If you need to secure funding for college, you have two options: federal and private student loans. Federal student loans have better borrower protections and forgiveness options. Private student loans must be paid back in full, but you might be able to get a better deal on your interest rate and financing charges.
We list the four best converting private student loan companies for our readers at the top if you want to apply to only a few lenders. Otherwise, read the full page for our list of eight.
2.62% - 12.97% APR¹
3.75% - 13.72% APR¹
- No origination fee
- Competitive rates
1.34% - 11.44% APR
3.22% - 12.78% APR
- No origination fee
- Check rates in 2 min
1.75% - 12.30% APR
3.22% - 14.75% APR
- No origination fee
- Large autopay discount
1.79% - 11.24% APR²
4.49% - 13.34% APR²
- No origination fee
- Flexible in-school terms
1Sallie Mae Disclosures 2Discover Disclosures: Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. Lowest APRs shown for Sallie Mae Loans: The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month.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.
Student Loan Planner® earns money if you get a private student loan through our referral links. We review each partner in great detail to make sure they’re worth your time to apply. Here’s how we determine where we list these partners in our list.
- How many readers successfully secured funding for their education with this lender in the past few months
- What are we hearing from applicants?
- How much does a lender pay us?
Now let’s look at the high costs of federal student loan borrowing for the upcoming school year.
Private student loans for the 2022-2023 school year
For all federal student loans issued between July 1, 2022, and June 30, 2023, the interest rates are:
- Direct Subsidized: 4.99%
- Direct Unsubsidized: 6.54%
- Direct Grad PLUS / Parent PLUS: 7.54%
The federal student loan interest rates this year are much higher than last year’s. Many borrowers, especially those with cosigners, could get better interest rate deals for the 2022-2023 school year through private student loans.
PLUS loans also come with a stunningly high 4.23% origination fee. Private student loan originators generally charge no origination fee in comparison.
Private student loans should generally be your last option
It doesn’t hurt to apply and double-check that you can’t find a better rate than what’s available with federal student loans. That said, your first priority should be obtaining all of the student loans you can get from the government.
Some private lenders offer interest rates higher than 8%. If that’s all that you’re offered, you wouldn’t accept it unless you didn’t have another option to maintain progress toward your degree.
Are private loans right for me?
We generally recommend maxing out your federal student loan options first. Federal student loans have repayment plans that can be based on your income. But that’s something you won’t find with a student loan lender.
However, federal loans have limits on how much you can borrow. Your federal loan might not be enough to cover the cost of going to school. And that’s where private loans can help.
Many private lenders let you borrow up to 100% of the cost of attendance. So if you’ve exhausted your federal lending options, taking out a private loan can give you more funding to pay for your education.
Depending on the lender, you may have several options to repay your loan. For instance, some lenders let you make interest-only payments while you’re in school. Others won’t ask for any payments at all until after you graduate.
But if you’re looking at a 7.5% PLUS loan with a 4.23% financing fee for this school year, there’s a good chance you could find a private loan with a better interest rate.
All 8 private student loan companies compared
Here’s a list of some of the most common questions we get from readers who are thinking about taking out a private student loan.
If you have a question that isn’t listed here, we’d love to hear it! Just comment on this post below.
The biggest difference between federal and private student loans is who provides them. While federal student loans are administered by the federal government, private student loans come from banks, credit unions and other financial institutions. Interest rates and repayment options can vary greatly, so make sure you understand the difference before applying.
After submitting your Free Application for Federal Student Aid (FAFSA), you may not have enough to cover all of your educational costs. That’s where private student loans come in. Choose a bank, credit union or online lender and submit an application. You may need to provide your tax returns, pay stubs or other personal information. The lender may also require a cosigner as part of your application.
Yes! Private loan lenders use your credit history to determine your eligibility, but there are non-cosigned options if you have no credit or poor credit. Here’s our list of lenders that offer private student loans without a cosigner.
Federal student loans have stricter limits on how much you can borrow, but some private lenders put a cap on the loan amount, too. In most cases, private student loans let you borrow up to the cost of attendance, which can include tuition, fees, books, supplies and living expenses.
It’s best to exhaust all of your grant, scholarship and federal student loan options before applying for a private student loan. Even with your financial aid award package, you might need private loans to bridge the gap and cover all of your educational costs.
For students who have a well-off cosigner, we sometimes see private student loan interest fixed rates between 4% and 5%. However, most private student loan interest costs fall in the 6% to 10% range, which you would only select if that was your only choice.
No, you should seek to refinance your private loans as soon as you graduate for a lower interest rate. There’s a better chance than not that you’ll lock in a lower interest cost.
Start applying or ask a question
Ready to take out a private student loan? Just click the links at the top of the page and get started.
If you’re an undergrad, try to get all of the federal loans you can. And only apply with a private company if you need to.
If you’re attending graduate or professional school, we offer a pre-debt consultation so you can be fully informed about your options going into your program. That way you don’t have to stress about what your financial life might look like after graduation.
Have a question? Go ahead and ask in the comments below. Many readers have extra questions because of the economic volatility out there.
The more details you give, the better answer we can supply. Also, use the comments to ask any lender specific questions. Or feel free to share your experience with taking out private loans.