With the average cost of attendance for the 2018/2019 school year at $21,370 for in-state public colleges ($85,480 for four years) and $48,510 at private colleges ($194,040 for four years), student loans have become a virtual necessity for nearly anyone who wants a higher education.
The student debt crisis is on all of our minds. You can hardly escape it these days.
With this humbling reality in mind, I’ve put together this guide for the best student loans.
What’s Ahead:
The best student loans overview
Lender Minimum credit score Interest rates Repayment terms Cosigner option?
Credible 670 starting at 3.24% APR (with AutoPay)* and 0.94% Var. APR (with AutoPay), See Terms* 5-20 years Yes
SoFi 650 Variable rates range from 2.560% - 7.295% APR; fixed rates range from 3.899% - 8.024% APR (both including an auto-pay discount of 0.25%) 5-20 years Yes
Ascent 600 Fixed rates range from 3.22% - 13.09%
Variable rates range from 1.75% - 10.54%5-year, 7-year, 10-year, 12-year, 15-year, or 20-year repayment terms Yes
Earnest 650 Variable interest rates from 1.89% - 7.99% (includes 0.25% autopay discount), and fixed rates from 3.24% - 7.99% (includes 0.25% autopay discount) 5-20 years Yes
CommonBond 660 Variable interest rates from 1.43% to 7.41% and fixed rates from 5.45% to 9.74% 5-20 years Yes
Credible
- Interest rate range – starting at 3.24% APR (with AutoPay)* and 0.94% Var. APR (with AutoPay), See Terms*.
- Fees – Generally none, but it depends on the lender selected.
- Prepayment penalty – Generally none, but it depends on the lender selected.
- How much you can refinance – $5,000 to $500,000 to no limit, but it depends on the lender selected.
- Loan terms – 5-20 years.
- Forbearance – Depends on the lender selected.
Credible is a good option to consider, and the magic word here is ‘aggregator.’ Credible is a student loan aggregator, which means it’s a loan website that multiple lenders participate in.
It offers student loans for both new and current students, as well as student loan refinances. By filling out a single application, you can receive rates from up to eight different lenders.
Credible offers a choice of either fixed or variable rate loans, as well as deferred and interest-only repayment options. The application can be completed in just two minutes and will open the door to loan rate offers from multiple lenders. Loans can be used to finance almost any degree type.
The other really attractive thing about Credible is that getting rate quotes from them won’t affect your credit score. And no information is shared with lenders while you are shopping.
Credible Credible Credit Disclosure - To check the rates and terms you qualify for, Credible or our partner lender(s) conduct a soft credit pull that will not affect your credit score. However, when you apply for credit, your full credit report from one or more consumer reporting agencies will be requested, which is considered a hard credit pull and will affect your credit.
Learn more about Credible or read our full review.
SoFi
- Interest rate range – Variable rates range from 2.560% – 7.295% APR; fixed rates range from 3.899% – 8.024% APR (both including an auto-pay discount of 0.25%).
- Fees – There are no fees.
- Prepayment penalty – None.
- How much you can refinance – $5,000 to no maximum.
- Loan terms – 5-20 years.
- Forbearance – Up to 12 months over the life of the loan under the Unemployment Protection plan.
Everyone is talking about peer-to-peer (P2P) lending, and SoFi is a peer-to-peer lender specializing in student loan financing and private student loans. They’ve handled more than $18 billion in refinanced student loans to more than 250,000 members.
You can refinance both federal and private student loans. To qualify:
- You must be either a US citizen or permanent resident, who has graduated from a Title IV accredited university or graduate program.
- You must be employed, or have a written job offer to start within 90 days.
- Your income must be sufficient to cover your financial obligations, and you must have a minimum credit score of 650.
However, if you don’t meet the above qualifications, no worries because you can add a qualified cosigner if you don’t qualify by yourself. But be aware that once a cosigner is added, that person cannot be released from the loan except through death.
Learn more about SoFi or read our full review.
Ascent Loans
- Fixed APR range – 3.22% - 13.09%.
- Variable APR range – 1.75% - 10.54%.
- Fees – None.
- Prepayment penalty – None.
- How much you can borrow – $2,001 to $200,000.
- Loan terms – 5-15 years (10 years for fixed-rate loans).
- Forbearance: Up to 24 months.
Ascent is the most unique student loan lender on this list – or maybe any other! They offer both refinances and loans for new and current undergraduate and graduate students, but with more credit flexibility than their competitors. You may be eligible for financing with a minimum credit score of 600. Otherwise, you can apply with a creditworthy cosigner. What’s more, Ascent provides for a cosigner release after just 24 months.
Furthermore, non-US citizens or permanent residents are eligible for financing when they apply with a creditworthy borrower who is either a US citizen or a permanent resident.
Even if you’re a current student and don’t qualify for financing based on your income, you may still be able to apply for a non-cosigner loan. You’ll need to meet the minimum credit score requirement and have a minimum credit history of two years.
But even if you don’t meet the credit score requirement, Ascent offers a non-cosigned future income-based loan. It’s available only for juniors and seniors, but it allows you to qualify based on your expected income upon graduation. However, generally speaking, you must have a minimum annual income of $24,000 and meet the (undisclosed) debt-to-income ratio requirements to qualify for financing.
Learn more about Ascent or read our full review.
Earnest
- Interest rate range – Variable interest rates from 1.89% - 7.99% (includes 0.25% autopay discount), and fixed rates from 3.24% - 7.99% (includes 0.25% autopay discount).
- Fees: There are no loan fees.
- Prepayment penalty – None.
- How much you can refinance – $5,000 to $500,000.
- Loan terms – 5-20 years.
- Forbearance – Up to 12 months over the life of the loan.
Earnest is a good place to start when searching for student loans. Earnest is a direct lender that offers student loan refinances and private loans.
Earnest requires that you have a job, or at least a written promise of employment to begin within six months, as well as a minimum credit score of 650.
However, they look beyond your income and credit score and consider future earning potential, your education, and responsible savings and spending patterns, in determining the amount of your loan as well as the rate. And one unique feature of Earnest is that they will also discharge all student loans in the event of death or total and permanent disability – you don’t get that understanding from many other lenders.
Learn more about Earnest or read our full review.
Earnest SLR Disclosure - Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.49% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.14% APR to 8.24% 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 8.95% 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 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. 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.CommonBond
- Fixed APR range – 5.45% to 9.74%.
- Variable APR range – 1.43% to 7.41%.
- Fees – None.
- Prepayment penalty – None.
- How much you can borrow – $5,000 to $500,000.
- Loan terms – 5-20 years.
- Forbearance – On a case-by-case basis, up to 24 months.
CommonBond is a direct student loan lender, providing financing for both new and current students, as well as refinancing. They offer loans for undergraduates, graduate and MBA students, and dental and medical students.
The company reportedly offers forbearance on a case-by-case basis, up to 24 months. Most private student loan lenders offer forbearance for no more than 12.
You must be a US citizen or permanent resident to be eligible. You must also have graduated or are currently attending one of the 2,000 Title IV accredited universities or graduate programs. If you’re refinancing, you also need to qualify based on credit and income.
CommonBond offers the usual fixed rate and variable rate loans. But they also offer what they refer to as a hybrid loan. Under this program, your loan is fixed for a portion of the repayment term – generally the first five years – then becomes a variable rate loan based on the one-month LIBOR index. The loan is designed to reduce the uncertainty of a variable rate loan by maintaining constant payments for the first few years.
Learn more about CommonBond or read our full review.
How I came up with this list
To come up with this list of the best student loans of 2020, I used the following criteria in evaluating each lender:
- Loan terms. The longer the loan term available, the lower the monthly payment will be on any student loan. I emphasized lenders with maximum loan terms of at least 15 years, and preferably 20.
- APR range. Interest rates are always a factor when borrowing money, especially on long-term financing like student loans. Both fixed-rate and variable rates ranges were included, and all lenders generally fell within the same ranges on both rate sets.
- Fees. None of the lenders on this list charge application fees, origination fees, or any other fees. Any lenders determined to charge such fees have been excluded.
- Minimum credit score. This criterion is difficult, only because private student loan lenders typically require average or better credit. With the exception of Ascent, which does offer financing for those with fair credit, you may need to get federal student loan financing which typically doesn’t require good or excellent credit.
- Prepayment penalty. Like loan fees, lenders that charge prepayment penalties are specifically excluded from this list.
- How much you can borrow. Naturally, lenders that allow higher loan amounts – at least up to $500,000 – are preferred. But lenders that provided other advantages were included, even if their maximum loan amount was below that threshold.
- Forbearance. This factor is commonly available with federal student loans but isn’t automatic with private student loans. While each of the lenders on this list offers some type of forbearance, it’s not as generous as that provided by federal loans. Still, forbearance of up to one year will likely be sufficient for the majority of borrowers dealing with a temporary hardship.
When to get a student loan
You’ll need to get a student loan when the cost to attend college exceeds the financial resources available for you or your family.
Those resources can include savings, including dedicated college savings plans, such as a 529 plan, but a Roth IRA could be another option. But they can also include scholarships, grants, and any income you expect to earn while you are in school.
Your first source for student loans should typically be federal loans since you will not be required to credit qualify for most programs. However, federal student loans are available in limited amounts, which may require getting additional funding from private sources, such as the providers listed above.
In applying for a private student loan, you’ll need to qualify based on your income and credit history. If you can’t, you can add a qualified cosigner. The major advantage of private student loans is that they are available for much higher loan amounts that can cover the entire cost of your education.
How to qualify for a student loan
With federal student loans, you don’t need to qualify based on your income and credit. Nor will they typically require a cosigner. They’re government financing programs specifically designed for those who lack the ability to afford higher education.
With private student loans, you’ll need to qualify for both income and credit history. Income will need to be sufficient to cover the new loan payment, plus existing recurrent obligations, and your monthly house payment.
You can either qualify for the loan based on your own financial profile or on that have a qualified cosigner.
Student loan important features
Fixed vs. variable loans
Student loans can be either fixed for the entire term of the loan, or variable, with the interest rate changing based on changes in the general interest rate picture.
Generally speaking, interest rates charged on variable rate loans will be lower. But over the long-term, fixed-rate loans will have lower rates should rates increase substantially in the future.
Federal student loans come only with fixed rates. Private loans offer either fixed rates or variable.
Maximum loan amounts
For Federal student loans, the maximum loan amounts are between $31,000 and $57,500 for undergraduates, and up to $138,500 for graduate students.
Private student loans can have maximum limits of anywhere from $150,000 to $500,000. But some private lenders will extend loan limits to whatever the cost of the student’s education is.
Because of the higher loan limits offered by private student loan lenders, students often have a mix of both federal and private loans.
Terms
For Federal student loans, loan terms typically run between 10 years and 30 years.
For private loans, most are between 5- 20 years.
Fees
Federal student loans require origination fees, which currently range between 1.059% and 4.236% of the loan amount taken.
Private student loans normally don’t charge origination fees or other types of fees.
APR
Annual Percentage Rate, or APR, is the effective rate on a loan, with both the base interest rate and any required fees added to the calculation.
For example, if you borrow $100,000 and pay a 2% origination fee, the net proceeds of the loan will be $98,000. When a 5% interest rate is calculated on the loan, the APR will be slightly higher, due to the reduced net loan proceeds.
Deferment
With Federal student loans, no payments are required until six months after graduation. However, interest accumulates on the principal amount borrowed, which means your loan amount is increasing during the deferment period.
Private student loans come with a wide variety of deferment options. Some may offer a full deferral until you graduate from school. Others may charge a minimum payment, which can be as low as $25 per month while you are in school. And still, others will charge interest only while you are in school.
Forbearance and loan forgiveness
Federal student loans offer both forbearance and loan forgiveness. For example, under the Income-Driven Repayment plan, your monthly payment can be reduced to a small percentage – usually 10% – of your monthly income.
Meanwhile, under a Public Service Loan Forgiveness plan, your debt can be completely forgiven if you make 120 monthly payments while working full time for either a government agency or a qualifying nonprofit organization.
With private student loans, loan forgiveness is not an option. However, some will provide forbearance if you are experiencing economic hardship, such as unemployment. The specific provisions will vary from one lender to another.
Cosigner release
Federal student loans don’t generally involve the use of a cosigner, so cosigner release doesn’t apply. However, cosigners are common with private student loans. But many lenders provide a cosigner release provision, that allows you to continue on the loan with your cosigner released from liability.
If a lender does provide a cosigner release, you must typically be able to qualify to carry the loan based on your own financial resources and have a history of making payments on time for between 24 and 48 months.
Summary
Student loans are truly one of those uber complex things to figure out, and the market is overrun with lenders who have high rates and fees. But these four companies, in my experience, are the best student loan companies to work with. But like absolutely everything, make sure you read the fine print before applying.
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