Tips for Comparing Private Student Loans
As you prepare to get a private student loan, don’t wait for your school to decide how much of a loan you can handle; do the due diligence yourself. Experts recommend borrowing no more than what you’ll most likely earn in your first year out of college. This can protect you from having unmanageable monthly payments after you leave school.
Some private student loan lenders don’t cap the amount of money you can borrow each year, but yours may. As you evaluate which loan suits you best, find out how the loan will be disbursed and what costs it will cover.
When picking a private student loan, look at the overall cost of the loan—including its interest rate and fees—and what help the lender offers if you have trouble affording your payments. Just one of the lenders on this list charges origination fees, and all except for one wait until at least 120 days of nonpayment before putting loans into default status.
When comparing rates, know the low end of the rate ranges will only be available to those with good or excellent credit scores. Also, all rates listed below include a standard 0.25% interest rate discount for using automatic payments.
We scored 12 lenders that make the most loans by volume across 15 data points in the categories of interest rates, fees, loan terms, hardship options, application process and eligibility. We chose the nine best to display based on those earning three stars or higher.
The following is the weighting assigned to each category:
- Hardship options: 30%
- Application process: 16%
- Loan terms: 14%
- Interest rates: 13%
- Eligibility: 14%
- Fees: 13%
Specific characteristics taken into consideration within each category included number of months of forbearance available, economic hardship repayment options available beyond traditional forbearance, perks like cash-back rewards upon graduation, discounts, time to default, disclosure of credit score and income requirements and other factors.
Lenders who offered interest rates below 10% scored the highest, as did those who offered more than the standard 12 months of forbearance, who made their loans available to non-U.S. citizens, who offered interest rate discounts beyond the standard 0.25% for automatic payments, who offered multiple loan terms maxing out at 15 years and who charged minimal fees.
In some cases, lenders were awarded partial points, and a maximum of 3% of the final score was left to editorial discretion based on the quality of consumer-friendly features offered.