Best private student loans of July 2024

Publish date: 2024-06-08

Private student loans accounted for 15% of all educational loans in 2022-23 according to the College Board. While federal student loans often offer the best terms, they might not cover all of your college expenses. That’s where a private student loan can help.

If you’ve received your financial aid package and it isn’t enough to cover your college costs, it may be a good time to start thinking about a private student loan. These are provided by private lenders and generally require a credit score of 670 or higher (from either you or a cosigner) to qualify.

For many student borrowers, private student loans can be more expensive than federal ones. But if you aren’t eligible for federal aid or need extra funding to pay for college, these loans can come in handy.

We evaluated these student loan lenders based on interest rates and origination fees, loan amounts, loan terms, discounts, whether cosigners are accepted, and more. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

There are two main types of student loans: federal loans, which are offered by the Department of Education, and private loans, which are available through private companies like online lenders, banks, and credit unions.

Federal student loans are the most common type, making up an estimated 92% of the student loan market, according to a 2023 Enterval Analytics report. That’s because these loans come with special benefits and protections, including:

Relatively low, fixed rates that aren’t based on your credit
More relaxed qualification requirements
Flexible repayment options, such as income-driven repayment plans
Forgiveness programs for eligible borrowers

Private lenders generally can’t match those perks, but private student loans may still have a place in your borrowing plan. While federal loans may be more affordable, they also tend to come with lower borrowing limits. If you max out the federal aid available to you, private loans can help you access additional funds.

In addition, well-qualified borrowers (or applicants with cosigners who have strong credit) may be able to access lower rates on the private market. Compare all your options before deciding what type of loan is best for you.

Learn more: Federal vs. private student loans: Which should you choose?

Private student loans have stricter eligibility requirements than federal student loans, because credit is taken into consideration. Requirements vary by lender, but most lenders will look for the following:

A good to excellent credit score – A FICO score of 670 or higher is usually required.
A steady income and stable finances
U.S. citizenship or permanent resident status
Enrollment in an eligible educational degree program

Pros and cons of private student loans

Interest rates could be lower than what you’ll find with some federal student loans, particularly for borrowers with excellent credit.

Many private loans come with higher borrowing limits compared to federal loan, and you can usually cover up to your school’s total cost of attendance

Private student loan repayment terms start at 5 years compared to 10 years for federal loans. Opting for a shorter loan term means you’ll be debt-free faster.

Unlike federal student loans, which have origination fees ranging from 1.057% to 4.236% in 2023-24, most private lenders don’t charge origination fees.

For borrowers with poor or average credit, private loans may be more expensive compared to federal options.

You won’t have access to federal relief programs such as income-driven repayment plans that set your monthly payments based on your income and family size.

For borrowers facing financial hardship, it’s less common for private lenders to offer financial relief.

Private loans from a bank or credit union don’t provide a path to federal student loan forgiveness.

Many private lenders allow you to choose either a fixed APR or variable APR on a loan. These have significant differences, and can greatly affect the total cost of your debt.

Fixed rates: These stay the same over the life of your loan, so they’re extremely predictable. You’ll easily be able to project out your total cost of borrowing, and your monthly payment won’t change.
Variable rates: These can fluctuate with the market, and will rise or fall depending on larger economic benchmarks. There’s the potential to save money, but you could also pay more in the long term if the market takes a dive.

The right loan for you depends on your needs and your situation. For example, if you’re looking for the most savings, the interest rate might be the most important factor, since it determines long-term costs. But if you plan on going into a profession that has a low starting salary, you might be more interested in things like repayment options and grace periods.

Before taking out any loan, make sure you consider factors like:

How much you’re able to borrow
How long you have to repay the loan
What your monthly payment and lifetime costs will be
Your interest rate
Your current student loan debt
Your expected family contribution
Fees and discounts
Available repayment plans
When you’re required to start making payments
How the lender may help if you later have trouble affording your payments
Cosigner policies, including the option to release a cosigner later
The lender’s reputation and customer service options

Before applying for a private loan, it may be wise to check your eligibility for federal loans and other aid. To do so, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). Your school will use this form to see what you qualify for and determine your financial aid package. Once you have that information, you’ll have a better idea of how much you need to borrow from a private lender.

When you’re ready to apply for a private loan, take the following steps:

Compare private lenders: Each lender determines your eligibility differently, and will offer you various interest rates and loan terms. By comparing multiple lenders, you can make sure you find the best loan for your situation. In addition to borrowing costs, review the repayment options, grace period lengths, and discounts offered by each lender.

Get prequalified: Many lenders allow you to prequalify with only a soft credit check. After inputting a few pieces of personal information, you can view the estimated rates and terms you’re likely to qualify for. This can give you a better sense of what each lender has to offer.

Choose a cosigner, if needed: If you know that your credit won’t be sufficient to qualify on your own, finding a cosigner is an important step. This is someone who agrees to share responsibility for your debt. By adding a cosigner who has strong credit to your application, you could get approved or access lower rates.

Submit an application: Once you’ve picked a lender, you can formally apply for a loan. You’ll need information about yourself, your school, as well as any cosigner to get it done.

Sign your loan agreement: If approved, you can review your loan offer and, if desired, sign your loan documents. This will make everything official.

Wait for disbursement: Your lender will send the loan funds directly to your school, which will apply the money to any outstanding tuition and fees. Any extra cash left over can be distributed to you.

Private student loans are separate from federal, state, or school-based financial aid. But because your financial aid package (including federal loans) may be based — at least partially — on your financial need, consider waiting to apply for private loans until you’ve sent in your FAFSA and have your financial aid package in hand.

Unlike most federal loans, private student loans typically depend on your credit. You’ll generally need good-to-excellent credit to qualify, in addition to a verifiable income source.

Yes, a private student loan can affect your credit just like any other type of debt. Once you submit a formal application, a hard inquiry is added to your credit profile, which can slightly impact your score. And once you enter repayment, any late or missed payments could adversely affect your score. (Signing up for autopay can help here.) However, making consistent on-time payments can help your credit score.

In general, student lenders want to see a credit score in the mid- to high-600s to qualify for a private loan. However, if your score is lower than that, you may still qualify by adding a cosigner with solid credit. Some student lenders cater specifically to borrowers with poor credit, or use alternate factors like your GPA or degree program to gauge your eligibility. However, these loans typically come with much higher interest rates and less favorable terms.

Yes. If you have sufficient credit, a private lender will allow you to take out a loan without a cosigner. However, many undergraduate students simply don’t have the required credit history to borrow on their own. Using a cosigner is very common — more than 90% of private loans were cosigned, often by a parent or grandparent, according to data from the Consumer Finance Protection Bureau (CFPB). Even if you can qualify for a loan on your own, including a well-qualified cosigner can help you access lower rates and better terms. Note that most types of federal loans don’t require a credit check or cosigner, so it’s easier for young students to access these loans on their own.

Typically, no. Private student loan forgiveness doesn’t exist with most lenders, though many will discharge the loan if the borrower dies or becomes seriously disabled. Private loan borrowers may also be eligible for forgiveness through state-based assistance programs, though these typically require you to work in a high-need career for several years to qualify.

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