You got your acceptance letter into your first-choice graduate school and are excited to finally realize this long-term dream. That is, until you look at the cost.
Let’s face it: graduate school can cost a pretty penny. One funding source is private graduate student loans. In this guide, we’ll cover student loans for graduate school and the best private graduate student loans to consider.
Student loans for graduate school
If you’re in need of student loans for graduate school, there are federal student loans and private student loans.
The federal government offers up to $20,500 in Direct Unsubsidized Loans. You can also take on Direct PLUS loans to cover the rest of the cost. PLUS loans, however, have the highest APR of all federal loans, currently at 7.6%.
Private loans may be able to offer a lower rate. And when you’re borrowing thousands of dollars, that certainly helps lower the cost of graduate school. That’s why in some cases it might make sense to look into private loans as a cost-effective option.
3 top lenders offering private graduate student loans
Before taking out any loan, you’ll want to shop around and do your research. That’s especially true when considering a private student loan. These loans have fewer protections, so it’s worth knowing in advance what you’re getting into and whether a company fits your needs.
Here are three private graduate student loan lenders to consider.
You can get private graduate student loans from LendKey, an online marketplace. LendKey works with various credit unions and financial institutions to offer you the best rates.
To see if you qualify, you’ll need to submit a student loan application on its site. Unlike many federal student loans, private student loans all check your credit and in many cases may require a cosigner.
LendKey’s website states, “A creditworthy cosigner can make all the difference when it comes to a private student loan application’s chances for approval. Cosigners play a critical role in helping borrowers to secure the best private student loans and qualify for a lower loan rate.”
A cosigner is someone close to you, like a parent or other family member. These individuals are legally on the hook for your loans if you don’t end up making payments on time. Being a cosigner is a big responsibility, but having one can unlock a better rate or be the key to getting approved.
Because LendKey acts as a lending hub and middleman that partners with banks and other financial institutions, fees and rates vary. Also, the rate you’re approved for can vary based on your credit.
Another option for private graduate student loans is Credible. Similar to LendKey, Credible aggregates private student loan offers from different lenders. This gives you the ability to compare terms and find the best rates, based on your credit. As of March 2019, it offers variable rates from 4.20% APR and fixed rates from 4.50% APR.
Credible is free to use, and none of its partners have origination fees. Origination fees are fees you pay upfront for the lender to process the loan. There’s also no prepayment penalty, so you can pay off debt faster at no cost to you.
You can check your rate within two minutes. Doing so won’t affect your credit score since only a soft pull on your credit is requested. A hard credit pull isn’t formally done until you submit your application.
CommonBond is another lender that offers private student loans for graduate students, with rates starting at 3.95% APR. There are options for both fixed and variable rates. CommonBond also offers various repayment terms.
The repayment terms include 5,10 and 15 years. CommonBond also offers forbearance protection, no prepayment penalties and cosigner release after two years.
An important note about CommonBond: It does charge a two percent origination fee. So while its APR might be more competitive, weigh interest savings against the cost of the origination fee. Also, though most private student loan lenders need a cosigner for approval, CommonBond actually requires a creditworthy cosigner.
Best private graduate student loans: federal or private?
If you’re headed to grad school, you want to compare federal versus private loans. While federal loans come with more protections, private loans could offer more cost savings. With the current Grad PLUS Loan interest rate at 7.6%, an $80,000 loan would cost you $34,455.65 in interest over 10 years.
If you were able to score a 5% APR with a private graduate loan, within 10 years you’d pay $21,823.04 in interest. That’s close to $13,000 in savings on interest alone.
Consider what you’re missing out on when choosing private student loans — namely, federal protections like income-driven repayment and student loan forgiveness. But if you aren’t interested in pursuing those options, a private loan could save you money. The key to saving money is finding the lowest rate, and evaluating each lender’s terms to find the right loan for you.