Best Private Student Loans And Top Refinance Options In 2021
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Demand for student loans in the US has never been as high as today, with almost 69% of new graduates finishing college with an average of $30,000 of debt. In a recent study, it was claimed that the value of outstanding student loans in the United States has more than doubled in ten years by 119.51%. It is, therefore, of prime importance that aspiring students understand the responsibility that a student loan may have on their future life and career.
This new staggering record translates to a 1.64 trillion by the end of 2019 third quarter. Compared to the Q3 of 2009, the loan debt stood at $771.7 billion.
In essence, a Student Loan should act as an invisible hand opening doors for you, helping you achieve your goals of higher education and excelling in your desired profession. While this is the basic principle behind a student loan, it is important to mention that certain providers have taken advantage of the rise in demand to hike interest rates and offer payment plans with dubious intentions.
Keep in mind that as an aspiring student the most important decisions that you will make will be choosing a college, a major and also how you will pay for your education. Choosing the wrong provider can have severe repercussions on your life and career. It is important for anyone interested in getting a student loan to take their time, research the options available in order to make a balanced decision.
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Sallie Mae – Best For Flexibility
Our Rating
- Highly flexible repayment options
- Graduate loans available at a fixed loan rate
- Variable interests for undergraduate loans
Types of Student Loans (Federal & Private)
Even though there are many different types of Student Loans available in 2024, all of them can fall into two main categories, Federal Loans, and Private Loans. It is key for individuals to understand the differences between a government-sponsored program and a fully private service. Keep in mind that the average length for full repayment of student loans in the US takes between 15 and 18 years after graduation, it is imperative to plan in order to choose the best possible plan.
Choosing the right provider and loan type are desitions that will follow you for a considerable part of your professional career and your life. Take your time to evaluate all your options before embarking into a Student Loan.
Federal Loans
Generally speaking, many individuals believe that dealing with a government loan would be better than dealing with a financial institution. While on paper this is the case as federal plans offer their own type of benefits, in reality, federal loans have changed in the past decade and many individuals are having problems with them. The reason behind the problem is not the loan type or their laws, but the provider that is acting on behalf of the government in order to offer them to the public.
Please note that in order to apply for student aid or a Loan you will have to submit your FAFSA (Free Application for Federal Student Aid) application every year, this will allow you to check your eligibility for a Federal Student Loan. What many people don’t know is that depending on your School and your State, the government may automatically assign you to a provider who will oversee your account.
If you are aiming for a traditional Federal Loan instead of a private, please take your time to understand your options and also to review your assigned provider in cases where it was not selectable.
Federal Loans are usually divided between Subsidized and Unsubsidized, this means that while you are a student the government will take care of the interests, and you will only start paying for the entire loan once you graduate.
Please note that subsidized loans will require the student to be eligible based on family income and necessity for financial aid. On the other hand, unsubsidized loans are available for any individual regardless of financial need.
Private Loans
Private loans are offered by many stable and well known financial institutions, as a private product they respect the laws of Student Loans and the guidelines of the government but they also follow in most cases a proprietary model that will vary from institution to institution.
Keep in mind that just like a federal loan you can still apply to subsidized loans where the government will cover your interests while you finish your education.
From a pricing perspective, federal loans are usually cheaper than private offering, but the latter will offer a more flexible and nimble service. Once you understand the big picture of how much money you need to borrow in order to successfully afford education, you will be able to make the conjectures to determine which type will actually be better for you.
Since you can have both types of loans, it is openly recommended for individuals to take advantage of the free offering from federal loans first and then to borrow any outstanding money with a reputable financial institution as a private student loan.
Pros and Cons of Getting a Student Loan
Getting in debt with the intention of paying for education is one of the noblest reasons anyone should get a loan for. Keep in mind that just like with any other thing in life, Student Loans are not a rose color, they have their own negative and they can be tricky to understand. Knowledge is power, inform yourself the most in order to avoid dealing with tiring situations down the road.
Pros
- Access to afford Education: It is fairly common to see individuals bailing out on their dreams of attending college and becoming professionals simply because they can’t afford tuition, you might finish your career with debt that needs to be paid but it will allow you to successfully follow your dreams to get a higher education.
- Attending a better college: For many individuals getting a student loan can mean the difference between their dreamed major and settling down for what they can actually afford. While being out of debt is a blessing, it is important to keep in mind that studying what truly drives you will make the entire college experience better. You should not be aiming to simply get a degree, but to get a degree that goes along with your personality, your life expectations and also your personal goals and beliefs. Before making a decision of what you can afford, take your time to evaluate your options, chances are you will be surprised by what you can get.
- Paying other Expense: Besides paying for tuition student loans can be used to cover other expenses related to your education like accommodation, board and even supplies of certain careers. Keep in mind that you should aim to be comfortable during your college years, not to splurge your money but to focus on your education instead of having to pull every penny in order to make ends meet. The best advice I can give you is to try to borrow the least possible without having to sacrifice the quality of your education.
- Credit Score: It is relatively common to see individuals building their credit scores straight out of their student loans. Many individuals have never had anything under their names before going to college, if you are responsible with your payments, having a students loan will help build and boost your credit score.
Cons
- Expensive: You would be surprised by how high the rates can be for certain student loans, choosing the wrong plan can let you paying interests that would make you want to go back in time and pay your loans with a credit card instead! As mentioned before, you should take your time to review all your options, including analyzing if you would be better with a high fixed rate or a floating rate for your line.
- Starting a career with Debt: Starting a career and a life with a burden of being in debt can be pretty hard if you don’t get a job or if you don’t earn as much as you thought you would. It is critical for aspiring borrowers to understand how much can they really pay and to not overextend their loans beyond what they truly need.
- Personal goals might have to wait: Having a Student Loan will force you to re-evaluate your decisions after graduation. In order to avoid any bad surprises down the road, it is important for individuals to understand the sacrifices they will encounter later in their life. Managing your expectations is the best way to ensure you won’t have to deal with any disappointment when the time of repaying comes.
- Bankruptcy won’t help you: There is nothing more loyal in life than a student loan. If you ever wonder who would follow you to the end of the world and back then look no more! Sarcasm aside keeps in mind that the chances of getting rid of your loan without paying it in full are very slim. Even if you could get an attorney to present a case and filed for chapter 7 or 13 of the Bankruptcy Act, the chances of winning are really really tight.
- Credit Score Destroyer: Just like they can act as levers to build a great credit score, Student Loans can also become in your worst enemy since in most credit scores scenarios they have a higher weight than traditional debt. You would be surprised by how devastating defaulting on student loans can result in someone’s credit score, forcing them to use bad credit loans. I won’t say that you should sacrifice your lifestyle or your overall life to pay for a loan but keep in mind of the repercussions it might have on you and your options in the long term.
- Crooked Providers: Over the last decade we’ve seen an incredibly fast risen in the amount of student debt owed by Americans. As the level of debt continues to rise even higher, the eyes of many regulators have fallen into a group of service providers who have been known for churning their clients in the past! Some of these companies have even been accused of committing fraud against their users and it won’t require much research to find open cases online.
“Profiting from student loans is usury, and we just can’t continue to allow it” Pramila JayapalWhen it comes to student loans you will find individuals who are grateful of being able to study what they truly wanted and that they are comfortable paying their loans, but you will also find the ones that have had to deal with either external factors or simply bad luck with their providers and their careers.
The best advice I can provide anyone interested in a student loan is to be prepared and aware of the commitment they will be taken with the loan. Take your proper time to analyze meticulously any plan and provider before signing the contract, the more prepare you are, the easier it will be down the road.
We live in an online world where reviews can be found on everything, be sure to do your due research before choosing a provider. Don let yourself be lured by deals that are too good to be true!
Best Student Loan Options: Summary
Reviewers Choice Sallie Mae
RatingAvailable Loan Amount$1,000 - Total cost of educationAvailable Term Length20 YearsRepresentative APR3.62% to 10.54%Product Details- Best for individuals looking for repayment flexibility
Pros- Disability discharge in case of death or incapacitation of the borrower
- Extended loan repayment periods averaging more than 20 years
- Highly flexible repayment options for both the employed and unemployed graduates
- Interests accrue while you are in school
Key Facts- Offers loans with variable interests for undergraduate loans
- Graduate loans available at a fixed loan rate
- Covers the total cost of tuition and attendance fees
College Ave
RatingAvailable Loan Amount$1,000 - $80,000Available Term Length5-15 yearsRepresentative APR3.99% - 12.78%Product Details- Best for more involvement/greater say in loan terms
Pros- One of the few lenders to offer short term loans
- Maintains a relatively straightforward student loan application process
- Every student is free to settle for either the variable or fixed interest loans
- Lack of transparency in loan calculation
Key Facts- Offers more flexibility with any student able to choose between fixed and variable rate loans
- Managed by experienced ex-SallieMae executives
- Offers different types of repayment options; immediate, fixed, deferred and partial interest
Discover
RatingAvailable Loan Amount$1,000 - Total education feesAvailable Term Length15 yearsRepresentative APR4.99%-11.99%Product Details- Best for individuals looking for transparent interactions and high-quality services
Pros- No penalty charges on late payments
- Offers cash back for good grades and responsible Discover card spending
- Supports student loan consolidation
- No guarantor release clause for responsible borrowers
Key Facts- Offers the choice of variable and fixed interest fees to all students
- Embraces the deferred loan repayment option
- Lends 100% of School certified expenses; tuition, living and miscellaneous expenses
LendKey
RatingAvailable Loan Amount$7,500 - $125,000Available Term Length10 yearsRepresentative APR2.49%-7.50%Product Details- Best for students looking for affordable interests on loans
Pros- Maintains one of the lowest student loan interest rates
- A large number of lenders increases chances of scoring the loan
- Offers discounts on interest rates to responsible borrowers
- One may consider the 10-year repayment period relatively short
Key Facts- Introduces students to more than 13,000 banks
- Offers both undergrad and graduate student loans at favorable interest rates
- Offers Different loan repayment options; deferred, immediate and fixed
Lendedu
RatingAvailable Loan Amount$5,000 - Total cost of educationAvailable Term Length20 yearsRepresentative APR2.49%-7.5%Product Details- Best for students looking for favorable lending options from local banks
Pros- Maintains one of the fastest student loan application and approval process
- Offers flexible loan repayment options over an extended period
- Provides 100% school-certified expenses; tuition, living and miscellaneous
- Biased towards borrowers with favorable credit reports
Key Facts- Offers four types of student loans; undergrads. Graduate, technical trading, Parent loan
- Flexible loan repayment options; deferred, fixed, immediate, interest-only
- Every applicant has a choice to choose between fixed and variable student loans
Best Student Loan Options of 2024
1. Sallie Mae – Best For Flexibility
Sallie Mae is the largest private provider of student loans in the US, with over $180 billion in managed debt and 10 million borrowers. When you start analyzing the numbers it becomes easy to see how big this company really is. The firm started in the early 1970s as a provider for federal loans, it was not until six years ago when the firm drifted towards private offering.
If you ever got a Federal Loan from Sallie Mae, it is very probable that it is now being managed by the new group of federal providers like NAVIENT.
The firm is a great provider mainly because of all their experience and proven track record, but also because of how flexible they can be when it comes to requesting a loan or repaying for it. This is one of the only firms from this list where I can actually say their best interest is to help individuals and also to help them repay for their loans. This is one of the only companies I’ve seen where they don’t see students as dollar symbols with zeroes to their right ($ 000,000).
Additional Information
APR:
- Fixed: 5.74 to 11.85% (undergrads)
- Variable: 3.62% to 10.54%(undergrads)
Loan Type:
- Undergraduate
- Graduate
- TechnicalTraining
- K-12
Repayment Options:
- Deferred
- Fixed
- Immediate
Loan Amount: $1,000 up to 100% of the cost of education and attendance. The firm actively encourages students to focus on their education and to borrow what they need in order to secure taking the most advantage of their time in college. The main idea behind this is to avoid any additional stress of the students having to worry about their expenses and how to afford them while studying.
Length: In order to calculate the length of the loan it is important to take into consideration how long is it going to take for the student to actually graduate, after that a mutually arranged payment schedule will be created. The reason for this is to give students the opportunity to make repayments as flexible as possible. If you are lucky enough to find a six figures job after graduation and you want to pay your loans early you can do it. On the other hand, maybe paying only the interests is your goal right now as you haven’t found the right job, in any case, the point is that flexibility is offered to you.
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- Consignment Release: After 12 months without zero problems in terms of late payments, Sallie Mae offers the release of responsibility for any consignment.
- Discount on Automatic Payment: If you automatize your payments you will get a discount of 0.25% to your interests rates, this might not sound like much but once you consider the average American spends 20 years of their life repaying their student loans, the perspective becomes more apparent.
- Disability Discharge: There are nightmare stories online of individuals who passed away and the lending companies came back to reclaim the loan to their loved ones. This is a key element that makes great student loans, in reality, anything can happen at any time and it is better to be prepared and also to protect the ones we love from a situation like this.
- Customer Support: If you have to call the firm for any inquiry, you will find yourself wasting at least one hour on the phone just to get connected with the right team to help you.
- Unsubsidized Loans: Keep in mind that most loans from Sallie Mae are unsubsidized, this means that while you are studying interests will be running. The term refers to the government subsidizing interest payments on their federal loans.
2. College Ave - Best For Debt Refinancing
College AVE is a fairly new company with less than five years of active operations. The firm was established by a group of executives from Sallie Mae, the organization might not be old but their Sr Management is composed of some of the most experienced professionals of the Studen Loan Market.
It is important to mention that the company did not become famous for its loans per se, but for the refinancing options. Depending on your financial situation it can be smart to aim for a refinancing method when you consider that you could be paying less every month or simply save money by repaying it early.
There are many different reasons that can take an individual to become interested in refinancing their debt, whatever your reasons are you should consider taking a look at the flexibility offered by College AVE. Keep in mind that not many companies will allow you to refinance at a loan with a shorter tenure, if this is what you are looking for then College AVE might be your best option.
Additional Information
APR:
- Fixed: 4.74% – 12.78% (undergrads)
- Variable: 3.99% – 11.32% (undergrads)
Loan Type:
- Undergraduate
- Graduate
Repayment Options:
- Immediate
- Deferred
- Partial Interest
- Fixed
Loan Amount: $1,000 to $80,000
Length: 5-15 years. Please keep in mind that depending on the case a loan can take considerably longer to be repaid.
Our Rating
- Short Term Loans: Keep in mind that it is pretty difficult to find institutions offering a tenure of fewer than 10 years (with College AVE you can aim for a loan from a minimum of 5 years)
- Straightforward application: Even though many individuals believe it is easy to obtain a student loan based on the fact that it represents the business for lenders, in reality, many names have a very strict process and it can be pretty tricky to follow. College AVE offers a very linear model that makes requesting a loan easy and accessible for most individuals.
- Transparency: Even though the process of soliciting the loan is considerably easy, there is an outstanding lack of transparency in terms of the debt and how everything is calculated. If you openly ask about the details you will receive them, but this is something that should be given to you without having to ask.
- ***Navient is a provider***: This might be the overall biggest cons to using College AVE, it is important to keep in mind that certain types of loans of the firm are offered through Navient. If you still don’t what Navient is, I invite you to take a quick look around google and social media to hear the terror stories about how this provider is considered to be the worst in the US.
3. Discover – Individuals with High Credit Score
It is very possible that if you are in the US, you might have used Discover for their credit cards, ATMs or simply because of their broad payment network. But, the company is more than a plastic cards provider, over the past decade, the company has ventured into other areas and services like online banking and lending.
One of the best reasons to deal with Discover for your student loans is that you will be borrowing from a well known and stable company, the overall service you will receive will be more transparent than with most dedicated Student Loan Lenders. Keep in mind that Discover is not in the business to destroy their reputation for ripping off students with unpayable programs and churning practices, instead, it is a company interested in offering a full suite of services while taking care of their clients.
The only drawback I find with Discover is that in order to apply for a Students Loan you will need to have a great credit score and a cosigner. If you don’t have the right record and score, it is likely that your request will be rejected.
Additional Information
APR:
- Fixed: 6.49% – 11.99% (undergrads)
- Variable: 4.99% – 11.24% (undergrads)
Loan Type:
- Undergraduate
- Graduate
Repayment Options:
- Deferred
Loan Amount: With Discover, you will be able to borrow the 100% of the school-certified expenses (tuition, living, miscellaneous expenses)
Length: 15 years
- Fees Free: One of the best adding value characteristics of Discover is that in case you incur in a late payment, you won’t have to deal with any penalty or fees. Keep in mind that in order to maintain the best credit score possible, it is recommended to automatize payments, but if you don’t feel comfortable with this then keep in mind you will be receiving a considerable additional period of grace free of fees and penalties.
- Cashback: Following a similar model to what they offer with their credit cards if you are responsible for your payments and also with your grades you can become eligible to receive a cashback of 1% on each newly added loan. Once you take into consideration how expensive college can be, even a one percent return of your funds can be material.
- No Cosigner Release: Asking someone to cosign for your loan can be a hard thing to do. Even if its sponsored by someone close to you or even part of your family, the responsibility of becoming accountable for a loan in case of default is high. It has become pretty common for student loan providers to offer access to a release of the cosigner once a period of at least 12 months have passed and the individual has proven to be responsible for their payments. Unless your Loan was requested before 2012, Discover will not offer you any cosigner release.
4. LendKey – Best For Quoting with Smaller Banks
LendKey is probably the most different option from this list. The company was initially created with the intention of acting as a P2P lending platform for student loans but later changed their business model into a platform that would allow individuals to receive quotes and information of multiple types of loans and providers. The company became publicly known in the US for their efforts to offer attractive lending packages with the liquidity and execution of more than 13,000 community banks and financial institutions all over the country.
The firm might be offering a completely different product with its own approach, but it is important to keep in mind that it works incredibly well. Take your time to review their app and their platform, it is very easy to use and besides, receiving quotes from thousands of financial institutions has never this easy. At the end of the day, the companies interest is to deliver the best possible option for your loan, it is great to see that there are still companies interested in the well being of their clients.
Additional Information
APR:
- Fixed: 3.64% – 7.5 (undergrads)
- Variable: 2.49% – 7.41 (undergrads)
Loan Type:
- Undergraduate
- Graduate
Repayment Options:
- Deferred
- Fixed
- Immediate
Loan Amount: $7,500 to $125,000
Length: Up to 10 years for repayment
Our Rating
- Visual Calculators: One of the main concerns individuals have when it comes to their student loans is not knowing clearly when they will finish repaying them. In order to make planning and overall forecasting easier, the firm offers its own deck that automatically calculates and gives you all the details from your loan (interests, pending capital, tenure, final payment date). As simple as it might be, this platform allows individuals to make plans and test how changes in their lifestyle or employment may affect their loans down the road.
- 10% – 1%: The company offers a unique feature where after repaying 10% of the debt you can become eligible for a 1% discount to your current interest rate bracket. As mentioned before, this might not sound like much but once you start taking into consideration how interest accrues over, it becomes easy to see the amount of money this can saves you.
- Unemployment Protection: Even though it has become more and more common to see institutions charging a fee in exchange for protection in case of Unemployment, Lend Key is not one of them. There is third-party insurance that you can buy but it is important to do the right research in order to make sure it does not violate any fine print.
- 1o years for repayment: Lendkey does not offer long term financing, instead most of their loans are capped at 10 years (some cases can go up to 15). While this might be positive for certain individuals, it also means that payments would be considerably higher.
5. Lendedu – Best Marketplace
Lendedu is another fintech company offering its own marketplace where individuals can search for their best options in terms of student loans, refinancing and even credit cards consolidation. With a similar approach to what LendKey is currently offering, Lendedu is an overall more complete option as it also allows to quote refinancing of other types of loans as a whole.
It is worth mentioning that the firm currently operates with the leader student loan providers in the US, this usually allows for requests to be smooth and agile.
Disregarding where you are living, I actively advise to take your time and to review all available options. Reviewing pricing in terms of rates and benefits with these two market places is pretty straightforward. You would be surprised by how much rates can defer between community banks and bigger financial institutions.
Additional Information
APR:
- Fixed: 3.64% – 7.5 (undergrads)
- Variable: 2.49% – 7.41 (undergrads)
Loan Type:
- Undergraduate
- Graduate
- Technical Trading
- Parents Loan for their Children
Repayment Options: Deferred Fixed Immediate Interest-Only Loan Amount: Min $5,oo0 to No Max. Please keep in mind that the firm allows you to borrow as much as you can but as mentioned before this is something you should be worried about. Without sacrificing your education it is advised to try to borrow the least possible and only when truly necessary.
Length: Up to 20 years for repayment
Our Rating
- Easy and Fast application: Applying to any type of loan tends to be slow and very time consuming, with the help of LenEdu, the overall process can be done in less than 10 minutes. The main goal of the firm is to connect you with the best type of loan according to your profile and your goals.
- Best Providers: In order to ensure the best overall experience the company only does business with the top student loan providers in the country. If you are planning on getting a loan with a tier-one institution, the pricing provided by the platform will be the best that you will get.
- Please note that as a provider the company offers a great service, their marketplace has a vast range of offerings and the applications are incredibly fast. I personally could not find a problem worth mentioning, but it is important to keep in mind that all the loans offered by this firm will carry on any problems from the provider itself.
6. Ascent – Best For Individuals with no Credit Score
Ascent offers a traditional lending service, but at the same time, the company makes a great effort in order to emphasize that all their services are design with the intention of expanding possibilities and not to restrain them, clients, as many other providers do.
There are many reasons why an individual would be interested in borrowing from Ascent, but the principal would be if they have a solid cosigner. This is partly because they will offer a very competitive rate and they will weight the credit risk on your cosigner and not on you.
Besides offering an incredibly competitive rate, the firm also offers access to a high level of flexibility when it comes to repayment. One aspect I believe that more individuals should take into consideration is that life is not linear, and we can’t forecast everything that might happen. Chances are you have been planning on getting a job straight out of college, but in reality, it could take you more than the buffer of six months to do so. Maybe you got fired and you can’t afford the payments, being able to take advantage of a nimble plan can save you a lot of money, emotional pain and also keep your credit score untouched.
Additional Information
APR:
- Fixed: 4.98% – 14.16% (undergrads)
- Variable: 4.23% – 13.23 (undergrads)
Loan Type:
- Undergraduate
- Graduate
Repayment Options:
- Interest-Only
- Deferred Repayment
- $25 Minimum Payment
Loan Amount: $2,oo0 to $200,000
Length: Up to 15 years for repayment
Our Rating
- Cosigner Release: Even though the release is permitted please keep in mind that on average it takes up to 20 months to become eligible.
- Easy Application: The company offers a fast review of all their applications which means you will get a response to your request in a fast manner
- Reasonable monthly payments: One of the key elements of a great student loan is how flexible the payments are going to be, you don’t want a plan so flexible that you will never finish paying for it, but neither a plan so tight that will suffocate you. Considering its pricing and overall service Ascent offers a very nimble approach.
- Not all schools are applicable: This is probably the worst deal-breaker of the company, nothing worse than seeing a very attractive plan that meets all your expectations and being told at the last minute that you are not eligible based on your major or your school. This is not a common practice but it is worth noticing that certain schools are not eligible for specific plans and the same happens with certain majors due to over offering and unemployment in that particular sector.
- Pricing: Against their major competitor’s it is probable that you will get better pricing somewhere else. f
Summary of Private Student Loan Options
The steady rise of student debt in the US and also the increase in their rates have made the sector part of a very active political discussion in congress and the Senate. What was intended to be used in order to open doors for individuals that otherwise would not be able to receive a higher education, has turned into a money-making machine for some corporates who profit from churning their clients?
With almost 69% of new graduates using student loans in order to pay for their education, it is easy to see how big the market and its demand really is. Luckily for applicants, the market is offering an equally large offering of loans and providers. If you do your proper research, it is probable you will be able to find the right plan that will help you to achieve your education dreams without sacrificing your personal life and also your professional career.
Even though Studen Loans are seen by many as a necessary evil, I personally believe that if you pontificate properly your loan and you use a well-known provider, you won’t have to deal with any type of drama or sketchy situations down the road.
One of the things that make student loans so great and so dangerous at the same time is the fact that in most cases repayment will only begin after graduation. While this provides a false sense of tranquility, it is key to understand that life goes by fast. Before you notice, you can find yourself as a senior starting to feel the pressure of knowing that you need a job as soon as possible to cover for your loan and also your responsibilities.
Starting college can be a very stressful time, not only you will have to make all the decisions related to your University and your major, but also you will have to plan on how to pay for your education. One of the capital sins that many individuals commit when it comes to student loans is that they were not prepared enough. You need to be aware that the decision that you are making right now on how to cover the cost of your education will have strong repercussions on your adulthood and the rest of your life
Maybe you chose the wrong type of loan, or your credit score was not the desired one, whatever the reasons where you should focus on your current situation and on what you can do to make it better.
How can Student Loan Refinance Help? A loan refinancing if used properly, could be a second chance to select the right type of loan with the right institution. I can stress enough on how important it is for you to take advantage of this opportunity to its fullest, and to avoid putting yourself back into another precarious situation later in your life.In this article, we will cover the best refinancing options available in 2020. Take your time to review them and to proceed with your investigation if needed. It is important to keep in mind that there are hundreds of other options available in the market, these are just a few of the most important names and also the best according to our investigation and also our perspective.
Why Should I Refinance Student Loan?
Before actively considering to refinance any debt, it is crucial to understand the benefits but also the consequences of doing so. Even though you might be stressed out by this debt, it is recommended to take your time to review the case and to also research for the best possible providers and plans. Rushing into decisions might help you improve your conditions today, but the risk of impacting your future is extremely high.
Pros
- Lower Interests Rates: Maybe you got your loans at a time where your credit score was bad or simply not as good, chances are that after years from graduation, your score is way stronger. By opting for a refinance you will be able to search for a cheaper financing option to your current plan, this will allow you to save money, and it could also help you get a better monthly fee to what you had before.
- Lower Monthly Payments: One of the main reasons why so many individuals become interested in refinancing their debt is to improve their liquidity by lowering the monthly payments on their loans. This lower structure is possible because either you got a better rate or because you might be expanding the tenure of your loan. In the following example, it is essential to understand that you will indeed have to pay more money in the long run, but you would be able to overcome your current situation in a more natural way. My best advice is not to sacrifice your future over your present.
- Consolidate Multiple Loans into one: In 2018 almost 69% of all graduates had at least one student loan, and it is keen to do an emphasis over number one as the average of loans per student was of at least four. One of the Benefits of refinancing is being able to consolidate all your payments as one structure. Imagine how difficult it is to manage four different loans with different institutions and also different rates.
- Cosigner Release: Depending on the type of student loan that you got and also the chosen provider, you might find yourself having to get a cosigner that will cover your back and your loan in case you default. Most plans in the US would allow for a cosigner release after a while or after a certain number of payments have been successfully covered, but like some institutions would allow for a release to happen, others won’t permit it ever. By refinancing your debt, you will be able to choose for a loan that would not require a cosign, and that will make you the only individual responsible for the repayment. It is incredibly common seeing individuals changing their loans to take their parents out of the responsibility of being cosigners.
Cons
- Lower Federal Protection: If you are refinancing a private student loan you won’t be missing any benefit, on the other hand, it is a Federal loan…. you should take two steps and reconsider if its worthy or not to refinance it as the structure will become private, and you will lose all the benefits from a Government-Backed loan.
- Lose of Forbearance and Deferment Options: Forbearance and Deferment allow you to utilize a stop button to the payments of your loans. Picture yourself losing your job or going back to school, and being able to stop any fees while doing so. Even though in both scenarios interests will be running in the back, you wouldn’t have to deal with the loan payments over a predetermined period. And the best part of this is that you would not affect your credit score in any way. You might not need any of these options, but it is always a good thing to have under your sleeve in case things go south, please be aware to understand the consequences of such a decision appropriately. Your self might not be needing them now, but it is always essential to think about a future scenario. Ask yourself how you would react in case of needing them?
- Your Credit may Impact the pricing directly: After soliciting your first loan, you will realize how important it is to have a good credit score, and also how much money it will save you or will cost you. Financial institutions analyze your credit score to determine how creditworthy you are, and based on the result, they will give you a rate. If you have had problems paying credit cards and even your bills, you will immediately notice that your cost of borrowing is higher as you are categorized under a riskier category. Take care of your credit score; it will open you many doors and will also save you tons of money.
- Lifetime: Extension of Loan Lifetime: Keep in mind that unless you have the means to refinance and be able to afford higher payments to finish the loan sooner, you will most likely be extending the longevity of your debt or at least will sustain the current schedule. It is common to see individuals being surprised and even upset when they realize that they might have lowered their rates and with that their payments, but the tenure was even longer than the initial loan. There are many different options that you can choose from, the best advice I can give you is to take your time to analyze all the scenarios before making any choice.
Best Student Loans Refinancing Options in 2020
1. LendKey –Best For Quoting with Smaller Banks
The first thing you need to understand about LendKey is that they are not a bank; instead, the firm acts as a network that connects financial institutions all over the US. The idea of this connectivity is for you to get the best possible pricing based on your credit score.
One of the perks of this firm besides better pricing is how fast things can be. Imagine being able to apply to more than 400 providers in the US and getting a quote on all of them in a matter of minutes.
Note that even though a third party institution would lift the heavyweight, your refinancing and your interaction would be direct with LendKey.
Another point worth mentioning is that the company offers access to smaller banks. You might be surprised by how much cheaper certain institutions in the midwest can be compared to the rest of international banks.
Additional Information
APR:
- Fixed: 3.64% – 7.50% (with autopay)
- Variable: 2.49% – 7.41% (with autopay)
Loan Type Refinancing:
- Private Loans
- Federal Loans
Loan Amount: Minimum refinancing loan of $7,500
Length: 5 to 20 years
Our Rating
- Unemployment protection: This is one of those benefits you should never take for granted. Even if you have a successful career and you are comfortable with your current employer, things can change in a blink, and you would not want to find yourself in a position where you would not be able to cover your payments because of being unemployed. This is simply insurance for your mind and also for your credit score. Note that the offer package will cover the payments for up to 18 straight months as long as you can prove that you are actively looking for a job and interviewing.
- Interest Rate Discount: While offering an interest rate discount for automatizing payments has become the new norm in the market, Lend-key is going even further by providing higher and additional discounts based on credit score.
- Cosigner Release: You will be eligible to release your cosigner after completing a minimum of 12 months. Keep in mind that this will be based on how responsible you are in paying your monthly fees on time. The advice I can give you is to aim for automatic payment. This will help you maintain a track record free of stains during all the period.
- Strong Credit Scores: LendKey is a firm that truly pays attention to credit scores before even taking your case for examination. If your score is under 680, don’t even waste your time trying to apply with this company.
- Middle Man: Lend key is not a lender, instead of the firm acts as the middleman between their reputable partners and the end customer. While in most cases, quotes are usually bellowed market due to the size they move, it is important to be aware that going directly to a bank can sometimes be cheaper.
2. Earnest – Best For Merit-Based Lending
Earnest is another disruptive name of silicon valley joining the Fintec world. Instead of simply offering a traditional refinancing service where an individual is analyzed and then determined how creditworthy they are, the firm took a different approach by automatizing everything under a proprietary algorithm.
The idea of utilizing an algorithm and also artificial intelligence is to be able to look beyond what traditional parameters and ratios tell about an individual.
The whole approach of the firm is to prove that individuals could be evaluated as a whole and not solely on what their Fico score says about them. Things happen, life happens…. life is not linear, and it should not be evaluated that way.
If you believe that your credit score does not reflect the type of person you are, you should consider review what earnest has to offer and also where you would be ranked in their system. It is not uncommon to read reviews online about individuals expressing all the gratitude in the world for earnest as the firm believed in them when no one else did.
Additional Information
APR:
- Fixed: 3.50%(with autopay)
- Variable: 2.49% (with autopay)
Loan Type Refinancing:
- Private Loans
- Federal Loans
Length: 5 to 20 years
Our Rating
- Credit Score: Ever since its inception, the firm has always been known for being aware that there is more in an individual than just their credit score. Instead of only focusing on the number the pay close attention to the reasons that could have lower your credit and also if there is a red flag in terms of a completely pristine score. If you’ve had drawbacks in the past you might want to consider Earnest as a great option to refinance.
- Skip Payments: This might be a gimmick type of benefit but it is still something you should know about. Every year the firm allows you to skip payment of your choice, this is a get out of jail free card as you would be deferring that payment later in time. If you find yourself in a bad financial situation or you are simply planning on another use for your hard earn dollars, you can take advantage of doing so without affecting your risk!
- High Refinance Limits: This might sound crazy but you can find individuals whose student debt is easily over the six figures, and it can be extremely hard as not many institutions are interested in dealing with those customers. Earnest offers its clients to refinance up to $500,000 making it one of the highest in the US Market.
- Not in Every State: Even though Earnest is not a small or a new company, the range and availability is not covered by all states.
- Savings: One key element where the company adds extra steps is to make sure that you have enough savings to cover part of the loan and also your expenses as well. This might not sound like much but it is key to understand that no every American has $6,000 moving around their bank accounts without even purpose.
- No Cosigner: With Earnest, you would be on your own. While many individuals are trying to get their cosigner released some others are doing as much as they can to be supported by someone of trust.
3. Sofi – Best For Competitive Rates
Sofi is a fully online platform that specializes in the refinancing of student loans, mortgages, and personal loans. The company was founded by a group of four students while they were still finishing their majors in Stanford.
It is worth mentioning that even though the firm has its own capital that it is utilized for refinancing purposes, many other financial institutions like international banks have invested in their funds and are acting as liquidity providers for the firm.
Due to their business model on which funding for the firm comes from multiple banks and also regions, Sofi can deliver exceptional services and very competitive pricing vs their key competitors.
If you are planning on refinancing your loans, you should take your time to review what this company has to offer. Without a doubt, SoFi is a name that we will start listening more often as they continue to grow in market share.
Additional Information
APR:
- Fixed: 3.69% – 8.07% (with autopay)
- Variable: 2.43% – 6.65% (with autopay)
Loan Type Refinancing:
- Private Loans
- Federal Loans
Loan Amount: Minimum refinancing loan of $5,000
Length: 5 to 20 years
Our Rating
- Unemployment protection: The company includes with every refinancing Unemployment insurance which will protect you in case you lose your job
- Getting a Job: If you find yourself utilizing your unemployment protection, you will be offered by Sofi, access to their database of open positions and hiring managers around the US. It is truly incredible to see a company putting your loans in forbearance while giving you counseling and even actively helping you find a new job, proving how much the company cares about the well being of their clients.
- Online Process: Refinancing requests can be made 100% online, this is great for individuals that don’t have a lot of time to spend going to a branch. This also enables individuals from states to apply with any type of hassle.
- Initial Quoting: The company performs an incredibly deep inquiry about your credit record, this usually causes first quotes to change after the credit review has been completed. Even though this is a well-known practice, it is still very conflictive and it usually causes most individuals to aim for another option.
- Not Colleges are Available: It is important to be aware that not all Universities and majors will be covered by Sofi.
- Time: If you are rushing against time to get your loan refinance for an X reason, you might want to look after another option as the firm is known for taking their time. Please note that it is not that the company is not providing the level desired, but the fact that they really take their time to review and analyze anything before lending you $1.
4. Citizens One – Best For Individuals who did not graduate
The Citizens Financial Group is one of the oldest banks in the US, with almost 200 years of existence this RhodeIsland bank has become an example for the rest of the country.
The institutions might only be number 23rd in largest banks list in the country, but they’ve been able to grow a real name around something as negative as student loans.
One of the points where the firm excels the most is at allowing individuals who did not graduate or that are simply taking time off college to refinance their existing debt. While this might sound like something normal, it is indeed rare to see institutions lending money to those who did not complete their cursing major.
Transparency should be a key for all financial institutions, in the case of Citizens One, it is their priority. How many of you have been rejected of a student loan without been given an explanation or reason for it? With Citizens One you will know since the beginning what is it that they are looking for and also the requirements for you to successfully refinance your debt with them.
Additional Information
APR:
- Fixed: 3.89% to 9.99% (with autopay)
- Variable: 2.93% to 9.67% (with autopay)
Loan Type Refinancing:
- Private Loans
- Federal Loans
Loan Amount: Minimum refinancing loan of $5,000
Length: 5 to 20 years
Our Rating
- Great Online Platform: The firm offers its proprietary application that allows you to manage your account as easy as possible.
- Low Fees: The firm has always focused on delivering a process with reasonable or minimal fees. Since you won’t be charged for processing and application fees, Citizens Bank might be one of the very best options in the market today.
- DropOuts Refinance: One of the best things about Citizens One is the fact that the firm allows an individual who did not complete their college to apply for refinancing. In reality, a large number of new students will never finish their career, but that does not mean that any money borrowed won’t continue accruing interests.
- Limited Branches: If you are an individual who does not feel comfortable dealing with online banking services and fully free banking, then you might be better of choosing another option from this list. The reason for this being that the company offers a very limited number of branches across the US.
- Quoting: If you are planning on requesting the quote for your refinancing online, it is very probable that you will end up being frustrated and even mad with the firm. Please note that this is a cumbersome process and their platform is simply not powerful enough for it to provide a smooth pricing process.
- No Cosigner… No Deal: Disregarding of your income and your credit score, this is a company that will always request you to have an active cosigner to back your loan for a certain time. After the time has passed you would be able to release the cosigner out of their duties (36 months when their competitors only ask for 12).
5. Common Bond – Best For Flexibility
Common Bond is a fully dedicated online firm focused on refinancing student loans. This is a firm that has been developed with the solely intention of helping students become financially free.
One of the key points that make Common Bond so great is that the company offers one if not the best forbearance program in the US, allowing their users to take up to 4 times the national average.
Part of the model of this company is to enable faster repayment, in reality, they are not interested in keeping hostage by refinancing your loans. Once you’ve paid they will say thank you and you can continue with your life as if you never had student loans in the first hand.
With so many students getting loans to cover their education every year, it is great to know that there are still companies that are not looking at students as zeroes with feet.
Additional Information
APR:
- Fixed: 3.69% – 8.07% (with autopay)
- Variable: 2.46% – 7.08% (with autopay)
- Hybrid: 4.35% – 6.30% (with autopay)
Loan Type Refinancing:
- Private Loans
- Federal Loans
Loan Amount: Minimum refinancing loan of $5,000
Length: 5 to 15 years
Our Rating
- Savings: The pride of the firm falls into allowing individuals to save in the fees and interests that are being paid. On average the firm has calculated that savings on refinancing processes is around $14,000 per student.
- Autopay: The firms offer to their client’s access to a discount for automatizing the payments on their loans. Even though 0.25% is not much, it is key to understand that over a long time it could mean a lot of money.
- Deferment & Forbearance: Just like having unemployment insurance can be a great thing to have, being able to simply utilize deferment or forbearance for any type of loan is one of the great advantages. Common Bonds also offers academic deferment for individuals who are hitting back the classes.
- High Origination Fee: The firm currently charges an origination fee of up to 2% of the value of the loan.
- Cosigner: This is another company who has truly been pushing hard on the request of a cosigner to become eligible for the refinancing loan.
- Terms: The company currently only offered 3 types of terms ranging from 5, 10, and 15 years.
6. Laurel Road – Best For Health Sector / Dr, Nurses, Dentists
LaurelRoad is a an institution fully dedicated to student loans, both new ones and also refinancing of existing debt. Even though the firm has only been around for less than six years, they’ve been able to refinance more than $4 billion in federal and private debt since.
One of the key differences about this firm is that they are heavily focused on individuals from the Health sector, making it the best option for dentists, doctors and nurses to refinance as soon as they start their residency.
If you are planning on going back to school you might want to consider Laurel Road as their refinance products also allow individuals to deferment while in school.
Additional Information
APR:
- Fixed: 3.50% – 7.02% (with autopay)
- Variable: 2.43% – 6.65% (with autopay)
Loan Type Refinancing:
- Private Loans
- Federal Loans
***Must have graduated***
Loan Amount: Minimum refinancing loan of $5,000
Length: 5 to 20 years
Our Rating
- Limit: This is another firm that would allow you to refinance as much debt as you can pay. Keep in mind that certain universities are extremely expensive and the same happens with specific majors, this will allow you to refinance 100% of your outstanding debt.
- Deferment Periods: If you’ve gotten a deferment with your current provider don’t worry, this firm will respect any standing deal you may have for up to 6 months of additional support and grace.
- Checkings Account: If you are an already regular customer you should think about also refinancing directly with Laurel Road, this will allow you to get up to 0.25% of additional discount on the rates!
- Late Fees: if you are not planning on making your payments automatically, then you should be aware that being late in a single monthly payment could get you paying up to 5% of additional charges over your regular payment.
- Credit Score – Ratios: This is another name on the list that won’t be an option if you don’t have a shiny looking credit score, and to make things even better the company pays close attention to ratios like your outstanding loans outside student loans and also your current income.
7. PenFed – Best For Military Families
The name penFed derives from Pentagon Federal Credit Union, making this firm a members-only credit union. Following the credit union model, the firm offers its members access to numerous services and products like loans, mortgages and even several credit cards.
From a Student Loan perspective the firm is focused on helping their members become debt free, even if it’s a credit union, the company acts under a fiduciary structure where all decisions should be taken based on the client benefit and not the bank.
If there is a member of your family that has served in the military forces, then this might be your best option to refinance any type of loan.
Additional Information
APR:
- Fixed: 3.87% – 7.03% (with autopay)
- Variable: 3.1% – 7.84% (with autopay)
Loan Type Refinancing:
- Private Loans
- Federal Loans
Loan Amount: Minimum refinancing loan of $7,500 to $300,000
Length: 5 to 15 years
Our Rating
- Savings Account: By also opening an account as well as getting your refinancing loan you would get an additional discount over the rates and also a 2.00 APY on the funds in the account.
- PenFed Credit Union Member: Part of the requirements demand that you become a client by opening an account with at least $5. After becoming a client you will be able to get your refinancing, but you will also get all the benefits from the credit union at a super low minimum deposit vs what they usually charge.
- LongTerm Loans: If you are planning on repaying your refinance in the short period of time, you will soon realize that with a company like PenFed it could be more expensive to do it in the short term. This is a company that will lower the APR as the tenure rise.
- Limited Eligibility: Don’t forget that this firm was created in order to help the families of those serving the country. For this reason, if you have a direct family member in the forces it will be pretty likely to get rejected.
Summary of Refinancing Options
Refinancing your student loans might help you boost your finances and even your morale if you’ve been feeling pressured with your current conditions. Many individuals in the US simply took whatever the bank offered them in order to afford to finish their education, and it was not until after four years and graduation that they realized what they got themselves into.
If you are reading this article it means that you are already taking the first step forward gaining back control of your finances and your peace of mind. Even though it might sound tempting to simply refinance, lower the payments and aim for a longer term for the loan, I can’t stress enough on the fact that you should not let your present stole your future and vice verse.
There are many different options to choose from in terms of refinancing and providers, as long as you take your time to review all your options, it is very likely that you will be able to fulfill your expectations.
Don’t forget that even if you hate the idea, in certain scenarios your best option under the current conditions might be to remain within the same plan and not to refinance. This can be the most financially sound decision, but this does not mean it is the one that will truly help you emotionally, and this should be weighted equally at the moment of making any determination.
US Student Loan Debt Over the Last 10 Years
The value of outstanding student loans in the United States has more than doubled in ten years by 119.51%.
This new staggering record translates to a 1.64 trillion by the end of 2019 third quarter. Compared to the Q3 of 2009, the loan debt stood at $771.7 billion.
Data compiled by Learnbonds.com indicates that between 2015 and 2019, the student loan debt grew by more than 30% to the current $1.6 trillion. To put this into perspective, if the current rate of growth is considered, the outstanding value of student loans in the US might hit $2 trillion by 2024.
The Rising Cost of College education
Notably, with increasing loans, enrollment into universities has not changed. Data indicates that enrollment fell by 7% between 2010 and 2017. However, fewer students are borrowing more to pay for tuition, transportation, electronic devices among other items.
Generally, the cost of college in the US has been rising over the years. At in-state public colleges during the 2019-2020 period, the average tuition and fees are about 73% less than the average at a private college. For public colleges, it stands at $10,116 compared with $36,801 for private colleges.
Sallie Mae – Best For Flexibility
Our Rating
- Highly flexible repayment options
- Graduate loans available at a fixed loan rate
- Variable interests for undergraduate loans
Glossary of Loan Terms
FAQs
How early should I Apply for a Student Loan?
Student loans can be requested at any time during the year, having said so keep in mind that you will be eligible to request a loan during the year as long as you submitted your FAFSA form on time. Please be aware that any submission of a FAFSA form should have been sent before Jun 30 (there will be a 15 days window for any adjustment or updates if needed).
Can I apply for a Students Loan without a credit score?
A student loan is one of the only situations where you can aim to borrow money without having a credit score or having a really bad one. While not all SL providers will allow this to happen, it is known that Federal Direct Student Loans will offer access to individuals in this type of situation.
How long after graduation do I have to start paying for my loans?
Many students start feeling anxious just before graduation time because it is finally when the debt burden starts kicking in. Please be aware that there is a buffer of time between graduation time and the first payment date. On average, most student loans providers (federal and private) will allow for a grace time of 6 months before the first payment runs out. Note that depending on your situation this can be extended for even longer.
What are Forbearance and Deferment?
There are two principal mechanisms that an individual can use in moments of crisis in order to postpone their payments on a student loan, one of them is Forbearance. Forbearance is not automatically granted and it usually has to go through approval from the lender side. In synthesis, you would be allowed to stop the payments without it affecting your credit score. Keep in mind that even though payments might be stopped, interests are still accruing and will continue running like it’s business as usual. The other method is Deferment, keep in mind that you can apply for if you fall into one or more of the following scenarios:
• You are unemployed or working less than 30 hours a week and you are looking for a fulltime work
• Proven financial crisis • Actively service in the US Military during a war or during a National Emergency
• Actively service PeaceCorps
• You went back to school and you are currently enrolled at least half time
While you can still be rejected for a forbearance request if you meet the requirements for a deferment you cannot be rejected.
What is the PSLF Program, am I eligible?
The PSLF program allows individuals to apply for forgiveness of their debt after paying back 120 monthly payments while working for a qualifying employer. The list of jobs that are eligible is pretty broad, but in the end, it will depend on who your employer is. It is super important to understand that only direct federal loans are applicable to this program.
What are the consequences of defaulting on a Federal Loan?
After the payments start accumulating the loan will be considered under the category of delinquency. It won’t be until after nine months that the entire account will be considered in default. Keep in mind that not only you will be killing your credit score with the default, but you will also be exposing yourself to further punishment as the government will be allowed to seize tax refunds and also garnish from your wages directly, without a judges order. The worst part of falling into a default category will be dealing with collecting agencies and their incredibly large and expensive fees. I can easily understand and imagine scenarios where not being able to pay a Student Loan might be the only way for an individual to cover their main needs, but it is also keen to keep in mind there are other options to avoid getting to this point. Keep in mind that under most scenarios, both federal and private providers should allow you to take forbearance or deferment for a determined period of time. Remember that once you fall into default you will automatically lose any rights to get a more fair agreement. If possible try to manage it in a way you will stay out of default, even if it means taking an extra method like the ones mentioned above.
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