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Private Student Loans


Private student loan volume grows when federal student loan limits remain stagnant.

Private student loan volume grew much more rapidly than federal student loan volume through mid-2008, in part because aggregate loan limits on the Stafford loan remained unchanged from 1992 to 2008. (The introduction of the Grad PLUS loan on July 1, 2006 and the increases in the annual but not aggregate limits had only a modest impact on the growth of private student loan volume. The subprime mortgage credit crisis of 2007-2010, however, limited lender access to the capital needed to make new loans, reining in growth of the private student loan marketplace.) The annual increase in private student loan volume was about 25% to 35% per year, compared with 8% per year for federal loan volume.
Student Loan Comparison Sites

This page provides a basic comparison chart that highlights the key characteristics of the major private education loans. FinAid also provides a separate list of private consolidation loans that can be used to consolidate private education loans.

In addition to these lists of private student loan programs, there are several web sites that provide tools for comparing private student loans. These tools can help you identify the loans that match your criteria. These student loan comparison sites include Credible and other student loan comparison sites.

Then the Ensuring Continued Access to Student Loans Act of 2008 increased the annual and aggregate loan limits on the federal Stafford loan starting July 1, 2008. This shifted significant loan volume from private student loan programs to federal. Private student loan volume dropped in half in 2008-09, according to the College Board's Trends in Student Aid 2009.

Private student loan volume is expected to return to the 25% annual growth rate unless there is another increase in federal loan limits or an expansion of the availability of federal student loans. For example, the proposal for expanding Perkins loan funding from $1 billion a year to $8.5 billion a year will cause a significant decline in private student loan volume. But so long as federal loan limits do not increase every year, private student loan volume will continue to grow at double-digit rates.

If current trends continue, annual private education loan volume will surpass federal student loan volume by around 2030. Accordingly, it is important that students have tools they can use to compare different private student loans.

Best Private Student Loans

As a general rule, students should only consider obtaining a private education loan if they have maxed out the Federal Stafford Loan. They should also file the Free Application for Federal Student Aid (FAFSA), which may qualify them for grants, work-study and other forms of student aid. Undergraduate students should also compare costs with the Federal PLUS Loan, as the PLUS loan is usually much less expensive and has better repayment terms.

The fees charged by some lenders can significantly increase the cost of the loan. A loan with a relatively low interest rate but high fees can ultimately cost more than a loan with a somewhat higher interest rate and no fees. (The lenders that do not charge fees often roll the difference into the interest rate.) A good rule of thumb is that 3% to 4% in fees is about the same as a 1% higher interest rate.

Be wary of comparing loans with different repayment terms according to APR, as a longer loan term reduces the APR despite increasing the total amount of interest paid. FinAid's Loan Analyzer Calculator may be used to generate an apples-to-apples comparison of different loan programs.

The best private student loans will have interest rates of LIBOR + 2.0% or PRIME - 0.50% with no fees. Such loans will be competitive with the Federal PLUS Loan. Unfortunately, these rates often will be available only to borrowers with great credit who also have a creditworthy cosigner. It is unclear how many borrowers qualify for the best rates, although the top credit tier typically encompasses about 20% of borrowers.

Generally, borrowers should prefer loans that are pegged to the LIBOR index over loans that are pegged to the Prime Lending Rate, all else being equal, as the spread between the Prime Lending Rate and LIBOR has been increasing over time. Over the long term a loan with interest rates based on LIBOR will be less expensive than a loan based on the Prime Lending Rate. About half of lenders peg their private student loans to the LIBOR index and about 2/5 to the Prime lending rate.

Some lenders use the LIBOR rate because it reflects their cost of capital. Other lenders use the Prime Lending Rate because PRIME + 0.0% sounds better to consumers than LIBOR + 2.80% even when the rates are the same.

It is not uncommon for lenders to advertise a lower rate for the in-school and grace period, with a higher rate in effect when the loan enters repayment.

Federal student loans are not available for expenses incurred by law, medical and dental students after they graduate, such as expenses associated with study for the bar or finding a residency. There are two types of private student loans for these expenses:

  • A Bar Study Loan helps finance bar exam costs such as bar review course fees, bar exam fees, as well as living expenses while you are studying for the bar.
  • A Residency and Relocation Loan helps medical and dental students with the expenses associated with finding a residency, including interview travel expenses and relocation costs, as well as board exam expenses.

Comparing Private Student Loans

Key information to understand student loans includes being aware of the annual and cumulative loan limits, interest rates, fees, and loan term for the most popular private student loan programs. Often the interest rates, fees and loan limits depend on the credit history of the borrower and co-signer, if any, and on loan options chosen by the borrower such as in-school deferment and repayment schedule. Loan term often depends on the total amount of debt.

Most lenders that require school certification (approval) will cap the annual loan amount at cost of education less aid received (COA-Aid). They may also have an annual dollar limit as well.

Lenders rarely give complete details of the terms of the private student loan until after the student submits an application, in part because this helps prevent comparisons based on cost. For example, many lenders will only advertise the lowest interest rate they charge (for good credit borrowers). Borrowers with bad credit can expect interest rates that are as much as 6% higher, loan fees that are as much as 9% higher, and loan limits that are two-thirds lower than the advertised figures.

The APRs for variable rate loans, if listed, are only the current APRs and are likely to change over the term of the loan. Borrowers should be careful about comparing loans based on the APR, as the APR may be calculated under different assumptions, such as a different number of years in repayment. All else being equal, a longer repayment term will have a lower APR even though the borrower will pay more in interest.

The information presented below is based on lender provided information. Actual rates and fees may differ.

Lenders listed in the table below:

Lender Loan Limits Rates (Min/Avg/Max) Fees Term

Featured Lender - Credible

Credible offers borrowers a "kayak-style" experience while shopping for student loans. Similar to the common application, users (and co-signers) fill out a single, streamlined form and qualified borrowers will receive personalized offers from multiple lenders on their Credible dashboard. This dashboard enables users to sort and compare offers and select the loan that best meets their personal financial needs. The offers ranking, therefore, is determined by the user, not advertising.

Choose between fixed and variable rate loans, as well as deferred and interest-only repayment options for your school loans. COA-Aid (annual limit)
Borrow up to $170,000 through Credible's marketplace
Fixed rates as low as 3.99% APR and variable rates as low as 2.20% APR with auto pay. Access special discounts from some lenders. No fees 5, 8, 10, 12, 15 and 20 year terms available
Sallie Mae
Funded by Sallie Mae Bank.
Lender ID 900905.

Special Features/Benefits:

  • Auto Debit Savings — 0.25 percentage point interest rate reduction for automatic debit enrollment.
  • Free financial literacy tools and resources, including access to quarterly FICO® Credit Scores for both borrowers and cosigners.
  • Graduated Repayment Period— Budget flexibility for graduating students.
  • Death and disability loan forgiveness.
  • Loan Limit - Borrow up to 100% of the school-certified cost of attendance (minimum $1,000).

    Cosigner Requirement - Applying with a creditworthy cosigner may help you qualify. You may apply to release your cosigner from the loan after you graduate, make 12 on-time principal and interest payments and meet certain credit requirements. Releasing the cosigner will not adversely impact the rate on your loan.

    Eligibility - Available to students enrolled full time, half time, and less than half time.

    Application Process - Student or cosigner can initiate the application process at It only takes about 15 minutes to apply online and get a credit result.

    Sallie Mae reserves the right to modify or discontinue products, services, and benefits at any time without notice. Terms, conditions, and limitations apply.

    Visit to get more information on all loan options. Terms, conditions, and limitations apply.

    Smart Option Student Loan®

    For Undergraduate Students attending degree-granting institutions only. (School Certified)

    Pay now or later – choose an in-school repayment option that fits your needs or defer your payments until after school.

    • Make interest payments each month
    • Pay $25 per month
    • Defer payments
    COA-Aid ($1,000 minimum) Variable Rates: 1-month LIBOR + 2.00% (2.87% APR) to 1-month LIBOR + 9.88% (9.69% APR)

    Fixed Rates: 5.75% (5.74% APR) to 12.88% (11.85% APR)
    No origination fee and no prepayment penalty. 5-15 years based on loan balance and year in school.
    Smart Option Student Loan

    For Graduate and Professional School Students attending degree-granting institutions only. (School Certified)

    Pay now or later – choose an in-school repayment option that fits your needs or defer your payments until after school.

    • Make interest payments each month
    • Pay $25 per month
    • Defer payments
    COA-Aid ($1,000 minimum) Variable Rates: 1-month LIBOR + 2.0% (2.87% APR) to 1-month LIBOR + 7.25% (7.86% APR)

    Fixed Rates: 5.75% (5.74% APR) to 8.88% (8.56% APR)
    No origination fee and no prepayment penalty. 5-15 years based on loan balance and year in school.
    Sallie Mae Parent Loan

    Any creditworthy individual can take out a Sallie Mae Parent Loan, including grandparents, aunts, uncles, spouses, and guardians. The Loan, which is available to pay for education expenses of both undergraduate and graduate students.

    Choose a repayment option that fits your needs:

    • Interest Repayment: Borrowers make monthly interest payments while the student is enrolled in school for up to 48 months, followed by principal and interest payments
    • Principal and Interest Repayment: Borrowers make monthly principal and interest payments while the student is enrolled in school and through the life of the loan
    COA-AID ($1,000 minimum)

    Variable Rates: 1-month LIBOR + 3.50% (4.37% APR) to 1-month LIBOR + 9.88% (10.74% APR)

    Fixed Rates: 5.75% (5.74% APR) to 12.88% (12.87 APR)

    No origination fee and no prepayment penalty. 10 years of principal and interest payments

    Additional Lenders listed below. Please visit lender website for updated information.


    Private loans for private elementary, middle and secondary schools are listed separately. See Education Loans for Private Schools.

    • LIBOR is the 3-month average of the London Interbank Offered Rate. LIBOR is the average interest rate paid on deposits of US dollars in the London market.
    • PRIME is the Prime Lending Rate as published in the Wall Street Journal. This is the rate banks charge their most creditworthy customers.
    • COA-Aid is the Cost of Attendance minus all other student aid received.
    • APR is the Annual Percentage Rate, a rate that factors in the interest rate, fees, and other terms.


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