The best student loans are typically federal loans that have fixed interest rates, limited fees, and are relatively easy to acquire. Private loans can also be used, but these may have fixed or variable interest rates, and may have less flexible repayment plans. Our list helps you find the best fit.
Finding the best student loans can be a time-consuming process if you aren’t sure where to start, and there are different tools and options available to help. Federal loans have been around for several years and offer a cost-efficient alternative, but frequently aren't enough to cover the expense of particular degrees.
How We Chose Our Ratings
Our ratings for student loans included a review of information from several websites for both federal and private loans. While many federal loans have few reviews, the feedback for private student loans was substantial.
We cross-referenced all feedback to get rid of any outliers and verified the conditions of each loan which has been factored into our ratings. We also factored in the reputation of the lender, and their customer service for students and parents alike.
Top 6 Best Student Loans
Our list of best student loans also includes three private loan finding tools that have proven to be exceptionally valuable for students who need to finance a part of their education. With the combination of federal loans and private loan finding tools, students should be able to find the best possible mix of funding to suit their needs.
Federal Student Loans
Federal loans are typically going to be easiest to acquire when you complete your FAFSA and receive your financial aid package. If you are planning to apply, you should do so as early as you are able to in July prior to fall enrollment.
Federal loans frequently have lower interest rates than private loans, and they can be a preferable option for those looking to enter programs with higher costs of attendance.
Direct Loans for 2018 have an interest rate of 5.05% which is lower than just about all private lenders are offering for this school year. The cap for this loan is $5500 for undergraduates and graduates can borrow up to $20,500 per year with a total limit of $138,500 including undergraduate loan amounts.
Graduate students can expect a loan rate of 6.60% for 2018, and there is the usual upfront fee of 1.066% subtracted from the total loan amount that you borrow. This fee means that the loan amount you borrowed will be slightly less than you receive, but it is also much lower than many, if not most, private lenders.
Repayment of this loan doesn't begin until six months after you graduate, and you can expect to do some loan counseling at the beginning and end of the loan online. The counseling takes less than 30 minutes for each session and aims to educate you on the process of taking out loans and what you can expect.
Direct PLUS loans are loans that are available for graduate students and the parents of students. The amount of the loan can be equal with the cost of attendance for your program and institution and is determined by the school you are enrolled in with any financial aid you have received subtracted from that amount.
To qualify for this loan as a graduate, you must have good credit and complete a FAFSA application in order to be eligible. The interest rate for 2018-2019 is 7.6% and is a fixed interest rate.
The origination fee for this loan is a bit higher than the one for undergraduates and comes in at 4.264% which is still lower than many private lenders. The cost is deducted from your total loan amount in the same way as the Direct Loan origination fee.
Repayment on this loan begins six months after you graduate or when you are enrolled less than half-time as a student. For parents, the payments typically start once the loan is disbursed but a deferment can be requested as long as the student has enrolled at least halftime. You can also get a deferment until six months after your student has graduated.
Perkins loans are for both graduates and undergraduates, and your eligibility is determined by financial need and the funds that are available at your school. The easiest way to qualify for a Perkins loan is to complete your FAFSA application.
The Perkins loan is one of the best student loans because there are no fees and the interest rate is capped at 5%. You can borrow a total limit of $27,500 for undergraduates and $60,000 for graduates in your lifetime.
Undergraduates can borrow up to $5500 per year and graduates can borrow up to $8000 per year. There is no origination or other fees, and repayment is delayed until six months after your graduation or until you are enrolled less than halftime.
Finding the Best Private Student Loans
While it’s possible to list specific lenders, and their student loan rates, comparing individual loan options can mean filling out repetitive paperwork, providing several rounds of documentation, and having each potential lender do a credit check before getting any information in return.
With a private student loan tool such as the one below, you can complete one account that serves to help you compare actual rates from all of the top lenders without the hassle of filling out duplicate paperwork for each one.
In 2018, private loan APR range from 5.25% to 13.99% for fixed interest rate loans, and 3.99% to 12.99% for variable interest rate loans. Depending on your credit score and other factors the rates lenders offer you will vary.
Credible.com is the easiest tool to use if you need to find the lowest interest rate private loan in order to pay for your education. This site features excellent customer service, provides actual rates from lenders, and doesn’t require students to fill out duplicate forms.
The site essentially allows several lenders to compete so that you can get the best rate on your loan, but it also minimizes the amount of personal information you need to release in order to do so.
Credible.com has no origination fee, no service fees, and no prepayment penalty which offers students the most flexible situation for their private loan.
SimpleTuition.com has arguably the best network of potential lenders and only asks for your zip code, email address, and what institution you’ll be attending to get started. From there you can opt to have them send you your loan results via email, or you can continue to their site to view your options and the next steps.
Simple Tuition breaks down all of the costs associated with the loan in an easy to understand manner that makes comparing different loans a simple and easy process. They also offer additional information about how the loans work, and what the rewards are for the borrower.
The Discover website allows students and co-signers the ability to create an application on their website and lists upfront what information will be needed and provided during the process. This level of transparency is relatively unique which is why it’s one of the best tools for finding private loans.
To complete your application, you'll need to provide some financial information, your social security number, the loan amount that you need, and your address. In return Discover promises zero fees, the ability to get students college costs 100% covered, and even allow students to earn cash rewards for getting good grades.
They also have US-based customer service representatives that are available to help at any time. The application on their website takes only minutes, and you can expect to receive results in as little as 15 minutes.
The site has you create an account so that you can check on your existing application and use the service again should you need to during your degree. Students who have at least a 3.0 GPA on a 4.0 scale are eligible for a cash reward of 1% of their total loan amount for each loan taken.
Why Use a Comparison Website for Private Loans?
Using a comparison website not only saves you time but it minimizes the amount of personal information that you have to provide in order to receive actual private loan rates and terms. By completing an account on one of the websites above, you are able to protect your personal information and quickly compare loans.
Private loans make sense when you have maxed out your other options from federal aid and grants, but private loans come with higher interest rates. The prevailing wisdom when it comes to funding your college education is that you should use up all the free money first, max out federal loans second, and use the option of private loans as a last resort.
A comparison website will also encourage lenders to compete to get students to use their loans, and this means that you can expect better terms and lower interest rates. These websites also offer excellent customer support, the ability to help you initiate contact with lenders, and flexible payment plans.
Not all student loan options will be created equal and different lenders will have slightly different processes and terms for issuing student loans. Many lenders will do what is called a "soft pull" for your credit score which is an acceptable way for them to gauge what loan amount they'll approve you for without your credit taking a hit in the process.
Federal Aid and Other Free Aid
Before you explore taking out student loans on your own, it's a good idea to fill out the FAFSA that is available online in order to see what financial aid you are eligible for through the federal government.
These funding sources can include grants of different kinds, subsidized and unsubsidized loans, and potentially even funding from the institution where you plan to enroll. You can fill out the FAFSA online, and the process can be completed relatively quickly once you have set up your account.
Before deciding on a loan, it's worth educating yourself on the different loan types that are available:
Depending on the loan type the lender may alter the total loan amount, the interest rate offered, or the terms of how the loan needs to be repaid. The lender may also have individual loans for any of these categories based on the specific degree you are pursuing.
Parent loans are offered to the parents of students who will be attending college but with the agreement that the parents will be legally responsible for paying back the loan amount. Some loans are taken out directly by the student who is obligated to repay them, but parent loans allow parents to shoulder that burden instead.
Some graduate loans will also be offered in higher amounts from lenders if you are pursuing a degree in law, medicine, or business. Undergraduate loans are typically not degree specific, but some lenders offer a custom option for particular degrees.
Loan Limits and Interest Rate Types
For most loans, there will be a minimum and maximum loan amount, and this may largely depend on your degree, your state of residence, and other criteria besides your credit score. For those pursuing a graduate or professional degree, a lender may be more likely to offer you a more substantial loan based on the higher cost of attendance.
Interest rates on loans can be either fixed or variable, and each of these loan types serves a different purpose. If your credit score is low, variable rate loans may be all that you qualify for, but the fixed rate loans are generally a better idea for most students.
Fixed rate loans have interest rates that do not change, however, if student loan interest rates drop you are stuck with the interest rate you have when you signed the loan. Likewise, if you take out a loan and student loan interest rates skyrocket you can rest easy knowing your interest rates will not change.