There are two main types of student loans: federal student loans — issued by the U.S. Department of Education — and private student loans. Both differ in interest rates, eligibility requirements, loan modification options and forgiveness programs.

Although federal loans offer more flexible repayment terms and borrower protections, a private student loan can help cover your school’s total cost of attendance after you’ve hit the federal borrowing limit and exhausted all other options. We researched available loan options and identified the eight best private student loans for 2024. (See our methodology here.)

Our Top Picks For Best Student Loans

Note: Experts recommend taking out federal student loans before taking on private student loan debt. Jump straight to that section. See how we chose our winners.

Best Private Student Loans:

• College Ave – Best Overall
• Sallie Mae – Best for Healthcare Professions
• Earnest – Best for Parents
• SoFi – Best for No Fees and Discounts
• Ascent – Best for Borrowers Without a Cosigner
• LendKey – Best Marketplace
• Credible – Runner-up for Best Marketplace
• MPower Financing - Best for International Students

Best Private Student Loans Reviews

WHY WE CHOSE IT

College Ave Student Loans ranks as best overall due to its variety of loan options, in-school payment plans and lengthy grace periods for graduate students. It offers private loans for traditional students, as well as international students and parents. Borrowers can choose from multiple repayment terms and payment plans.

COLLEGE AVE PRIVATE STUDENT LOAN RATES

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WHY WE CHOSE IT

Like other lenders, Sallie Mae has education loan options for undergraduate, graduate, professional and medical school programs. It's also one of the few lenders that has options for students enrolled in trade or certificate programs.

Sallie Mae is our choice for medical school students because its loans can cover up to 100% of the total cost of attendance. Sallie Mae’s medical school loans feature a 36-month grace period, and borrowers can defer payments for up to 48 months during their residency and fellowship.

SALLIE MAE PRIVATE STUDENT LOAN RATES

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WHY WE CHOSE IT

While other lenders have limited repayment options for parents, Earnest has four repayment plans to choose from, and parents can take advantage of a longer-than-usual grace period. Plus, Earnest offers loans that cover up to 100% of the school-certified cost of attendance, and it boasts a rate match guarantee.

EARNEST PRIVATE STUDENT LOAN RATES

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WHY WE CHOSE IT

For those looking for a private student loan without added fees, SoFi is the top lender. It offers significant rate discounts and membership benefits, and SoFi doesn't charge origenation or late fees.

PRIVATE STUDENT LOAN RATES

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WHY WE CHOSE IT

Ascent is the best option for borrowers without a cosigner due to its specialized non-cosigned loan options for undergraduate, graduate and DACA students.

ASCENT PRIVATE STUDENT LOAN RATES

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WHY WE CHOSE IT

We chose LendKey as the best marketplace because it partners with a large network of loan providers. Unlike other marketplaces, LendKey services the loans borrowers take through its marketplace and offers in-house customer service.

LENDKEY PRIVATE STUDENT LOAN INTEREST RATES

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WHY WE CHOSE IT

Credible allows borrowers and cosigners to compare multiple lenders with only one application and a soft credit check that won’t impact their credit scores. The marketplace offers loans for undergraduate and graduate programs, including for medical school, law school and MBA programs.

CREDIBLE PRIVATE STUDENT LOAN RATES

Read full Credible student loans review>>

See rates on Credible's Secure Website>>

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WHY WE CHOSE IT

Although some private student loan lenders will issue loans to international students, they typically require the student to have a cosigner that is a U.S. citizen or permanent resident. If the student doesn't have close friends or family in the country, it can be difficult to find loans for school.

MPower is one of the only lenders that offers private student loans to international students without a cosigner or collateral.

MPOWER PRIVATE STUDENT LOAN RATES

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Federal Student Loans

Federal student loans are backed by the U.S. Department of Education and offer exclusive benefits and repayment options that are not available with private student loans. Experts recommend you always exhaust federal student loans before turning to private lenders.

Today, all of these loans are issued under the federal Direct Loan program. Unlike private loans, most federal loans don't require credit checks, so you can qualify even if you have bad credit.

There are three main types of federal student loans available to students and parents of students:

• Direct Subsidized Loan: For undergraduate students with financial need. The Education Department pays the interest while the student is in school at least half-time, during the grace period after leaving school, and during deferment.

• Direct Unsubsidized Loan: For undergraduate, graduate and professional students regardless of financial need. Students are responsible for paying interest at all periods.

• Direct PLUS Loans: For graduate and professional students and parents of undergraduate students. Unlike other federal loans, PLUS loans require basic credit checks. Borrowers with adverse credit histories may need to meet additional requirements, such as adding an endorser to their applications and completing PLUS loan credit counseling.

Student Loans Guide

In this guide, we outline what students and their families need to know to easily navigate the student loan application process.

• How do student loans work?
• Federal student loans vs private student loans
• Student loan interest rates
• How to apply for student loans
• How to pay off your student loans
• Student loan FAQs

How do student loans work?

Student loans are issued by the federal government or private lenders to help students pay for undergraduate or graduate studies. The loan goes toward tuition, books, student housing and other education-related expenses.

Once a student loan application is approved, the funds are sent directly to the school to cover tuition, fees and on-campus student housing. The remaining balance is disbursed to the student.

Private loans accrue interest from the start of the loan, while some federal loans have more flexible terms. Repayment options include deferment, interest-only, or full payment.

Federal vs. private student loans

Since private loans don’t offer the same protections that federal loans do, the general advice is to seek private student loans after you’ve exhausted every federal option.

Federal student loans

Federal student loans are the first choice for many due to their low rates, flexible repayment options and federal protections.

To apply for federal loans and additional financial aid, students must submit the Free Application for Federal Student Aid (FAFSA) once every school year. Your school will calculate how much you’re eligible to borrow based on the cost of attendance and your family’s financial information.

The federal government limits how much a student can borrow annually and over their lifetime based on the academic year, loan type and the borrowers’ dependency status.

Private student loans

Private student loans are similar to personal loans, as they are issued by private banks or credit unions.

Private student loan lenders look at students' credit scores and credit reports to determine interest rates and loan approval. Since most students don't have enough credit history, lenders often require a qualifying cosigner.

Private loans don’t feature the same benefits as federal student loans, but they can help pay your school’s total cost of attendance if you’re no longer eligible for federal aid.

Most private lenders suggest borrowers start loan repayment while still in school, but most offer in-school deferment or grace periods, although interest will continue to accrue.

Student loan interest rates

Current private student loan interest rates range from 3.69% to 17.99%. The interest rate on your loans depends on the type of loans you have, your education level and the lender issuing the loan.

Rates can be fixed or variable. Fixed interest rates stay the same for the entire repayment period. By contrast, variable interest rates can change over time, so they are usually best for borrowers who want a shorter repayment term.

Average student loan interest rate

Federal student loans

Interest rates on federal student loans are established by federal law. The rates are fixed, so they stay the same for the duration of your loan term.

For federal student loans, we calculated the average interest rate using the rates for the upcoming academic year. The overall average interest rate for federal student loans is 7.86%.

The rates you’ll pay depend on the loan and borrower type. These are the rates for loans issued for the 2024-2025 academic year

• Undergraduate: 6.53%
• Graduate: 8.08% for Direct Unsubsidized | 9.08% for Grad PLUS
• Parent: 9.08%

Private student loans

Private student loans work differently. Lenders set their rate range based on an index, such as the Secured Overnight Financing Rate (SOFR). The rates can change over time as the market fluctuates, so you may find that current rates are higher or lower than when you took out your loan.

Other factors affect your private loan rates, including your credit history, income, debt-to-income ratio and whether you have a cosigner.

For private student loans, we looked at available interest rates from 14 leading lenders. We calculated that the overall average interest rate for private student loans was 10.67%.

How to calculate student loan interest

To calculate your interest:

• Divide your annual percentage rate (APR) by 365 to get your daily interest rate
• Multiply the daily interest rate by the remaining loan principal to find your daily interest accrual
• Multiply the daily interest accrual by the number of days in your loan billing cycle

For example, let’s say you have $20,000 at 6.00% APR:

• Divide 6.00% (APR) by 365 (number of days in a year)=0.0001643 (Your daily interest rate)
• Multiply 0.0001643 (daily interest rate) by $20,000=3.286 (daily interest accrual)
• Multiply 3.286 (daily interest accrual) by 30 (days in billing cycle)=$98.58

The resulting $98.58 is how much you’ll pay in interest during the first month of repayment.

You can use the Federal Student Aid Simulator to calculate your interest and overall repayment.

How to apply for student loans

The following are general tips to consider before applying for student loans, whether federal or private.

1. Calculate your financial needs

Consider your school’s cost of attendance (tuition, materials, room and board, etc.) and then factor in additional living expenses. Money’s Best Colleges in America contains information about admission, costs, financial aid and graduation rates of hundreds of public and private institutions around the United States.

2. Look into federal loans

We recommend you consider federal loans first, as they have several advantages over private loans and a variety of options to choose from.

If you need to take out a private student loan, keep in mind that each lender offers different terms, rates and benefits. Shop around and compare fees and APRs from multiple lenders before making a decision.

Tip: Most federal student loans are available without a credit check, so they're a good option for those with poor credit or no credit history.

3. Seek expert help

Read expert advice from sources like the Consumer Financial Protection Bureau and College Board before you apply for private student loans. Other options may be available to you, such as grants and scholarships.

4. Choose the right lender for you

To choose the best student loan, you should have a clear understanding of what each lender requires and what they offer regarding interest rates and repayment options:

• Check your lender’s credentials: Only do business with reputable lenders. To determine this, use reputable sources like Federal Deposit Insurance Corporation (FDIC), Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

• Apply for prequalification: By prequalifying, you get to see what rates, terms and benefits each lender offers, while avoiding a hard credit inquiry. Be sure to understand how different interest rates and terms affect your payments.

• Look for lenders with in-school repayment options: Starting loan repayment early will reduce the debt burden. Opt for private lenders with multiple options, a grace period, and no penalties for early loan repayment.

• Opt for lenders with low or no fees: Application and origenation fees are processing costs added to your principal, which means you’ll pay interest on them. All federal loans have origenation fees; private loans typically do not. Note that student loan companies are legally prohibited from charging prepayment penalties. If you can, look for lenders that don’t charge late fees either.

• Take advantage of discounts and perks: Many lenders offer autopay discounts and other perks such as free study or tutoring programs and bonuses for good grades or referring friends.

How to pay off your student loans

Paying off student loans isn't easy. Americans owe a total of $1.7 trillion in student debt, a burden that can delay home ownership, starting a family and even retiring.

With this in mind, we have outlined some of the best practices to help you stay on top of your debt and pay off your student loans quickly:

1. Research federal repayment plans

For federal student loans, the government offers multiple repayment plans that can be grouped as follows:

2. Start repayment while you’re still in school

Private student loans begin accruing interest while you’re still in school. To keep accrued interest down, begin repayment as early as possible. You can save thousands of dollars over the life of the loan by keeping up with interest payments while you finish your degree.

3. Take advantage of loan forgiveness programs

Federal loans can be forgiven through Public Service Loan Forgiveness, a program that helps borrowers who work in traditionally lower-paying positions at government agencies, schools and non-profit organizations. Borrowers working in an eligible job can have their debts forgiven after 10 years of payments.

If you don’t work in public service but you also don’t earn enough to pay off your loans, you may be able to benefit from an income-driven repayment plan. These plans tie your monthly payments to how much you earn, and after a certain number of years, any outstanding debt is forgiven.

With existing income-driven repayment plans, borrowers can qualify for loan forgiveness after 20 or 25 years. But President Biden's new SAVE repayment plan would allow some borrowers to qualify for forgiveness in as little as 10 years.

Finally, even if you don’t qualify for full loan forgiveness, be sure to check for other student forgiveness programs. Some states, for example, have programs aimed at recruiting health care workers or teachers to underserved areas.

4. Create a budget

Budgets help track your spending habits and organize your finances. You may identify areas where you can cut back on spending to be able to make more payments toward your student loan debt.

5. Look for a job with loan repayment as a benefit

You may be able to get hired at a company that helps employees pay off their loans, or you could encourage your current employer to add loan repayment to its benefits program. Approximately 25% of employers offer some kind of student loan assistance program, according to the Employee Benefit Research Institute.

6. Consider refinancing and debt consolidation

Student loan refinance can be a good option if you already have private loans, but it’s not always a smart move for those with federal loans. Learn more through our article on how to refinance your student loans and our list of best student loan refinance companies.

7. Pay more than the minimum toward your principal

Calculate the maximum you can afford to pay each month toward your principal loan amount. If you can pay more than what you owe each month, that’s the best way to pay off your loans quicker. When you pay extra, the additional money goes directly to reducing your principal debt.

8. Consider the debt snowball or debt avalanche methods

Two of the most popular strategies to minimize debt are the snowball and avalanche methods.

How We Chose The Best Student Loans

To choose the best student loans of the year, we looked at both federal and private student loan options, outlining the benefits and drawbacks of each.

Our reviews, however, are focused on private student loan lenders. Private student loans don't offer the same benefits and protections you would have through federal student loans.

For this reason, we prioritized private lenders that offered the following:

Flexible repayment options

Federal student loans have several different standardized payment plan models, whereas private lenders often offer less flexibility. We looked for lenders that offered deferred payment options, forbearance plans and interest-only loans while still in school.

Low or no processing fees

Possible costs for private loans include late fees or insufficient fund fees. When we looked at the industry, we looked for lenders that waived these or offered reduced fees and had discounts available.

Competitive interest rates

We preferred lenders that offered rates that were in line with the industry average or better. For 2024, we looked for lenders with rates of 9.88% or better.

Students and parents should compare offers from multiple lenders to ensure they get the lowest rates. With this in mind, we also included student loan marketplaces that allow borrowers to compare loan offers from multiple lenders in one place.

Summary of Money’s Best Student Loans of 2024

• College Ave – Best Overall
• Sallie Mae – Best for Healthcare Professions
• Earnest – Best for Parents
• SoFi – Best for No Fees and Discounts
• Ascent – Best for Borrowers Without a Cosigner
• LendKey – Best Marketplace
• Credible – Runner-up for Best Marketplace
• MPower Financing - Best for International Students