through a Direct Consolidation Loan. The new interest rate will be the average of the rates on the loans you are consolidating. However, you’ll want to consider some of the benefits associated with federal student loans that you’d be giving up, such as income-driven repayment, the possibility of loan forgiveness, and other federal borrower protections.
Negotiate with the Lender
This method won’t guarantee you any savings in interest, but it’s always worth a shot. Look around online for private lenders offering competitive interest rates and present it to the lender you’re already working with. The lender might be willing to make alterations to the rate you previously agreed upon in an effort to keep you as a customer.
Final Thoughts from the Nest
Finding a way to lower your student loan interest rate is one of the best ways to save yourself money in the long run. While not all methods will work for everyone, it’s likely that if you’re trying different approaches, you’ll find at least one that will work.
Your student loan debt increases every single day because interest compounds daily. If you are looking to pay off your debt faster, making monthly payments won’t be most effective.
Here’s two simple hacks that can help you pay off your student debt faster.
You’re Paying Off Your Debt Inefficiently
If you’re making monthly payments on your student loan debt, you aren’t making the most efficient payments possible. Now, we aren’t saying monthly payments are a bad thing, but you could be paying more efficiently – and why wouldn’t you want to do that?!
Lenders determine a specific repayment period and divide the total principal amount plus the interest the loan will accrue into monthly payments. Borrowers then make those monthly payments overtime and pay off their loan.
However, with student loans, interest accruesdaily. This doesn’t align super well with monthly payments. You could be making monthly payments on your loans for years without making a dent in the principal because it’s hard to really get ahead of the interest.
Monthly payments work, but we want to give you the best options, not just the ones that work, so we can all make the smartest financial decisions.
Let’s break down the two main things you can do instead to pay off student debt faster.
Biweekly Payments
Biweekly student loan payments are simple.
If you typically pay $500 once a month, you would instead pay $250 twice a month.
Because there are 52 weeks in a year, you would end up making 26 payments (or 13 full months worth of payments) instead of the 12 you’d make with monthly payments. Not only does this mean an additional payment, but you’re able to keep up with the interest which means paying down your loan faster.
Continuing with the example of $500 monthly payments, biweekly payments would look like this:
Monthly Payments:
$500/month
x 12 months
$6,000 total
Biweekly Payments:
$250 every other week
x 26 weeks (52 weeks / 2)
$6,500 total
Paying more each year would save you both money and time as you’d pay your loan off faster than your initial repayment period.
Here’s another example from StudentLoanPlanner for a $50,000 loan with a 5.7% interest rate:
Another pro of biweekly payments? Most people get paid biweekly, and thus, making biweekly payments works great with their budget (keeping the money out of sight, out of mind!)
Surplus/Greater than Minimum Payments
This may sound fairly obvious, but putting any extra money you can onto your loans could save you thousands of dollars over time.
If you pay only the minimum monthly payments on your loan, it will take you the full repayment period. However, if you added even an additional $100 a month to your payments (or $50 every biweekly payment!), you could save yourself some serious coin.
Let’s look at some numbers to conceptualize just how big of a difference this can make
Total Current Balance: $50,000 at a 5% interest rate
10-year repayment plan
Minimum Monthly Payments: $530
Total Paid Over 10 Years: $63,639
10-year repayment plan
Minimum + $100 Extra/Month: $630
Total Paid: $60,820
Time Saved: ~1.9 years
Now, imagine if you were able to add $200 or maybe even $500 on some of those months instead of $100. Incorporating surplus payments can save you a lot of money and time.
Summary
Making monthly payments is a good way to pay off student debt, but making biweekly surplus payments is even better. If you’re struggling to allocate funds in your budget to this extra bit of money, due to high interest rates or unfavorable loan terms, it might be time to consider refinancing your student debt.
The term “refinancing” is one we hear a lot in the realm of student loan repayment, but how many of us know what it actually means?
Refinancing is actually surprisingly easy to understand: a lender will pay off your existing loans and give you a new one with a lower interest rate or shorter repayment plan. It’s basically a chance to swap your current loan for a better one, with better terms.
In the long run, the goal of refinancing is to help save you money. And the best part is, you are allowed to refinance as many times as you like, free of cost. Most lenders allow you to refinance both your federal and private student loans.
Let’s say you took out a student loan of $50,000 at an interest rate of 5% during undergrad and you plan on paying it off over the next 10 years at a monthly rate of around $530. By the time you finish paying it off, you will have actually paid $63,640 — the original $50,000 plus $13,640 in interest.
On the other hand, if you refinance at an interest rate of 2.5% over the same ten-year period, you can reduce your monthly payments to $471, and pay only $6,562 in interest, saving $7,078 over the lifetime of the loan.
Most lenders require you to have a good credit score (in the mid 600s). Lenders also want proof of a stable income and cash flow to support your new loan.
If your credit score has improved since taking out your original student loan, you may be well-positioned to refinance.
If your credit score is poor, you may struggle to find a lender willing to help you refinance because you will be viewed as a higher risk. If this sounds like you, consider adding a creditworthy cosigner to your application to increase your changes of qualifying for a lower rate.
Change in interest rate and loan term
Before you refinance your student loans, consider the change in interest rate and loan term. A lower interest rate means you will pay less interest each month, resulting in a lower total payment.
The loan term dictates how long you will be paying back the loan. A shorter term typically means a higher monthly payment, but allows you to get out of debt faster. On the other hand, a longer term usually means a lower monthly payment, but increases the amount of interest that you have to pay throughout the lifetime of the loan.
Type of loans
When you refinance, you are essentially applying for a private loan. If you already have private loans, refinancing is a great way to decrease the amount of interest you pay on your loans.
If you have federal loans, however, you’ll want to weigh the reduction of your interest rate with the loss of federal student benefits that you’ll miss out on when you refinance with a private lender, such as:
Income-driven repayment plans
Income-driven repayment plans readjust the amount you pay as your income falls. This keeps your repayment from ever totaling more than 10% of your monthly income, and it can help you stay financially secure.
Loan forgiveness
Federal student loans have some loan forgiveness options, such as the Public Service Loan Forgiveness and Teacher Loan Forgiveness. When you refinance a federal student loan, you lose access to all these long forgiveness programs.
Deferment and Forbearance
Federal student loans include deferment and forbearance which allow you to postpone your loan payments if you suffer severe financial hardship. But if you refinance, you’ll likely lose these protections.
Am I Eligible to Refinance My Student Loan?
While everyone’s situation is different, here are some of the qualities that will make you well-positioned to refinance your student loans.
You’ve graduated or are no longer in school.
You have a high-interest private or federal student loan
You earn a steady flow of income
You’ve kept up with your loan payments and have a credit score in the mid/high 600s or above.
You do not work for the government, and you do not foresee the need for an income-driven payment plan.
If this describes you, then you are in good shape to refinance your student loans, and will likely save a substantial amount by doing so. If you answered yes to some of these and not others, you should consider refinancing only your private student loans.
Situations Where it Makes Sense to Refinance
Here are some situations where it would make sense:
You have a private student loan with a high interest rate
If you’ve got a private student loan with a high interest rate, you should try refinancing as soon as possible. That will maximize your potential savings.
If you can lower your interest rate (even by just a half of a percentage point), it could save you thousands of dollars throughout the lifetime of the loan. If you previously refinanced your loans, you can refinance again to lock down an even lower rate. Since refinancing is free, you are almost guaranteed to save money.
Want to compare all your student loan refinancing options? Complete the free Sparrow application to compare personalized rates from over 15 premier lenders.
Your finances improve
Credit score and income are the two main factors that determine the interest rate on your private student loans. If your credit score increases or you get a pay raise, it could be a great time to shoot your shot at refinancing your student loans. Refinancing to a shorter repayment plan at a lower interest rate will allow you to pay off your loans faster and save money in the long term.
In order to refinance, you generally need a credit score at least in the high 600s and enough income to consistently pay your debts and other expenses. If you don’t meet those criteria, you could refinance with a cosigner who does.
You have a federal student loan but don’t plan on using of the federal protections
If you don’t plan on taking advantage of federal loan benefits, such as income-driven repayment and Public Service Loan Forgiveness, refinancing might be a good option for you. Only refinance your federal student loans if you know you can get a lower rate. There is no reason to refinance your loans unless you end up paying less in interest.
You have a creditworthy cosigner
A cosigner is a person – such as a parent, close family member or friend – who pledges to pay back the loan if you do not. If you can find a cosigner with strong credit and high income, you’ll have a better chance of qualifying for a low interest rate. This could end up saving you thousands of dollars of interest expense over the lifetime of your loan.
How to Prepare For Refinancing
1.Explore all private loan options.
Determine if the private loan being considered will have a fixed or variable interest rate. A fixed interest rate remains the same throughout the lifetime of the loan, while variable rates will likely fluctuate throughout the lifetime of the loan depending on interest rates set by the banks.
Although a variable rate may be lower at certain points throughout the loan, they are largely unpredictable. On the other hand, fixed-rate offers more stability since you’ll know exactly how much you owe each month. Both can be good options depending on your circumstance and the movement of variable rates.
2. Know where you stand.
A strong credit score will almost certainly be required. While most lenders want to see scores in the mid-to-high 600s, aiming for 700 or higher will help with both the approval process and the rate you will qualify for. This means you will need to know where they stand before starting the process.
3. Carefully examine your credit report and score.
There are a number of sites that allow you to check your credit report for free. If there are mistakes, you will need to take the time to correct them before you start the process of applying for refinancing. If your score is not where it needs to be, you will need to take steps to improve your score before starting on the path to refinancing.
4.Shop around for the best rates.
Some borrowers may be concerned about damaging their credit score by having too many hard inquiries over a short period of time. Luckily, we’ve built a free tool that allows you to see what rates you’ll qualify for without impacting your credit score.
It is no secret that the cost of education has increased dramatically over the last several decades. At the current rate, the cost of college doubles every nine years. The rapid increase in the cost of education has forced generations of Americans to rely on student loans to afford a degree. Unsurprisingly, almost 70% of students in the Class of 2019 took out student loans.
Since borrowing affects most students in the US, it is important to know how the student lending industry operates. In this article, we’ll break down everything you need to know about student loans.
What is a Student Loan?
A student loan is money borrowed from the government or a private lender, designated for educational purposes. Typically, these loans cover the cost of tuition, books, supplies, and room-and-board.
While it is best to avoid debt, many financial professionals classify student loans as “good debt.” That’s because a college education is seen as an investment in yourself that helps increase your lifetime earning potential. In other words, the career earnings unlocked by a college degree are worth more than the loan. On average, college graduates earn more money and have better job security across their professional careers than those with only a high school diploma.
Federal student loans are provided by the U.S. Department of Education, while private student loans and student loan refinancing are supported by banks, credit unions, non-profits, and other private lenders.
Of the three types of debt, federal loans usually have the lowest interest rates and most flexible repayment options. With that said, the particular loan that is best for you depends on your financial need, year in school, and credit history.
Federal Student Loans
After you’ve exhausted grants, work-study, and scholarships, you should turn to federal student loans to pay for college.
To apply for federal student loans, you must fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is the go-to form that determines your eligibility for federal financial aid.
To receive federal support, you must be a U.S. citizen, have a valid social security number, have earned a high school diploma, and be enrolled at an eligible college or university.
The FAFSA is available starting Oct. 1 the year before a you plans to enroll. For example, if you are enrolling for the 2022-23 school year, the FAFSA will be available on Oct. 1, 2021.
The FAFSA is accepted, reviewed, and distributed on a rolling basis. You should complete the FAFSA form as early as possible. The earlier you apply, the better your chances are for receiving financial aid awards.
Benefits of Federal Student Loans
Federal student loans come with many benefits and protections that are not typically offered with private student loans. Designed to reduce the burden of repayment, these advantages include:
Federal student loans typically have lower interest rates than private loans. Rates for new federal loans are also fixed, meaning they’ll stay constant during the entire loan term.
2. No credit check
Unlike private student loans, most federal loans do not require you to have credit history. The only type of federal loan that requires a credit check is Direct PLUS, which is available to graduate students and parents. This makes federal student loans the best option if you have a limited credit history.
3. No cosigner requirement
Federal student loans do not require cosigners. This means you do not need to rely on a relative for financial help, making the process much easier for those legally and financially independent.
There is one exception: if you are a graduate student or parent applying for a Direct PLUS loan and have a poor credit history, you may not be eligible without an “endorser,” which is similar to a cosigner.
4. Forbearance and deferment options
Federal student loans offer forbearance and deferment options if you face economic hardship. Forbearance and deferment allow you to postpone your student loan payments for up to three years.
5. Income-driven repayment
Federal student loans offer a repayment plan that is based on your income. With income-driven repayment, you pay a percentage of your income each month — or $0 if you have no income.
6. Loan forgiveness
The Public Service Loan Forgiveness program allows you to have loans forgiven after at least 10 years of public service and 120 qualifying monthly payments.
Loan forgiveness is also available after you have made qualifying monthly payments in an income-driven repayment plan for 20 to 25 years.
We’ll break down what you need to know about each of the loans below.
Direct Subsidized Loans
Who can get Direct Subsidized loans?
In order to qualify for Direct Subsidized loans, you must be an eligible undergraduate student who demonstrates financial need.
How much can you borrow?
Your school determines the amount you can borrow. The amount you borrow may not exceed your financial need.
If you are an undergraduate student, the maximum amount you can borrow with a Direct Subsidized loan ranges from $5,500 to $12,500 per year depending on your year in school and your dependency status (whether you are a dependent or independent student). The maximum amount you can borrow per year increases every year you are in school.
What’s the interest rate on Direct Subsidized loans?
The interest rate for Direct Subsidized loans is 3.73% for 2021-22.
Is there an origination fee?
When you take out a Direct Subsidized loan, you will be charged an origination fee — a fee meant to offset a lender’s cost for issuing a loan. The origination fee is deducted from the loan disbursement before you or the school receives the funds. Currently, the origination fee on Direct Subsidized loans is 1.057%, but it changes each year on October 1st.
So for example, if you borrow $12,500 in Direct Subsidized loan, 1.057% (or $132) will go to the federal government, while the remaining $12,368 will go to your school (and then you).
Who will pay the interest?
The U.S. Department of Education pays the interest on a Direct Subsidized loan:
while you’re in school at least half-time,
for the first six months after you leave school (referred to as a grace period), and
during a period of deferment (a postponement of loan payments).
Thoughts from the Sparrow Nest
The low interest rate and generous grace period make Direct Subsidized loans the preferred option if you need to borrow money for school. But remember, Direct Subsidized loans are only available to undergraduates who can demonstrate financial need, and the amount of money you can borrow with Direct Subsidized loans is capped at $12,500. This means that, even if you do qualify for Direct Subsidized loans, you might need to look elsewhere to fund the gap in your education financing.
Direct Unsubsidized Loans
Who can get Direct Unsubsidized loans?
Direct Unsubsidized loans are based on merit, not financial need. They are made eligible to undergraduate, graduate, as well as professional students.
How much can you borrow?
Your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive.
The maximum amount you can borrow each academic year in Direct Unsubsidized loans ranges from $5,500 to $12,500 for undergraduates, depending on your year in school and your dependency status. Direct Unsubsidized loans have an annual limit of $20,500 for graduate or professional students.
What’s the interest rate on Direct Unsubsidized loans?
The interest rate for Direct Unsubsidized loans is 5.28% for 2021-22.
Is there an origination fee?
Similar to Subsidized loans, when you take out a Direct Unsubsidized loan, you will be charged an origination fee — a fee meant to offset a lender’s cost for issuing a loan. The origination fee is deducted from the loan disbursement before you or the school receives the funds. Currently, the origination fee on Direct Unsubsidized loans is 1.057%, but it changes each year on October 1st.
So for example, if you borrow $20,000 in Direct Unsubsidized loan, 1.057% (or $211) will go to the federal government, while the remaining $19,789 will go to your school (and then you).
Who will pay the interest?
When you take out a Direct Unsubsidized loan, you have a 6 month grace period. Unlike with Direct Subsidized loans, however, you are responsible for all interest charges on unsubsidized loans, from the moment you take out the loan until the day you pay it off.
Thoughts from the Sparrow Nest
Direct Unsubsidized loans are a great choice for undergraduate who have exhausted their Direct Subsidized loans. They’re also the preferred option for graduate and professional degree students who need federal funding. That is because of the relatively low interest rate and higher borrowing limits.
With that said, if you meet the financial need requirements to qualify for subsidized loans, you’ll pay less over time than you would with unsubsidized loans. Unlike with Direct Subsidized loans, you are responsible for all interest charges on Unsubsidized loans, from the moment you take out the loan until the day you pay it off.
Direct Subsidized Loans vs Direct Unsubsidized Loans
Subsidized
Unsubsidized
Qualification
Need-based
Merit-based
Annual borrowing limit
$5,500 – $12,500, depending on your year in school and dependency status
$5,500 – $12,500, depending on your year in school and dependency status
Interest while in school
Government pays interest while you’re in school
Interest accrues while you’re in school that you must eventually pay
Eligible borrowers
Undergraduates only
Undergraduate and graduate or professional degree students
Direct PLUS Loans
What are the different types of Direct PLUS loans?
There are two types of Direct PLUS loans: Grad PLUS loans and Parent PLUS loans.
Grad PLUS loans allow graduate and professional students to borrow money to pay for their own education. You can use Grad PLUS loans to cover any costs not already covered by other financial aid or grants, up to the full cost of attendance.
Parent PLUS loans allow parents of dependent students to borrow money to cover any costs not already covered by the student’s financial aid package, up to the full cost of attendance. The program does not set a cumulative limit to how much parents may borrow. Parent PLUS loans are the financial responsibility of the parents, not the student.
Who can get Direct PLUS loans?
While most federal student loans are need or merit-based, Direct PLUS loans are based on a credit check. If you have a poor credit history, you will have a harder time qualifying and might require an “endorser” (essentially a cosigner, who pledges to pay back the loan if the primary borrower cannot). Even if you have an adverse credit history, you may still be able to receive a PLUS loan if you meet additional requirements.
How much can you borrow?
The maximum PLUS loan amount you can receive is the cost of attendance (determined by the school) minus any other financial aid received.
What’s the interest rate on Direct PLUS loans?
The interest rate for Direct PLUS loans is 6.28% for 2021-22.
Is there an origination fee?
Similar to Subsidized and Unsubsidized loans, when you take out a Direct PLUS Loan, you will be charged an origination fee — a fee meant to offset a lender’s cost for issuing a loan. The origination fee is deducted from the loan disbursement before you or the school receives the funds. Currently, the origination fee on Direct PLUS Loans is 4.228%, but it changes each year on October 1st.
So for example, if you borrow $12,500 in Direct PLUS Loan, 4.228% (or $528) will go to the federal government, while the remaining $11,971 will go to your school (and then you).
Who will pay the interest?
Direct PLUS loans are not subsidized, which means that interest accrues while you are enrolled in school. Direct PLUS loans also do not have a “grace period,” which means you must start repaying PLUS loans as soon as you or the school receives the loan funds.
Thoughts from the Sparrow Nest
Direct PLUS loans can be a good option for parents and grad students, alike.
If you’re a parent, you should take out PLUS loans if you need the safety net or want the benefits these loans offer, such as income-driven repayment plans and Public Service Loan Forgiveness.
If you’re a student, you should take out PLUS loans to pay for grad school only after you have maxed out the borrowing limit on lower-interest unsubsidized loans.
Federal Student Loan Interest Rates
Loan Type
Borrower Type
Interest Rate
Origination Fee
Direct Subsidized Loans & Direct Unsubsidized Loans
Undergraduates
3.73%
1.057%
Direct Unsubsidized Loans
Graduate or Professional Students
5.28%
1.057%
Direct PLUS Loans
Parents and Graduate or Professional Students
6.28%
4.228%
Note: The interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS loans first disbursed on or after July 1, 2021 and before July 1, 2022. Rates and fees are subject to change.
Federal Student Loan Repayment Plans
Federal student loans offer several repayment options depending on the loan type. These options include:
Check out the information below for a complete breakdown of the different repayment options for federal student loans.
Standard Payment
The standard payment plan is available to all borrowers and is great if you want to pay off your debt in the shortest period of time. With a standard student loan payment option, you would make equal monthly payments for 10 years. You’ll pay less interest and pay off your loans faster than you would on other plans.
Eligible Borrowers
All borrowers are eligible for this plan.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
All PLUS loans
All Consolidation Loans (Direct or FFELP)
Pros of Standard Repayment:
Shorter repayment period compares to other options
Less interest over time
Cons of Standard Repayment:
You may have higher monthly payments compared to the other options
Your monthly payment would remain the same even if your income dropped
Graduated Repayment
The graduated repayment plan allow you to start your payments off at a lower amount and gradually increase to the full payment over a 10-year period. This plan is ideal if you plan to start your career at a lower income level or do not plan to dive into full-time work immediately after graduation.
Eligible Borrowers
All borrowers are eligible for this plan.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
All PLUS loans
All Consolidation Loans (Direct or FFELP)
Pros of Graduated Repayment:
The 10 year repayment period allows you to pay off your loans faster compared to other plans
Your payments might align better with the entry-level wages many new graduates take on
Cons of Graduated Repayment:
You would pay slightly more over time in comparison to the standard repayment plan since more interest would accrue while you’re making smaller payments
You could be in a tough spot if your income does not grow over time as you expect
Extended Repayment
The extended repayment plan is available to all borrowers except those with Federal Direct Loans or Federal Family Education Loans (FFEL) that owe less than $30,000. This option allows for either a fixed or graduated payment, leading to full repayment by the end of a 25 year period.
This option is ideal if you have a hefty total loan amount and need a smaller monthly payment.
Eligible Borrowers
If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
All PLUS loans
All Consolidation Loans (Direct or FFELP)
Pros of Extended Repayment:
Lower monthly payments relative to other plans
You have the option to choose either fixed or graduated payments
Cons of Extended Repayment:
There is no option for loan forgiveness as with the income-driven repayment options
The longer repayment period would cause you to pay more interest over time in comparison to the other plans
Income-Driven Repayment
Income-driven repayment plans use your income to set a monthly payment. This amount is typically 10-20% of your income and can be as low as $0 if you’re unemployed. With these plans, your loan term is extended, usually to around 12-25 years. When this term is up, the remaining balance you owe will sometimes be forgiven. However, you would be required to pay taxes on the forgiven amount, so you are not totally off the hook.
There are 5 different income-driven repayment options offered for federal student loans. Each of the income-driven repayment options has its own specific requirements in order to qualify, but they’re all ideal for people whose monthly income is too low to pay the standard monthly payment.
The PAYE plan makes your monthly payment 10% of your discretionary income. The payments are reevaluated every year and updated if your income changes for any reason or if your family size changes. If you have not repaid your loan in full after 20 years, the remaining balance will be forgiven.
Eligible Borrowers:
If you are a new borrower from either on or after October 1, 2007 and received a Direct Loan disbursement on or after October 1, 2011
Eligible Loans
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidated Loans not including PLUS loans made to parents
2. Revised Pay As You Earn Repayment Plan (REPAYE)
The REPAYE plan makes your monthly payments 10% of your discretionary income and is recalculated every year in the same way the PAYE plan is. For undergraduate loans, your remaining balance will be forgiven after 20 years, and for graduate loans, 25 years.
Eligible Borrowers:
Any Direct Loan borrowers with an eligible loan type
Eligible Loans:
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidated Loans not including PLUS loans made to parents
3. Income-Based Repayment Plan (IBR)
An IBR plan sets monthly payments at either 10 or 15 percent of your discretionary income, neither amounting to more than what you would pay under the 10-year standard repayment plan. Payments are reevaluated every year based on changes in income and family size. Depending on when you received your first loan, your remaining balance will be forgiven after either 20 or 25 years. It is important to note that you may have to pay taxes on this forgiven amount.
Eligible Borrowers:
Those with high debt relative to their income
Eligible Loans:
Direct Subsidized and Unsubsidized
Subsidized and Unsubsidized Stafford Loans
All PLUS loans for students
Consolidation Loans not including PLUS loans made to parents
4. Income-Contingent Repayment Plan (ICR)
The ICR plan sets monthly payments at whichever is lesser: 20% of discretionary income OR the monthly payment you’d have on a plan with a fixed payment over 12 years, adjusted to your income. Payments are reevaluated and updated based on changes in your income and family size. Outstanding balances are forgiven after 25 years.
Eligible Borrowers:
Any Direct Loan borrower with an eligible loan type
Eligible Loans:
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidation Loans
5. Income-Sensitive Repayment (ISR)
The ISR plan sets monthly payments based on your annual income with the caveat that the loan is paid in full within 15 years.
Eligible Borrowers:
Only for FFELP Program loans
Eligible Loans:
Subsidized and Unsubsidized Stafford Loans
FFELP PLUS Loans
FFELP Consolidation Loans
Pros and Cons of Income-Driven Repayment
Pros
Cons
1.) Your monthly payments would likely be more affordable
2.) Your monthly payments would decrease if your income decreased, so you would not be locked into paying a certain amount each month even if you fall into economic hardship
1.) You may pay more in interest with a longer repayment period
2.) The total amount you pay could be more than the standard repayment plan depending on the plan you choose
3.) You must meet certain requirements in order to qualify
Private Student Loans
Private student loans can help you pay for college after you’ve exhausted scholarships, grants, and federal loans.
Private loans are made by private lenders such banks, credit unions, non-profits, and online lenders, and have terms and conditions that are set by the lender. Private student loans typically have higher interest rates and less flexible repayment options compared to federal student loans.
Who Can Get a Private Student Loan?
To qualify for a private student loan, you’ll need to attend an eligible school, as well as meet any age, education, or citizenship requirements. You’ll also need to meet a lender’s criteria for credit and income, or apply with a cosigner who does.
While most private student loans are credit-based, there are a handful of private student loans that are future-income-based. These are great for students who cannot meet the credit requirements and do not have access to a qualified cosigner.
How Much Can You Borrow?
Private student loans have a higher borrowing limit compared to federal loans. Private lenders allow you to borrow up to your school’s cost of attendance. With that said, it is wise to only borrow what you need — and what you can afford to repay.
How are Interest Rates Determined?
The interest rate on your private student loan depends on a few main factors:
Most private student loans are credit-based. That means the lender looks at your history of borrowing money and paying it back on time. They want to know how creditworthy, or how responsible you are with credit, before approving your student loan application.
In general, a higher credit score leads to a lower interest rate. The reverse is also true — a lower credit score leads to a higher interest rate.
Type of interest rate (fixed vs variable)
Most private lenders allow you to choose between a fixed and variable interest rate.
A fixed interest rate stays the same for the life of the loan. This means you’ll have a predictable student loan payment each month.
A variable interest rate fluctuates throughout the life of the loan depending on economic conditions. Variable interest rates often start out lower than fixed rates but can change, so your monthly student loan payments may vary considerably from month to month.
In general, fixed student loan interest rates are a better option than variable rates. That is because fixed rates always stay the same, so you will know exactly how much you need to pay each month. If you’re unsure which rate to choose, go with fixed; it is the safer option and allows you to budget accordingly. If you’re comfortable taking a risk to potentially save on interest, consider a variable rate.
Loan term
Loan term, also called loan duration, is the length of time you’ll have to pay off your loan. Private student loan terms usually range between 5-20 years, with plenty of options in between. Keep in mind that the longer your loan term, the more time interest accrues — this leads to higher total cost.
A simple way to think about is:
The shorter the loan term, the higher the monthly payments. If you’re making high monthly payments, the faster the loan will be paid off and the lower the total cost, since interest has less time to accrue.
On the other hand, the longer the loan term, the lower the monthly payments.If you’re making low monthly payments, the slower the loan will be paid off and the higher the total cost, since interest has more time to accrue.
What is a Cosigner?
If you cannot qualify for a student loan on your own, most private lenders will encourage you to apply with a cosigner. A cosigner is a person – such as a parent, close family member, or friend – who pledges to pay back the loan if you do not. This can be a benefit both to you and your lender since many many college-bound high school students have not had time to build up their own credit. However, it is risky to be the cosigner because if the student is unable to pay the loan back, the cosigner is responsible to pay on their behalf.
Private Student Loan Repayment Plans
While repayment options depend on the lender, most private lenders offer some variation of the repayment plans below.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it is not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance will not grow while you’re in school.
You will not make any progress paying down your loan balance while you’re a student. But at least you will not owe more than you borrowed when it is time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance will not grow as quickly.
Deferred Repayment
Do not make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You will not have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Are there any discounts or fees on private student loans?
Auto-pay discount
Many lenders allow you to get an interest rate reduction by signing up for automatic payments. The autopay discount generally starts at 0.25% but can go up to 2%, depending on the lender.
Origination fee
An origination fee is a you must pay to offset a lender’s cost for issuing a loan. Private loans rarely have an origination fee, but all federal loans do (although at different rates: 1.057% for federal subsidized and unsubsidized and 4.228% for Federal PLUS).
Prepayment penalty
A prepayment penalty is a fee you would have to pay if you want to repay your loans early. It is not allowed on any student loans, federal or private.
Application fee
There is generally no cost to apply for private student loans.
Student Loan Refinance
What is Student Loan Refinancing?
Student loan refinancing is when a lender pays off your existing loans and gives you a new one with a lower interest rate or repayment plan. In the long run, this saves you money since you’ll be paying less interest.
Refinancing could look like this [note: this is a very basic example]:
Loan 1: $10,000 at 7.5% interest rate
Loan 2: 13,000 at 8.25% interest rate
~insert magical refinancing here~
New Loan: $23,000 at 5.25% interest rate
Notice that the new loan is for the same amount of total debt, however, the interest rate is lower. This would save you money in the long run since less interest would accrue.
Example of Refinancing Student Debt
To contextualize this information, let’s look at an example. Let’s say you took out a student loan of $36,405 at an interest rate of 4.66% during undergrad and you plan on paying it off over the next 10 years at a monthly rate of around $380. By the time you finish paying it off, you will have actually paid $45,614.52–the original $36,405 plus $9,208.42 in interest. On the other hand, if you refinance for an interest rate of 2.59% over the same ten-year period, you can reduce your monthly payments to $344.69, and pay only $4,956.52 in interest, saving $4,251.50 over the lifetime of the loan.
What Do I Need to Refinance?
Generally, you need a strong credit score (mid-high 600s), a stable income, or a qualified cosigner to refinance.
Should I Refinance My Loans?
You should refinance your loans if it will save money. Generally, a lower interest rate and shorter repayment plan will lead to extra savings.
When You Should Refinance
If the savings will be significant. If you can qualify for a better interest rate, it is a good idea to refinance. You do not need to have a perfect credit history. As long as you can get that lower interest rate, you’re likely going to save some coin.
If you have student loans with high variable interest rates. Variable interest rates do just as they’re called – they vary. It is challenging to predict what payments will be with a variable interest rate as it is always changing. Whether your variable interest rate is currently high or low, it may be a good idea to refinance if you can secure a lower fixed rate.
If the economy supports low interest rates. Interest rates are impacted by economic factors. If the rate environment is good, rates may be lower, and it may be a good idea to take advantage of that.
If your finances have improved. If your financial situation has improved since you first took out your loans, you may qualify for a better interest rate on a new loan.
When You Should Not Refinance
If you’re planning to pursue student loan forgiveness. If you are pursuing a program such as Public Service Loan Forgiveness, you should not refinance your student debt as it would make you ineligible for the program.
If you have Federal Loans and may experience a drop in income. When you refinance federal student loans, you lose the option to participate in federal repayment programs such as income-driven repayment and federal loan relief options.
If you’ve declared bankruptcy recently. It is significantly more difficult to refinance student debt if you have declared bankruptcy. While not impossible to refinance under these conditions, many lenders will require around 4-10 years to have passed since the bankruptcy filing before lending.
If you’ve had to default on student debt. Defaulting on a student loan is a red flag to lenders as it tells them that you may not be able to make consistent loan payments.
How Many Times Can I Refinance?
You are allowed to refinance as many times as you like, free of cost.
Final Thoughts from the Sparrow Nest
Our goal is to bring simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. We hope this guide helps.
At the end of 2020, the United States reached a new high of $1.7 trillion in student debt. It’s hard to conceptualize just how much $1.7 trillion is, but what we do know is that it’s really, really, really big.
How Many People are Impacted by Student Debt?
The $1.7 trillion in student debt is held by around 44.7 million Americans. This might seem like a lot, but it isn’t incredibly surprising when we consider the fact that in recent years, around 69% of college students took out student loans and graduated with an average of $29,900 in student debt, including federal and private debt.
How does this $1.7 trillion break down? Let’s see.
Federal vs. Private Student Loan Debt
Student loans are typically one of two types: federal or private. Federal loans are dealt by the government, and private student loans come from private lenders such as financial institutions and banks.
Federal student debt makes up about $1.57 trillion of the total student loan debt. This amount is spread across 42.9 million borrowers and various loan types.
Private student loans make up around $132 billion of the grand total.2 While this number is only a fraction of the federal loan debt, it’s important to remember that private interest rates tend to be much higher. Thus, this loan debt has just as much, if not more, of an impact.
Student Loan Debt By Degree Type
As of 2019, college graduates obtaining a master’s degree held the most debt. The following details the breakdown of which degrees held what percentage of the overall student loan debt.3
Associate’s Degree: 7%
Bachelor’s Degree: 29%
Master’s Degree: 36%
Professional/Doctoral Degree: 20%
Demographic Breakdown of Student Loan Debt
By Age
Believe it or not, the 25-34 years-old age group holds the most student loan debt. Here’s the breakdown:4
When we break it down by race, we can begin to see some startling disparities.
Black and African American college graduates owe an average of $25,000 more in student loan debt than White college graduates. That said, 54% of all student loan debt is held by White/Caucasian student borrowers. This means that even while holding less of the overall student loan debt, Black and African American college graduates still carry more in student loan debt.
Federal student loans have more repayment options than private student loans, allowing us to see just how much of this debt is in repayment versus forbearance and so on.
As of January 2021, federal student loan debt was broken down the following way:5
$14.7 billion in repayment, across 0.4 million borrowers
$114.4 billion in deferment, across 3.2 million borrowers
$887.4 billion in forbearance, across 22.2 million borrowers
$43.7 billion in a grace period, across 1.7 million borrowers
Student Debt for the Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness program (PSLF) grants eligible federal loan borrowers forgiveness on a portion of their loans after making 120 qualifying payments and working for a qualified employer. Borrowers in this program typically won’t throw lump sum payments at their debt as they know it will eventually be forgiven after making minimum payments.
This means that the debt levels for people in this program can look a bit different.
In total, there are around 1,378,000 borrowers in the PSLF program. The average balance forgiven is $76,906.6
One common trend amongst all of these categories is the fact that student loan debt is rising, and it’s rising steadily. Over the past few years, student loan debt has continued to jump by billions each year. Regardless of degree, program, age, or year, student loan debt is on the rise for us all.
This might sound scary, but we want you to know that if you’re reading this, you’re already ahead of the game. Being informed on what student debt looks like is a great place to start. Now, it’s all about making smart financial decisions when it comes to your loans. (fun fact: we’ve got you covered on that)
A 2019 study showed that most Americans live with some financial regret. One of the highest-ranked regrets was related to choices surrounding student loans.
Trying to figure out the difference between student loan options will leave you with gray hair by age 25. The truth is, there are tons of different options available, and it’s incredibly important to understand the differences to make the best decision for your education. The best place to start is understanding the differences between federal and private student loans.
So take a deep breath, and don’t worry. No gray hairs here. We’ll give you everything you need to know.
Who Issues the Loan?
Federal
The federal government issues these loans. Federal tax dollars paid by US citizens each year fund federal student aid programs
Private
Banks and other financial institutions issue private student loans.
Who is Eligible for the Loans?
Federal
In order to become eligible for federal student loans, you must meet the following requirements:
Demonstrate financial need: Financial need is calculated by taking the difference between the cost of attendance (COA) at a school and your Expected Family Contribution (EFC). While COA varies from school to school, your EFC does not change based on the school you attend.
Be a U.S. citizen or eligible noncitizen: some legal U.S. residents without citizenship may qualify.
Have a valid Social Security number: with the exception of students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau.
Be registered with Selective Services: if you’re a male (you must register between the ages of 18 and 25).
Be enrolled or accepted for enrollment in an eligible degree or certificate program: You are not eligible to borrow federal loans unless you attend an eligible program.
Be enrolled at least half-time to be eligible for Direct Loan Program funds: most programs require you to be enrolled at least half-time.
Maintain satisfactory academic progress in college or career school: You must meet the standards for satisfactory academic progress toward a degree or certificate offered by your institution. Check with your school to find out its standards.
Complete and sign the Free Application for Federal Student Aid (FAFSA) form: FAFSA is used to determine your financial need.
Show you’re qualified to obtain a college or career school education: You must have a high-school diploma or a recognized equivalent such as a General Educational Development (GED) certificate.
Private
Not everyone will qualify for private student loans. Private lenders evaluate applicants based on a variety of factors, typically including the financial history and credit history of the applicant and/or the cosigner (if applicable). If the private lender deems you to be too risky of a borrower, they may not issue you a loan.
Applying with a cosigner who has a strong credit score could improve your chances of qualifying and allow you to access lower interest rates.
How Much Can You Borrow?
Federal
The amount you can borrow in federal loans depends on your student status.
A parent can also borrow a maximum of $20,500 in Direct Unsubsidized Loans per academic year via a Direct PLUS Loan.
Graduate/professional students can also borrow a Direct PLUS Loan, however, the amount varies from person to person depending on the cost of attendance at their respective institution and the financial aid they received.
To see how much money you can receive in federal loans, you will need to fill out the Free Application for Federal Student Aid (FAFSA). This is essentially an application that gives the federal government an idea of your expected financial need.
Private
The amount one can borrow in private student loans varies by lender. Typically, borrowers are able to fill the remaining balance they owe after accepting scholarships and/or federal loans with private student loans. Regardless, the amount you borrow from any private lender cannot exceed the total cost of attendance at your institution.
What are the Interest Rates?
Federal
Congress sets the interest rates on federal student loans. The rates vary based on the loan type and the disbursement date of the loan (the date the funds are paid to the student or school directly).
The table below provides interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2021, and before July 1, 2022.
Loan Type
Borrower Type
Fixed Interest Rate
Direct Subsidized Loans & Direct Unsubsidized Loans
Undergraduate
5.50%
Direct Unsubsidized Loans
Graduate or Professional
7.05%
Direct PLUS Loans
Parents & Graduate or Professional Students
8.05%
Interest Rates for Direct Loans First Disbursed on or After July 1, 2023, and Before July 1, 2024
All federal student loans have fixed interest, meaning that the rate will not fluctuate for the life of the loan. Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%.
The interest rate on private student loans is based on a variety of factors. Most private lenders look at your financial history and credit score to assess the risk you pose as a borrower, which is reflected by the interest rate they offer you.
The lower your credit score, the more risk you present as a borrower — this means a higher interest rate. Similarly, the higher your credit score, the less risk you present as a borrower — this leads to a lower interest rate.
Unlike federal student loans, private student loan interest rates can be fixed or variable. You can use Sparrow to compare real interest rates from more than 15+ different lenders to ensure you’re getting the best rate possible.
When Do I Have to Start Paying the Loan?
Federal
Federal loans will go into repayment if you graduate, go below part-time student status, or leave school entirely. If you have a Direct Subsidized, Direct Unsubsidized, or Family Educational Loan, you will have a 6-month grace period before you are required to make consistent payments.3
It is important to note that Direct Unsubsidized loans and PLUS loans will accrue interest while you are in school. Direct Subsidized loans will not accrue interest while you are in school. So, while payments won’t be required until after the grace period, interest may be accruing depending on the loan type.
Private
Private loans typically don’t require consistent payments until after you leave school. Most lenders will implement a similar grace period to federal student loans, usually around 6 months after graduation. However, private student loans will accrue interest while in school, starting immediately after disbursement.
Is There an Advantage of One Over the Other?
Federal Loans
Private Student Loans
Pros
1. Typically don’t require good credit or a cosigner. 2. Come with additional benefits such as loan forgiveness programs and income-driven repayment options. 3. Interest rates tend to be lower than private loans.
1. Higher borrowing limit, up to 100% of the cost of attendance 3. You can apply online in a couple of minutes 2. Lowest interest rates on the market, if you have excellent credit.
Cons
1. There is a cap to how much you can borrow in federal student loans. 2. Not all students will qualify for subsidized student loans.
1. You may need a cosigner to qualify for a private student loan. 2. Not accessible to borrowers who lack a strong credit score or creditworthy cosigner
Final Thoughts
There’s a lot to understand about federal and private student loans, but the good news is that if you’ve made it to this point in the article (shoutout to you!) you’re already one step closer to making an educated decision when it comes to your loans.
Let us all take a moment of silence to thank our student loans for getting us through college. How could we ever repay them?
Jokes on us, we have to repay them.
In all seriousness, understanding your student loan repayment plan options is incredibly important, especially with private student loans. When you take out a private loan, interest starts to accrue as soon as the amount is disbursed. So, if you’re using a private loan to pay for your education, it will accrue interest the entire time you’re in school.
While every private lender has its set of repayment plans, there are four main repayment plans that have become quite common across the industry.
Immediate Repayment
Interest-Only Repayment
Partial Repayment
Deferred Repayment
In this article, we’ll break down the four main repayment plans for private student loans, and provide some suggestions that could save you money in the long run by minimizing the interest that accrues.
Immediate Repayment
Opting for immediate repayment means you would make full payments as soon as the loan is disbursed, including while you’re still in school.
Benefits of Immediate Repayment
By making full payments right away, you will be able to minimize the interest you pay, resulting in the greatest savings.
You will be able to get a good head start on repaying your loan by the time you graduate as you would’ve already paid a decent chunk in both interest and principal.
Downside of Immediate Repayment
For a majority of students, it just isn’t realistic to make full payments while still enrolled in college.
Interest-Only Repayment
Similar to immediate repayment, interest-only repayment requires you to make some payments while still in school. The difference is that you’re only paying interest rather than the full payment.
Benefits of Interest-Only Repayment
The monthly payments may be more manageable as they’d be only for the interest.
Your loan balance won’t grow while you’re still in school.
Downside of Interest-Only Repayment
You won’t actually be paying down your loan. Because the interest compounds, your payments would prevent you from owing more than you borrowed when it’s time to make full payments, but you won’t actually be paying off any of the initial loan amount.
Partial Repayment
Partial repayment is similar to immediate and interest-only repayment in that you make payments while in school, however, partial repayment may be more manageable depending on your overall loan amount.
Partial repayment requires you to pay a set amount, typically around $25, per month while still in school to reduce the accrued interest. (This could get confusing to differentiate partial repayment from interest-only repayments. Interest-only repayments would cover the entire monthly interest, as where partial repayment would only cover part of the monthly interest.)
Benefits of Partial Repayment
You can keep your loan balance in check and reduce the total amount repaid.
Your loan balance won’t grow as quickly in comparison to not making any monthly payments while still in school.
Downside of Partial Repayment
You would still owe more than you borrowed by the time you graduate.
Deferred Repayment
Deferred repayment is the only repayment plan that doesn’t require you to make payments while still in school. With this plan, payments would likely start after the grace period ends, typically 6 months after graduation.
Benefits of Deferred Repayment
You won’t have to make any payments while you’re still in school.
Downside of Deferred Repayment
You will likely pay the highest overall cost. Unpaid interest will compound and add to your principal amount at the end of your grace period.
So What Should I Do?
Making full or partial loan payments while in school could save you thousands of dollars over time and is certainly recommended. But at the end of the day, the best private loan repayment plan is the one that works within your budget.
Check out the table below for a quick breakdown of the four main repayment plans offered by private student lenders.
Private Student Loan Repayment Plans
Repayment Plan
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Final Thoughts
Understanding the different repayment plans for private student loans is crucial in making informed decisions about how to manage your debt. While there are pros and cons to each plan, making full or partial payments while in school can help minimize the overall cost of your loan. Ultimately, the best repayment plan is the one that fits your budget and financial goals. By taking the time to research and compare your options, you can make a plan that works for you and help set yourself up for a financially stable future.
