College tuition costs have skyrocketed in recent decades and the best student loans help people cover those costs. Today's students can expect to pay much more than their parents and their grandparents did to earn a degree.
To help with costs, around 70% of students take out loans. Many graduate with upwards of $30,000 in debt, often a mix of private and federal loans. I've done some digging and found the top companies that offer the best student loans.
In This Guide
The Best Student Loan Companies: Our Top Picks
- Fixed APR: 5.74-11.85%
- Variable APR: 2.62-9.69%
Sallie Mae Student Loans
- Offers undergraduate, graduate loans and loans for parents
- Offers both federal and direct loans
- Flexible payment options
- Decent customer service
- Information is secure behind their site's encryption
- No email contact on the site
- Not BBB accredited
As one of the best student loan options, Sallie Mae bridges the gap between federal and private providers. It offers both federal loans and private direct loans. It is one of the biggest and most well-known student loan providers, possibly because of its range of loan types and features. Unlike most loans with a government affiliation, Sallie Mae offers graduate loans as well as undergraduate and parent loans.
Sallie Mae offers helpful resources and has a general reputation for fair business practices despite the fact that it is not accredited be the Better Business Bureau. Sallie Mae prides itself on its high ethical standard according to company CEO and board member Raymond J. Quinlan who says, "I am proud of our dedication to doing business the right way."
Aside from loans, the company offers resources to help save and plan for college. They claim variable interest rates from 2.25% APR to 9.37% APR, but you should always ask if there is a limit to how high variable rates can go. Sallie Mae is one of the top student loan providers in the industry, and the company is focused on every aspect of paying for college. They are definitely worth looking into.
- Fixed APR: 5.25-11.75%
- Variable APR: 2.52-9.52%
Citizens Bank Student Loans
- Informative Site
- Offers graduate and undergraduate loans
- Offers parent loans
- No Loan Consolidation
- Loans come from large bank
One of the best banks for student loans is Citizen's Bank. Their site is clear and easy to understand but they do not have a separate site devoted to student loans. However, the site is securely encrypted and offers a range of helpful information and features.
Citizen's offers most of the loans that are standard in the industry including graduate and undergraduate loans, as well as parent loans. You can also receive assistance with or refinance your federal loans.
A big drawback of Citizen's Bank is the lack of loan consolidation, which seems to be common among banks that offer student loans.
Citizen's Bank is a competitive option and is worth checking out. It might not be the first place you think of for a student loan, but it is worth looking into, especially if you can get a good rate. Remember to always ask about APR and how much it can fluctuate during your loan's term before you sign up.
- Fixed APR: 3.50-7.74%
- Variable APR: 2.22-6.02%
Commonbond Student Loans
- Fixed interest rates
- High borrowing limits
- No co-signer needed
- Plenty of repayment options
- Only open to students in MBA programs
- High credit score required
- 2% origination fee
CommonBond is more commonly known as a student loan refinancing company. But it is also one of the best student loan companies for people pursuing a business degree. The loans are only available to students attending certain business schools. Currently, 29 schools are eligible for loans from CommonBond.
If you are pursuing an MBA, the student loan company has several advantages over other options. Its fixed interest rates, which are 6.23% for a 10-year loan term or 6.72% for a 15-year term are relatively low. You also have the guarantee that your interest rate won't go up over the years.
Although the repayment options available from CommonBond aren't as flexible as the options offered by Federal student loans, there are some protections built in. You can defer payments while you are earning your MBA. If you can't find a job, you have the option of forbearing your payments for a period of 12 months.
The downside is that interest keeps building up on the loans when you defer them or if you are in forbearance. The interest can be capitalized, meaning it's added to the principal of the loan. That raises the total amount you owe and the overall cost of your loan.
Key Considerations When Looking for Student Loans
The Best Student Loan Companies
In order to properly shop around for a quality student loan, you should keep the most important questions and features in mind.
- Are federal student loans an option for you? These are generally one of the safest bets for students in relation to the typical bank loans. A subsidized Stafford Loan is very affordable and the interest rates do not fluctuate. Plus, the government pays your interest while you are attending school, as long as you have at least a half-time attendance schedule. To qualify, you need to have an income that would reflect financial need and the qualifications required by FAFSA.
- Your school may recommend a lender but you shouldn't borrow blindly. Find out the reason behind the recommendation. Even if the lender has special offers for your university, investigate them first.
- READ the fine print. Don't let hidden fees let a seemingly good deal turn sour. Always ask to see the final terms of your loan before you sign up. If a lender isn't forthcoming, don't borrow. Cancellation processes are difficult and costly.
- Find a fair interest rate and ask how much it will go up or down. Ask how much typical interest rates have risen in the past.
- Loans with low interest rates often come with an armada of fees behind them. Look at the APRs between providers for accurate comparisons.
- Make sure you know where your loan actually comes from. Sometimes an organization simply handles a loan that comes from somewhere else.
Compare Student Loan Rates
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If you are going to get a mix of student loan, it helps to compare and contrast your options and to calculate the full cost of your loans before you commit.
It's a good idea to list all of the loans you take out, over the course of your education. Include all the details about each loan on your list. Create a spreadsheet or document to help you track your loans. Include the following details for each:
- Loan amount
- Type of loan, whether it's federal or private, for example
- Interest rate and type of interest (fixed or variable)
- Websites where you can find information on your loans
- Account number, username, and password
- Payment due dates and amounts
- Date of your final payment for each loan
Student Loan Types
Understanding the type of student loan you have is essential for understanding the payment options available and what protections are available to you. Surprisingly, about two-thirds of students aren't aware of the type of loans they are taking out or why those differences matter.
Quite simply, the best student loans are federal loans. These loans have a variety of repayment plan options, offer a variety of deferment options and usually have low fixed interest rates. Some federal loans can be forgiven, meaning you no longer need to pay them back, if you work certain jobs or commit to serving your country.
Among federal loans, there is a range of options. Once you fill out the Free Application for Federal Student Aid (FAFSA), your school will let you know which loans you qualify for and how much you can borrow.
Federal Student Loan Options
1. Stafford Loans
Stafford loans or direct loans are the most common federal student loans. They can either subsidized, meaning the government covers the cost of your interest when you are in school, or unsubsidized. If you don't pay the interest on unsubsidized loans while you are in school, it gets added to the principal amount when you graduate, making the loan more expensive.
2. Perkins Loans
Perkins loans are given to students who have the largest financial need. The loans have a fixed interest rate and a variety of forgiveness programs. Your school provides the loan to you.
3. PLUS Loans
Sometimes called parent loans, PLUS loans are for graduate and professional students as well as for parents of dependent undergraduate students. They usually have a higher interest rate than other federal loan options.
4. Consolidation Loans
A federal consolidation loan lets you combine one or two pre-existing loans into one larger loan, with a fixed interest rate. The interest rate is usually the average of the interest rates on the individual loans. Consolidation loans usually have a longer term than the other student loan options.
Federal student loans have yearly borrowing limits, which might not be enough to cover the cost of school. If your federal loans and other financial aid don't fully cover tuition and expenses, and you don't have money to pay out of pocket for school, you may need to find other student loan options.
Private Student Loan Options
1. Institutional Loans
Some schools will lend money directly to students.
2. State Loans
Many states offer loans to students, particularly if those students are residents who are attending an in-state university or college.
3. Private Loans
Banks and other private lenders often have student loan programs. Since interest rates and payment terms vary from bank to bank, it's always important to compare student loan rates and options when considering working with a private lender.
Options and Alternatives
Student loans can be a quick and easy way to get money for school. The best student loans have low-interest rates and flexible payment options so that you don't feel overwhelmed after graduation.
You can reduce your debt burden even further by fully exploring all of your college payment options. Student loans might seem like your only viable choice, but there are often plenty of other ways to pay for school.
1. Get a job at the school
If you can handle working full-time while going to school, you might get a free ride. Many colleges offer free tuition or tuition reimbursement to full-time employees.
2. Find another job that pays for school
If you can't land a full-time job at a university or college, look for a position at a company that offers tuition reimbursement. It can be difficult to juggle work and school, but the fact that your education is free can make it worth the effort.
3. Go to a cheaper school first
Private universities cost a pretty penny. In-state, public schools and community colleges are usually a lot cheaper, but the education provided is the same. Save money and avoid borrowing a lot by attending a less expensive school for at least the first two years.
4. Search high and low for aid
Don't skip filling out the FAFSA because you don't think you'll qualify for aid. You never know unless you fill it out. Also, keep your eyes peeled for scholarships. Lots of organizations offer them. You just have to look.
5. Consider a paid internship or apprenticeship
An internship or apprenticeship lets you get real-world training and experience while in school. Some even pay you for your efforts. Skip the unpaid internships and look for ones that offer a decent hourly rate. They do exist, especially in the more technical fields.
Repayment Tips & Advice
You've finished your degree and are facing up to your student loan debt. While you have the option of sticking to the payment plan and repaying the loans in 10 or 20 years, you'll pay less over time if you pay your loans more quickly. There are a few ways to make student loan repayment more manageable, no matter what types of loan you have.
First, always make more than the minimum payment if you can. Even if you can only pay an extra $20 or $50 per month, each extra payment you make will shave time off of the end of your loan. You'll get to the finish line that much sooner with every extra dollar you throw at your loan.
An easy way to make extra payment without even noticing is to pay half of the amount due twice a month, instead of the full amount due once a month. You'll end up making an extra loan payment every year.
I know this suggestion might seem crazy, but if you are still in school, it doesn't hurt to start repaying your loans. You'll reduce the amount of interest that is capitalized or added to the amount of your loan. You'll also reduce the amount you have to pay over time. If you're working while in school, it just makes sense to pay even the smallest amount, such as $10 or $20 per month, towards your loan. Your future self will thank you.
Choosing the Best Repayment Plan
Both federal loans and private loans offer a range of repayment options to students. The plan that works best for you depends on your income after graduating and how quickly you want to repay your loan. If you expect that your income will start out low and increase over time, a graduated repayment plan can make sense. These plans base your monthly payment on your initial income. As your income grows, so does the amount you owe.
An income-based repayment plan can be helpful if you are struggling on a low income. Available for federal loans, an income-based plan can reduce your monthly payment to zero if your income is low enough. Your loan can be forgiven after 10 or 25 years, depending on the type of work you do and whether you are still on the income-based plan.
Private loans usually have less flexible repayment options than federal loans. But if you are struggling to make your student loan payments, it can be worth discussing your options with a private lender. Some will let you pause payments for a while if you lose a job or struggle to find work.
Be smart when shopping for a student loan. Don't rush into anything even if a lender or your school pressures you to borrow before you've taken a deep look at your options. If you borrow the bare minimum and create a plan to efficiently use and pay off your student loan you can earn your degree and avoid years of excessive debt. To learn how to save more on your loans, check out my review of the best student loan consolidation companies. Consolidating your loans after graduation can get you a better interest rate.
You might also consider applying for a student credit card while in school. Check out our review of the best student credit cards to find one that offers the best interest rates and features. Use the same caution with applying for a credit card as you would for a student loan.
Credit cards aren't "free money." You'll need to repay them at some point, often with interest. Approach student loans and credit cards with caution and you'll graduate with the smallest amount of debt possible.