Last Updated on November 9, 2020
This page covers all the important information on finding the best student loans online. Here you will learn what a student loan is, the different types of student loans, where to get a student loan, how to apply for a student loan, student loan approval requirements and all other important student loan information you may need. Please stay tuned.
Table of Contents
What Is a Student Loan?
A student loan is money borrowed from the government or a private lender such as a bank or financial institution, or from other organizations to pay for college education. The loan must be repaid later, with interest accumulating over time. The money can generally be used for tuition, accommodation and board, books, or other costs. Student loans are different from scholarships and grants which don’t have to be paid back.
The Different Types of Student Loans?
Typically, student loans fall into two broad categories: federal student loans and private student loans. Both can potentially help reduce financial hardship and improve your credit score, but they have clear drawbacks.
Federal Student Loans
There are several types of federal loans, but in general they have lower interest rates and better repayment terms than private loans. They are also more readily available and may be easier to obtain than a private loan. They have fixed interest rates and some options are not dependent on your credit history.
Generally, the amount you can borrow each year depends on your education level and status as a dependent or independent student. Yearly loan limits can vary from $5,500-$12,500 for undergraduates. Loan limits for graduate students can reach up to $20,000.
Types of federal Student Loans You Can Get?
Direct Subsidized Loans.
These loans are for students with demonstrated financial need. Interest isn’t charged while you’re in school or during deferment periods, and payments aren’t required until six months after you leave school.
Direct Unsubsidized Loans.
These loans aren’t based on financial need. The amount you can borrow is based on attendance costs and financial aid. Interest is charged and added to the principal, or the disbursed amount of your loan, at all times — even during deferment periods. You can defer payments until six months after you leave school.
Direct PLUS Loans.
These loans are credit-based, unsubsidized loans for graduate or professional students (called grad PLUS loans) and parents of dependent undergraduates (called parent PLUS loans). Interest rates are higher than for other federal student loans, and you can borrow up to the cost of attendance.
Direct Consolidation Loans
Direct consolidation loans allow you to combine multiple federal loans into a single federal loan. These loans offer lower monthly payments and more diversity in repayment plans, which decreases the likelihood that the borrower defaults. They also enable you to apply for certain loan forgiveness programs. To find out more about how to consolidate student loans, contact your loan administrator.
Private Student Loans
You should only resort to private loans when you have exhausted federal financial assistance due to deficiencies. Private loans usually come from banks or other private companies and can cost you more in the long run. You might also need to start making repayments on them while still in school.
Before taking the bold step, think about the costs associated with private student loans. You will need to pay a lender fee to the vendor, who may not give you much freedom in choosing a loan repayment plan. Repayment terms vary be vendor.
Private loans are often unsubsidized and may have an annual limit to the amount of assistance you receive. The interest rates for private loans are also variable. Your credit history and that of your co-signer can affect all of these factors, especially the interest rate.
What is The Average Student Loan Interest Rate?
How much interest you pay depends on what kind of student loans you take out. For federal student loans, the current interest rates for loans disbursed between, July 2017 – July 2018 have been set at 4.45% for undergraduate direct subsidized and unsubsidized student loans, 6% for graduate unsubsidized student loans, and 7% for Direct PLUS loans. The interest rate on Perkins loans is 5%. These are all fixed interest rates, meaning they will not change over the life of the loan.
Private student loan interest rates vary by lender and each have their own criteria for which rates you qualify for. Private lenders also may offer different interest rates if you have a cosigner on your student loan. Private student loans also may offer variable interest rates, meaning they can start lower than a fixed interest rate but then go up over time, based on market changes.
How Can I Reduce the Interest Rates on My Student Loans?
Since federal student loans switch to only fixed rates in 2006 the interest rates offered to new borrowers over the years has gone both up and down. For instance, borrowers in 2014-2015 were offered a higher interest rate than 2017-2018 borrower, but less than those who borrowed in 2006. That means if you previously signed a loan at a higher interest rate or your credit circumstances have improved, you might be able to refinance at a lower interest rate.
You have two options here: You can refinance or consolidate your loans in hopes of getting a lower interest rate. Refinancing your student loans, which is offered by private lenders, is when you get a brand new loan with new terms and a new (hopefully lower) interest rate.
Along with being offered a different interest rate, when you refinance your current student loans with a private lender you may also be able to adjust the length of repayment. Many private lenders offer options to keep your student loan term the same, extend the term length, as well as shorten the term length. All of those options can change the total amount of interest you will pay.
Consolidating with the government doesn’t necessarily lower your interest rate, the new interest rate when you consolidate with the government is a weighted average of your original federal student loans’ rates. It repackages all your federal loans into one and it could lower the average rate on those loans.
One important thing to keep in mind is that you can consolidate all your federal loans into one federal loan, but you can only consolidate private student loans and federal student loans together when refinancing with some private lenders.
Consolidating your private and federal loans falls under the umbrella of refinancing, because you’re replacing your old student loans with one, new private loan. Remember that choosing to refinance with a private lender means you will lose the protections of a federal loan (such as Income Based Repayment, Income Contingent Repayment, or PAYE), but if you don’t think you will use those programs, you could potentially lower your interest rate.
How to Consolidate and Refinance Your Student Loans?
There are two types of student loan consolidation: federal and private. Private consolidation is often referred to as refinancing. These processes are often confused, but they’re very different.
Federal student loan consolidation combines multiple federal loans into a single federal loan through the Department of Education. You may need to consolidate to be eligible for some federal loan repayment programs, but federal consolidation won’t lower your interest rate. It may lower your payments by extending them.
Student loan refinancing, which is also called private student loan consolidation, is a financial move you do through a private lender. If you qualify, you can save money by getting a lower interest rate.
Consolidating Private Student Loans
Private student loan consolidation, or refinancing, means replacing multiple student loans (private, federal or a combination of the two) with a single, new, private loan. You’ll save money if your new loan has a lower interest rate.
Your financial history including your credit score, income, job history and educational background will dictate your new interest rate when you refinance. You typically need a credit score at least in the high 600s to qualify, and rates range from around 2% to more than 9%.
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Consider refinancing if you have:
- Made at least a few on-time student loan payments after leaving school.
- Good or excellent credit, generally defined as credit scores of 690 or higher.
- A stable job.
- Access to a co-signer with those characteristics, if that doesn’t sound like you.
Refinancing federal student loans into a private loan means losing consumer protections specific to federal loans. Those include the option to tie payments to income and opportunities for loan forgiveness.
Like the federal government, private companies offer the option to consolidate multiple student loans into one. But while you can’t transfer private loans to the federal government, you can consolidate both federal and private loans with a private lender.
The goal with this process is not only to get the ease of a single payment, but to receive a lower interest rate based on your financial history.
Use a consolidation calculator to compare monthly payments under three different scenarios: federal student loan consolidation, private student loan refinancing and income-driven repayment plans.
Consolidating Federal Student Loans
Federal loan consolidation doesn’t have a credit requirement, and it offers the benefit of a single loan bill and potentially lower payments. But it’s only for federal loans, and it won’t cut your interest rate. Consider federal consolidation if you:
- Need to consolidate to be eligible for income-driven repayment or public service loan forgiveness. This is the case if you have Federal Family Education, Perkins or parent PLUS loans.
- Want a single federal loan payment, but don’t need it to be drastically lower.
- Are in student loan default and want to get back on track.
When you consolidate federal loans, the government pays them off and replaces them with a direct consolidation loan. You’re generally eligible once you graduate, leave school or drop below half-time enrollment. Consolidating your federal loans through the Department of Education is free; steer clear of companies that charge fees to consolidate them for you.
When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%. So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.
Additionally, you’ll get a new loan term ranging from 10 to 30 years. Your repayment term will generally start within 60 days of when your consolidation loan is first disbursed and will be based on your total federal student loan balance, among other factors.
How to Consolidate Federal Student Loans?
Log in to studentloans.gov and click on “Complete Consolidation Loan Application and Promissory Note.” You’ll need to finish the application in one session, so gather the documents listed in the “What do I need?” section before you start and set aside about 30 minutes to fill it out.
- Enter which loans you do — and do not — want to consolidate.
- Choose a repayment plan. You can either get a repayment timeline based on your loan balance or pick one that ties payments to income. If you pick an income-driven plan, you’ll fill out an Income-Driven Repayment Plan Request form next.
- Read the terms before submitting the form online. Continue making student loan payments as usual until your servicer confirms consolidation is complete.
If your loans are in default, consolidation is one of a few methods to get your loans back on track. To consolidate defaulted loans you’ll need to make three full, on-time consecutive monthly payments on the defaulted loan and agree to enroll in an income-driven repayment plan.
How to Choose the Best Student Loans?
Choosing the right student loan can make a big difference when it comes to paying off your college debt. If you’re not sure what type of loan to choose, try one that offers a low interest rate, multiple repayment options, and borrower protection. Federal Direct Loan ticks all of these boxes and is a good start.
Best Student Loans Online
There are hundreds, if not thousands, of student loans. We researched and reviewed dozens of them before selecting the best competitors. We have selected these specific student loans as the best student loans based on their interest rates, type of loans offered, if you need a co-signer to apply, loan consolidation options, and the overall application process.
Credible: Best Student Loan Marketplace
Before applying for a student loan, it’s smart to compare rates from several different lenders to ensure you get the best interest rate and loan terms. Instead of doing this process on your own, which can be frustrating and time-consuming, you can use a student loan marketplace to speed things up.
With Credible, you fill out a simple form and get rate quotes from multiple student loan lenders within minutes. Getting a quote doesn’t affect your credit score, and you can view multiple repayment options. Once you find a loan that works for you, you and your cosigner (if applicable) can complete your loan application online.
Using Credible is completely free. Credible gets a referral fee when you apply for a loan through a lender on its marketplace. Credible doesn’t include all private student loan lenders available, but it does have a range of top lenders, including Ascent, Citizens Bank, and College Ave.
Rhode Island Student Loan Authority: Best Overall
When looking for an undergraduate student loan, it’s important to pay attention to interest rates, loan terms, and lender perks that can improve your borrower experience. With those factors in mind, the Rhode Island Student Loan Authority (RISLA) stands apart as the best overall lender.
Despite its name, residents from any state can qualify for a RISLA loan. However, applicants who live, work, or attend college in Rhode Island may be able to get a lower interest rate than other borrowers.
Applicants can borrow $1,500 to $45,000 per year to pay for their undergraduate degrees. There are no application, origination, or prepayment penalties.
Unlike some other lenders, RISLA only offers fixed-rate loans. However, the fixed rate loans have fairly low interest rates. As of October 21, 2020, the interest rate on a loan with Student Immediate Repay is 3.99%, while a Student Deferred Repay loan has a rate of 6.24% (both of these rates include an autopay discount).
As an undergraduate borrower, you have two main repayment options:
Student Immediate Repay: With this option, you begin making payments 15 days after the final loan disbursement. You’ll repay the loan over 120 months, and you’ll get the lowest possible interest rate.
Student Deferred Repay: If you opt for Student Deferred Repay, you’ll get a higher interest rate. However, you won’t have to start making payments until six months after you leave school. You’ll have 180 months to repay your loan.
College Ave: Best Student Loan Interest Rate
When you’re applying for a student loan, you can often choose between variable and fixed interest rates. While fixed-rate loans have the same interest rate for the duration of the repayment term, the interest rate on variable-rate loans can fluctuate over time. If you want to pay off your debt quickly, opting for a variable-rate loan can allow you to take advantage of the lower initial rate.
If you want the lowest rate possible, College Ave offers some of the lowest rates on undergraduate student loans as of October 30, 2020:
Variable Rates: As low as 1.09% (including 0.25% automatic payment discount).
Fixed Rates: As low as 3.49% (including 0.25% automatic payment discount included.
With College Ave, you can borrow up to the total cost of attendance. There are four different repayment terms to choose from, and you can defer your payments until after graduation or opt to make in-school payments.
Splash Financial: Best Student Loan Consolidation
Private student loan consolidation, also known as student loan refinancing, can be a smart way to lower your interest rate and save money over the life of your loan. Splash Financial is our pick for top student loan refinancing company.
There’s a few different factors that affected our decision:
Interest rates: Splash Financial offers very low interest rates. As of October 21, 2020, it has variable rates as low as 1.89%, and fixed rates as low as 2.63% (lowest rates includes 0.25% autopay discount).
Repayment terms: Splash Finance has multiple repayment terms, so you can choose a loan length and monthly payment that works for your budget. Depending on your needs, you can choose a loan term of five, eight, 10, 12, 15, or 20 years.
Cosigner releases: Typically, Splash borrowers can request a cosigner release after making 12 consecutive monthly payments on time.
College Ave: Best Parent Student Loan
As a parent, you want what’s best for your child. And that may mean helping them pay for their education by taking out a parent student loan.
College Ave offers 11 different repayment terms for parent student loans, ranging from five to 15 years in length. That flexibility allows you to choose a loan term that works for your budget.
College Ave allows parents to borrow between $1,000 and the total cost of attendance. As an added perk, the lender allows you to get up to $2,500 of the loan delivered directly to you, so you can manage purchasing books, dorm supplies, or a new computer for your child.
The lender also has low interest rates, with variable rates as low as 1.09%, and fixed rates as low as 3.49% (lowest rates include an autopay discount).
MPOWER Financing: Best for International Students
Unfortunately, international students often struggle to find private student loans to pay for school, especially if they don’t have access to a cosigner who is a U.S. citizen. For those students, MPOWER Financing is the best lender.
MPOWER Financing offers undergraduate and graduate student loans to international students as well as U.S. citizens, permanent residents, and Deferred Action for Childhood Arrivals (DACA) students.
MPOWER Financing doesn’t require applicants to have a cosigner, an established credit history, or collateral.
For international undergraduate students, you can borrow $2,001 to $25,000, with a $50,000 lifetime borrowing limit. The APR is 14.98%, but you can qualify for up to 1.5% in interest rate discounts, including:
- 0.50% automatic payment discount
- 0.50% on-time payment discount
- 0.50% graduation and employment discount
Both graduate and undergraduate loans require interest-only payments while you’re in school, and have 10-year repayment terms.
Funding U: Best for Students without a Cosigner
As a college student, you may not have an established credit history or income, and can struggle to qualify for a private student loan on your own. If you don’t have a parent or relative to act as a cosigner, getting a loan can be difficult. If you don’t have access to a cosigner, Funding U may be the best option for you.
Unlike some other lenders who offer non-cosigned loans, Funding U allows undergraduate students of all grade levels to qualify for loans. You must be a U.S. citizen or permanent resident over the age of 18, and you can borrow $3,000 to $10,000 per year. Your eligibility for a loan is based on your GPA, extracurricular activities, and work experience.
The interest rate on undergraduate student loans for the 2020-2021 school year is 7.99% to 14.49%, including a 0.5% autopay discount.
Unfortunately, Funding U only lends to residents of certain states. You must live in one of the following states to qualify for a loan: Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Maryland, Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia, and Wisconsin.
How to Apply for a Federal Student Loan?
Start by completing the FAFSA, available online at studentaid.gov. You must complete it each year to be eligible for federal loans, grants and scholarships.
The federal government sends a copy of your FAFSA to the schools you apply to. Each school’s financial aid office determines your aid package and will send you a financial aid award letter. The letter will outline gift aid like free grants and scholarships, work-study and any loans you’re eligible for. Accept all free aid and work-study before taking federal loans.
Frequently Asked Questions about Student Loans
How Long Can You Get Federal Financial Aid?
There is no time limit on federal direct unsubsidized loans or PLUS loans. For all other federal loans, you can only receive aid for 150% of the published length of the program you intend to complete. For example, you can only receive federal aid for a four-year bachelor’s degree for six years.
How Do You Qualify for Federal Loans?
To qualify for federal loans, you must first present citizen or eligible noncitizen status, along with a valid social security card, selective service registration, and a high school diploma or equivalent with a 2.0 minimum GPA. Then you must fill out the FAFSA form and enroll in an eligible school on at least a part-time basis.
Is There an Income Limit for Federal Student Loans?
There is no income cutoff for federal student aid. However, you should note that your income will influence the amount of student aid you can receive. Completing your FAFSA allows federal aid to calculate your estimated need based on the cost of attendance at your school minus your expected family contribution.
How Do You Get Approved for a Private Student Loan?
Private student loans set their own loan approval requirements, which typically include age, education, and citizenship requirements; enrollment in an eligible school; and an adequate credit score and income. Private lenders may also require a cosigner on your loan. The lender will likely send funds directly to your school.
Conclusion
Before applying for a loan, make sure you understand what you are spending your money on and how much you really need. Try not to borrow more than you can repay, and make sure you can handle monthly payments along with your other obligations.
Remember to compare lenders to find the best student loan for you. Look at several lenders and compare interest rates, origination fees, and other terms. Take a close look at the situation so you can choose the loan that will work best for you.
We hope you will find this information useful. Do you have any queries on finding the Best Student Loans Online? Please feel free to let us know so we can assist you with any information you will need.
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