The Best Private Student Loan Companies for 2017

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For most students, scholarships, grants and federal aid are the best options for funding higher education. However, you may find there’s a gap between what you’ve received and your actual cost of attending school. If this happens, you could take out a private student loan to fill the gap.

Private student loans typically carry higher interest rates and fewer flexible repayment options, which is why they should generally be a last resort when it comes to funding higher education.

According to a 2016 facts and trends report from The Institute for College Access and Success (TICAS), the total private student loan volume peaked at $18.1 billion for the 2007-08 school year. Although it’s nowhere near that peak today, private student loan volume has steadily increased since the 2010-11 school year and reached $7.8 billion for 2014-15.

If you’re one of the many students considering a private student loan, be sure to shop lenders, as each may offer different loan terms, interest rates and other benefits. To help you in your search, we’ve highlighted five of the top private student lenders.

Top 5 private student loan lenders for 2017

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How we ranked private student loan companies

Comparing your options before taking out a student loan can help you find the best lender, and loan, for your situation. Interest rates and fees directly impact your overall cost of borrowing, and are certainly important to consider, but don’t stop there. Repayment plans, cosigner release options and other benefits can all be important.

We started our search for the best private student loan lenders by finding the 10 largest. Each lender then received grades for its options or performance in these seven core categories:

After assigning a grade for each component, we ranked the best student loan companies from top to bottom based on their average score, plus bonus points.

Top 5 private student loan lenders for 2017

Many types of lenders offer private student loans: large banks with name recognition and history, or online-only lenders that were founded just a few years ago.

In addition to the seven core components and bonus, we’ve listed the lender’s maximum undergraduate aggregate loan limits. Although you should aim to borrow as little as necessary, it can be helpful to know the maximum you can borrow. The aggregate limit takes federal and private student loans into account, and some lenders also include other types of consumer debt in their limits.

In addition to aggregate limit, private student loans lenders may limit the amount you can borrow per term or year to the school-certified cost of attendance, minus your other financial aid.

Top 5 Student Loan Companies

1. SunTrust Bank

Of the 10 lenders we considered, SunTrust’s Custom Choice Loan® has the lowest possible APR on variable- and fixed-rate private student loans. SunTrust also offers up to a 0.50 percent interest rate discount if you sign up for autopay from a SunTrust account, or 0.25 percent with autopay from a non-SunTrust account.

SunTrust also offers a money-saving extra perk. If you earn a bachelor’s degree or higher, once in the lifetime of a loan you can apply for a 1 percent principal reduction from your loan servicer. The reduction is based on the net disbursed loan amount.

With either fixed- or variable-rate loans, you can choose from a seven-, 10- or 15-year term and fully defer your payments until after graduation. However, one potential drawback is that you have to make 36 to 48 consecutive full payments to release a cosigner. The other top lenders that allow cosigner release only require 12 to 24 consecutive payments.

  • Variable APR range. 3-10.05 percent APR
  • Fixed APR range. 4.75-11.50 percent APR
  • Interest rate reduction with autopay. 0.25 percent with autopay and another 0.25 percent if you make automatic payments from a SunTrust Bank account
  • Origination or application fees. No
  • Ease of online application. Good
  • Repayment terms. Seven, 10 or 15 years
  • Cosigner release. Yes, after 36 or 48 consecutive full payments.
  • Maximum deferment. You can fully defer your payments while you’re at school and during a six-month grace period after graduating.
  • Aggregate loan limit. $150,000

Bonus. You can request a 1 percent principal (based on the disbursed loan amount) reduction after you graduate.

2. Discover

Discover’s undergraduate student loans offer a unique benefit. As long as you have at least a 3.0 GPA during the school terms that your loan covers, you can request a one-time reward of 1 percent of your loan amount and Discover will send you a check for the amount. Be sure to make the request within six months of the end of the academic term to qualify.

Discover also scores well with its low APR ranges, autopay discount, lack of fees, full deferment option and maximum loan term. However, Discover only offers a 15-year term, while some other lenders offer a range of terms including 15 years. Although you could pay your loans back more quickly, you may lose out because shorter-term loans tend to have lower interest rates than longer-term loans.

A potentially major drawback with Discover is the lack of a cosigner release option. You still might be able to release a cosigner by refinancing your loans later, but if interest rates rise, you could get stuck with a more expensive loan.

  • Variable APR range. 3.87-11.12 percent APR
  • Fixed APR range. 6.24-12.99 percent APR
  • Interest rate reduction with autopay. 0.25 percent with autopay
  • Origination or application fees. No
  • Ease of online application. Good
  • Repayment term. 15 years
  • Cosigner release. No
  • Maximum deferment. You can fully defer your payments while at school and during a six-month grace period after graduating.
  • Aggregate loan limit. School-certified cost of attendance

Bonus. If you have at least a 3.0 GPA during the school terms that your loan covers, you can request a one-time reward of 1 percent of your loan amount.

3. Wells Fargo

You may be most familiar with Wells Fargo because of its mortgage and banking products, but it also offers private student loans. If you or your cosigner already has a Wells Fargo checking account or student loan, you can get a 0.25 percent interest rate reduction on a new student loan. Or, you could get a 0.50 percent interest rate reduction if you or a cosigner have a Portfolio by Wells Fargo account.

You’ll get the discount for the life of the loan, even if you close that account, and you can get an additional 0.25 percent interest rate discount by signing up for autopay after you take out the loan.

Like Discover, Wells Fargo only offers a 15-year term, which could force you into a longer repayment period or higher-interest-rate loan. Wells Fargo also has a checkered past when it comes to student loans. In 2016, the Consumer Financial Protection Bureau took action against Wells Fargo and forced it to pay in excess of $4 million in fines and student aid relief for illegal and deceptive student loan practices. Among the CFPB’s allegations, Wells Fargo was accused of failing to provide important payment information to consumers, charging consumers illegal fees and not updating inaccurate credit report information.

  • Variable APR range. 3.87-9.88 percent APR
  • Fixed APR range. 5.94-11.26 percent APR
  • Interest rate reduction with autopay. 0.25 percent with autopay. You can also get a 0.25-0.50 percent interest rate reduction if you or your cosigner has an eligible Wells Fargo account.
  • Origination or application fees. No
  • Ease of online application. Good
  • Repayment term. 15 years
  • Cosigner release. Yes, after 24 consecutive full payments.
  • Maximum deferment. You can fully defer your payments while at school and during a six-month grace period after graduating.
  • Aggregate loan limit. $120,000

Bonus. Not applicable

4. College Ave Student Loans

A relative newcomer, College Ave was founded in 2014 and focuses solely on student loans and student loan refinancing. As you may expect of a company that was born online, it gets top marks for an easy-to-use online application. College Ave also tied the other top lenders for the most points with its lack of fees and  15-year loan term.

When it comes to loan terms and repayment options, College Ave stacks up well. You can choose from an eight-, 10-, 12- or 15-year term, and between full deferment, $25 monthly payments or interest-only payments while you’re in school.

College Ave requires 24 consecutive full payments to release a cosigner, but you have to read the fine print to get the full picture. In addition to the payments, you have to wait until more than half of your scheduled repayment period elapses before you can release a cosigner.

  • Variable APR range. 3.69-10.10 percent APR
  • Fixed APR range. 6.22-12.52 percent APR
  • Interest rate reduction with autopay. 0.25 percent with autopay
  • Origination or application fees. No
  • Ease of online application. Very good
  • Repayment terms. Eight, 10, 12 or 15 years
  • Cosigner release. Yes, after 24 consecutive full payments.
  • Maximum deferment. You can fully defer your payments while at school and during a six-month grace period after graduating.
  • Aggregate loan limit. School-certified cost of attendance

Bonus. Not applicable

5. Sallie Mae

Sallie Mae could be one of the most recognizable names in the student loan space, but brand recognition alone doesn’t mean it necessarily has the best private loan offerings out there. It is still a strong option for private student loan borrowers, rounding out our Top 5, but you may find better terms and loan offerings with the other lenders on our list.

Its undergraduate Smart Option Student Loan® offering has the second-lowest starting APRs for variable- and fixed-rate APR ranges (behind SunTrust) on our list.

The Smart Option Student Loan® also stands out with the lowest number of consecutive full payments to release a cosigner, just 12, although as with all the lenders you’ll also need to meet the credit requirements to take on the loan by yourself. Sallie Mae also got good or top marks for fees, an autopay discount and a full deferment option. However, it doesn’t offer discount options as large or as numerous as you’re apt to find with some other lenders.

Borrowers will receive other perks, though. You can get free access to 120 minutes of live online tutoring through Chegg Tutors, four months free of Chegg Study, or a combination of the two study aids. You, and your cosigner if you have one, will also get a free quarterly snapshot of your FICO credit score.

  • Variable APR range. 3.25-10.22 percent APR
  • Fixed APR range. 5.74-11.85 percent APR
  • Interest rate reduction with autopay. 0.25 percent with autopay
  • Origination or application fees. No
  • Ease of online application. Good
  • Repayment term. Five to 15 years
  • Cosigner release. Yes, after 12 consecutive full payments.
  • Maximum deferment. You can fully defer your payments while at school and during a six-month grace period after graduating.
  • Aggregate loan limit. School-certified cost of attendance

Bonus. Not applicable


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Is a private student loan right for you?

Private student loans shouldn’t be most students’ first option for funding their education. Although in some cases federal student loans may have a higher interest rate or fees than private student loans, federal loans offer other benefits that can save you money or make it easier to repay your loans after graduating. These include loan forgiveness programs, income-driven repayment plans and guaranteed loan deferment and forbearance options.

Federal loans also don’t have a credit requirement, and they may be your only option if you have poor or no credit and don’t have a creditworthy cosigner. But even if you’re eligible for either type of loan, the benefits and options that come with federal loans make them a better choice for some students.

Nonetheless, The Institute for College Access and Success (TICAS) found that 47 percent of private loan borrowers during the 2011-12 school year didn’t apply for federal aid, didn’t choose federal Stafford loans or didn’t maximize their federal Stafford loan offer.

Some students may wrongly assume that they won’t be eligible for federal aid due to their grades or family income. But you can get some types of federal aid regardless of your income and grades.

To ensure you don’t miss out on federal student aid opportunities, including grants that you don’t have to repay, complete a Free Application for Federal Student Aid (FAFSA) every year. It’s free, as the name implies, and takes less than 30 minutes to complete. The FAFSA is more than just a requirement for federal student aid. Some state- and school-based aid depends on your FAFSA information, and it’s a requirement for some scholarship opportunities.

MagnifyMoney, another LendingTree-owned personal finance site, has a great guide that parents and students can use to fill out the FAFSA.

After you’ve done everything you can to get grants or scholarships and considered your federal aid offer, that’s the time to compare private loan options. Some students may need private loans if they reach the annual ($5,500-$7,500) or aggregate ($31,000) undergraduate federal loan borrowing limit.

In some cases, you may find that a private student loan is less expensive than a federal loan. However, try to include the federal benefits in your calculations. Although they don’t always have a clear monetary value, if you have trouble making payments later, the federal repayment plans and deferment options could help you avoid late payments and a default on your loans.

How to shop for and compare private student loans

Once you’ve decided to apply for a private student loan, take time to compare the lenders and loan options. One of these top five lenders could be a good fit, but each student has different needs and you may find that a different national lender, or even a local one, is best.

Some lenders let you apply for preapproval, which tells you if you can get approved and shows your approximate loan terms without hurting your credit.

SimpleTuition makes it easy to enter information about yourself and the loan you’re looking for and then compare loan offers, including the total cost, monthly payment amount, number of payments and APR range.

When you decide to apply for a private student loan, you’ll have to complete an application and agree to let the lender took a more thorough look at your credit. The resulting hard inquiry could ding your credit, and your cosigner’s. But the impact is typically minimal and temporary.

You can also apply for multiple student loans to compare firm offers (without a hard inquiry, you’re only getting an estimated offer) without having a large negative impact. Multiple hard inquiries made during a 14-day period count as a single inquiry for credit-scoring purposes. And, inquiries from the previous 30 days don’t count against you.

What to look for in a private student loan

As you’re comparing lenders and loan options, keep track of the terms and fine print for each. You can start with the data that we collected and use it as a framework as you research other options. Try to record at least the following:

 
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