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What Is a Private Student Loan?
Private loans are offered by banks, credit unions and online lenders.
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Anna Helhoski is a senior writer covering economic news and trends in consumer finance at NerdWallet. She is also an authority on student loans. She joined NerdWallet in 2014. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today. She previously covered local news in the New York metro area for the Daily Voice and New York state politics for The Legislative Gazette. She holds a bachelor's degree in journalism from Purchase College, State University of New York.
Karen Gaudette Brewer Lead Assigning Editor | Core Personal Finance
Karen Gaudette Brewer leads the Core Personal Finance team at NerdWallet. Previously, she guided students and their families through the ins and outs of paying for college and managing student debt on the Higher Education team. Helping people navigate complex money decisions and feel more confident brings her great joy: as the daughter of an immigrant, from an early age she was the translator of financial documents and the person who called the credit card company to fix fraud.
She joined NerdWallet with 20 years of experience working in newsrooms and leading editorial teams, most recently as executive editor of HealthCentral. She launched her journalism career with The Associated Press and later worked for The (Riverside) Press-Enterprise, The Seattle Times, PCC Community Markets and Allrecipes.com.
She is a graduate of the 2022 Poynter Institute Leadership Academy for Women in Media. Her writing has been honored by the Society for Features Journalism and the Society of Professional Journalists. In addition, she’s the author of two books about the Pacific Northwest.
Private student loans, like federal student loans, can be used to pay for college costs, but they come from a bank, credit union or online lender rather than the federal government.
Private student loans are best used to fill a college payment gap after maxing out federal loans. Federal loans are preferable to private loans for several reasons:
You don’t need a credit history or a co-signer.
The interest rate on federal loans tends to be lower.
Federal loans offer benefits like income-driven repayment options and forgiveness opportunities.
To get a federal loan, submit the Federal Application for Federal Student Aid, or FAFSA. You don't need to complete the FAFSA to get a private loan, but you should do it anyway. The application is also the key to accessing free financial aid like grants, scholarships and work-study.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.59-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Variable APR
5.34-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.49-15.49%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 10/25/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Variable APR
5.04-15.21%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 10/25/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
Private lenders look for borrowers who check off a few boxes:
A strong credit score — usually in the mid-600s or better.
A steady income that covers your monthly expenses.
If you don't meet these qualifications, you can apply with a co-signer who does.
Because of the credit requirements, many undergrad students apply a co-signer to get a private loan. There are niche private lenders that don’t consider credit scores, but those loans can carry higher interest rates.
Private graduate student loans may allow for a co-signer. Private parent loans usually won’t allow for co-signers, so borrowers need to meet credit and income requirements.
Private student loans don’t have the same borrower limits as federal loans. With federal loans, undergraduates are limited to up to $12,500 annually and $57,500 total. Graduate students can borrow up to $20,500 annually and $138,500 total.
Private loans max out at your college’s cost of attendance, minus any financial aid. Each lender may have its own limits for the total debt you can take on. For example, Ascent limits borrowing to $200,000 over the borrower’s lifetime.
A private student loan repayment term varies by lender. Some offer only one 10-year repayment term, which is the standard term for federal loans. Others have terms ranging from five to 20 years.
Most private lenders let you defer payments until after you leave school. But some private lenders expect you to make small, interest-only or fixed payments while you’re enrolled. When you leave school, you usually get a six-month grace period before a bill arrives.
Your loan collects interest daily when you defer payments and during your grace period. When repayment begins, all the interest that accrued is tacked onto your loan total.
What kind of interest rate to expect with private student loans
Private loans typically have higher interest rates than federal loans. The higher your or your co-signer’s credit score and income are, the more likely you are to get a low interest rate.
It’s possible to get a private student loan interest rate that is lower than the federal rates. To do this, you’ll need excellent credit and a lender that offers rates below those offered by the federal government.
Most private lenders offer two options for interest rates: fixed and variable. A fixed rate stays the same throughout the life of the loan. A variable rate changes periodically.
Always compare private student loan offers from multiple lenders. Interest rates aren't the only thing to consider: Fees, repayment options and borrower protections are all important, too.
How to get a lower interest rate on private student loans
If you don’t get the best rate on a private student loan now, you can get a lower one down the road by refinancing. That means a private lender pays off your current loans and gives you a new loan with a lower interest rate and repayment term.
You must meet any income requirements and typically have a credit score in the high 600s to refinance, or a co-signer who meets these qualifications. You can opt to refinance your federal and private loans or just the private ones. But think twice before refinancing federal loans because you’ll lose all federal protections and repayment options.
