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2021 NerdWallet Best-of Awards Winner for Best Student Loan Refinancing Overall
2021 NerdWallet Best-Of Awards Winner
If you’ve exhausted your federal aid, our top picks can help get the money you need for college.
Purefy’s experts have decades of experience in student loans and have identified the best private student loan companies. In addition to competitive interest rates, we’ve evaluated them on the following attributes: reputation/trust, security, transparency, fees (or lack thereof), flexible repayment terms, perks, and forbearance options.
Fixed Rate
Variable Rate
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Long 9-Month grace period after graduation
Option to skip a payment once a year
In-house loan servicing means only one company to deal with, start to finish
Fixed Rate
Variable Rate
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Every applicant is assigned a dedicated Student Loan Advisor
Easy, 100% online loan application
Academic deferment available if you pursue a graduate degree
Fixed Rate
Variable Rate
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Allows biweekly payments via autopay for faster payoff
Fast decisioning process (3 minute credit decision)
$150 cash back for completing your course of study
Fixed Rate
Variable Rate
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Non-cosigned loans considered based on school, program, major, and other non-credit criteria
1% Cash Back Graduation Reward program
Cosigner release available after 12 months of on-time, consecutive monthly payments
Need extra money for school, but not sure where to start? Private student loans may be your best option if you’ve maxed out your federal student loan options and explored all other avenues for scholarships, grants, and other financial aid.
Purefy helps you compare private student loans to find the best option for you. We’ve identified the top lenders offering low interest rates, flexible repayment terms, and unique perks for their customers.
Federal Student Loans
Federal student loans are issued by the U.S. Department of Education, and in most cases, offer lower rates (that are set by Congress) than rates offered by private lenders.
Federal loans also have great protections and benefits, such as forbearance, Income-Driven Repayment plans, and access to loan forgiveness programs. As such, they are the first choice when seeking the best loans for college.
You can apply for federal student loans using the Free Application for Federal Student Aid (FAFSA). After grants, scholarships, and other aid is awarded, the federal government will determine how much you can receive in federal loans. There are a few different types of federal student loans you may qualify for including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.
Private Student Loans
Private student loans, on the other hand, are offered by banks, credit unions, and other private institutions like online lenders. These lenders will run a credit check to determine your eligibility.
Private student loan interest rates vary and are determined primarily by your creditworthiness, as well as other factors like income or even the type of degree you are pursuing.
Because credit plays such a large role, most students will need a cosigner with an established credit history and a good credit score in order to qualify for a loan and obtain a manageable interest rate.
Although private loans don’t come with the same protections as federal student loans, many lenders offer attractive benefits and repayment options to borrowers. All in all, private loans can be another good solution for filling in necessary funding gaps so that you can afford college.
Once you have used our rate comparison tool and decided on a lender, you will be taken to their application.
You can apply at any time, but keep in mind it can take up to 30-60 days for the funds to be disbursed to your school — so make sure you leave enough time to meet your tuition due dates.
The student loan application process itself will typically take less than 15 minutes to complete, and will consist mostly of personal information about yourself and your cosigner (if applicable). After you apply, you also will be asked for a few documents to certify the information listed on your application.
In most cases, finding the best interest rate with the term and repayment plan you want is the number one selection criteria when comparing private student loan options.
That said, you should also pay attention to the other benefits that the lenders provide. For instance, if you plan on pursuing a graduate or professional degree full time after graduating from a bachelor’s program, you will want to choose a lender that offers deferment while you continue your studies.
You’ll also want to think about the different repayment options that each lender offers. If you can afford to make interest payments while you are still in school, you can save a lot in interest costs.
With private student loans, you may be able to choose between a fixed and variable rate, depending on the provider. Here’s how fixed rate and variable rate loans work so you can decide which would work better for you.
Fixed Rate
As the term suggests, a fixed interest rate will stay the same (or be “fixed”) for the entire length of the loan. This means that your monthly payment will also stay the same unless you’re on an alternative repayment plan such as a graduated repayment plan, which increases your payment over time.
Keep in mind that because the lender takes on more long-term risk with a fixed rate, it will usually be higher than the initial rate on a variable rate loan.
Variable Rate
Unlike fixed interest rates, variable rates fluctuate over the life of your loan. The interest rate will typically change on a monthly, quarterly, or annual basis. Variable rates are usually calculated based on the Secured Overnight Financing Rate or SOFR — a global market benchmark for many different types of loans and credit cards. If the SOFR falls, so will the rate on your loan. But if the SOFR increases, your interest rate — and monthly payment — will go up with it.
Since the lender is shifting some of the interest rate risk to you, variable interest rates typically start out lower than fixed interest rates. If the rate goes up, you’re the one who will end up paying for it with higher monthly payments.
For a further deep dive into the differences and benefits of fixed and variable rate loans, read more into their pros and cons before choosing .
Your credit score has a significant impact on the private student loan interest rates you can qualify for. But what is a credit score?
A credit score is a three-digit number that represents the overall strength of your credit history. It helps private student loan companies decide if you are creditworthy enough to lend money to.
The higher your credit score, the more likely you are to qualify for a loan and get the lowest interest rate available. The lower your credit score, the less likely you are to qualify for a loan. And if you do qualify, you may face a higher interest rate because of it. That means you’ll have higher monthly payments and end up paying more over the life of the loan compared to someone with a higher credit score.
What makes up your credit score is often the same set of criteria, including:
• Payment history
• Amounts owed (or credit utilization)
• Length of credit history
• Credit mix
• New credit
One of the most difficult credit score factors for private student loan applicants is often the length of credit history — because most students (especially undergrad students) do not have much of a credit history. That is why most private student loan borrowers will need a cosigner.
A cosigner (frequently a parent or relative) is someone who agrees to sign onto your loan with you and has a strong enough credit score to help you qualify for a loan. Typically, the better your cosigner’s credit score, the lower your interest rate.
Your consigner would ultimately be responsible for making payments should you be unable to do so. Having a cosigner with excellent credit is a great way to ensure you get the best rate on your private loans for college.
On the other hand, if you have a negative record in your credit history, such as delinquency, default, bankruptcy, or collections, you may want to give the lender you are considering a call before you apply to see if you are likely to be denied a private loan because of it.
Other than just qualifying you for a loan, a cosigner can also be very useful in getting you the lowest interest rate possible.
However, if you have established a little bit of a credit history and made your payments on time, you may find that you have a high enough credit score to qualify for a loan on your own.
With a decent credit score, many providers will offer loans to you without a cosigner, but you might not qualify for the lowest interest rates available. To get a better rate, make sure your credit score is in top-notch shape by taking all the necessary steps to boost your score as much as possible before applying:
• If you already have loans or credit cards, continue making on-time payments every month.
• Lower your credit usage by keeping the amounts you owe as low as possible.
• You could even try to become an authorized user on someone else’s credit card, preferably someone with a solid credit score who makes on-time payments. You don’t have to use the card to take advantage of any benefits this provides to your credit score.
But keep in mind — many lenders offering private loans for college have other criteria for qualifying than just credit score such as a minimum income or debt-to-income ratio. If you aren’t working while in school or are working part-time, it may be hard to get approved.
In other circumstances, you may just not have easy access to a cosigner. If a cosigner isn’t possible and you’re struggling to improve your own credit score to qualify for a private student loan, take a look at other alternatives including:
After you’ve completed the FAFSA for federal student loans, and secured your grants, scholarships, and other financial aid, your school’s financial aid office will provide you with a summary. You may find that there is a gap left in funding your education. Two common options to fill this gap are family college savings (if available), or private student loans.
Remember, if you do borrow, only borrow what you absolutely need. It’s easy to forget while you are busy with classwork and college social life, but every dollar you borrow for your education (and supporting yourself during your education) will be accumulating interest on a daily basis the entire time you are in school. So have fun while you’re in school — but don’t spend your private student loan money on it.
