If you plan to pursue college, you'll probably need to obtain student loans to pay for it. Federal aid may not be enough to cover college costs. Generally speaking, the best student loans are the ones that cost you the least. When you take out a loan, you must pay interest on the money borrowed. Student loan rates vary, and some student loans offer flexible repayment options.
Not all student loans have the same loan benefits. Borrowers should look at competitive interest rates, private student loan options, and repayment periods. If a borrower has an established credit history, it makes taking out private loans much easier and more affordable. College students in need are typically eligible for federal student loans.
If you want to avoid taking out numerous student loans, check out how to reduce college costs to save money!
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Create Free ProfileSo, what types of student loans are there? What student loans are the best?
Types of Student Loans:
There are two main types of student loans: federal loans and private loans. Federal student aid is offered by the U.S. Department of Education and private student loans are typically offered by banks, credit unions, and other financial institutions.
Federal Student Loans
The U.S. Department of Education backs federal student loans, which provide special advantages and repayment alternatives not available with private student loans. Federal student loan borrowers can benefit from lower interest rates, income-driven repayment plans, a six-month grace period after graduation, subsidized interest payments, and the possibility of loan forgiveness.
The federal government offers four main types of student loans to undergraduate and graduate students.
- Federal Direct Subsidized Loan: Undergraduate students in financial need are eligible for these undergraduate loans. The U.S. Department of Education covers the interest payments while students are in school at least half-time, during the six-month grace period post-graduation, and during deferment.
- Federal Direct Unsubsidized Loan: Undergraduate and graduate students, including professional students, are eligible for Federal direct unsubsidized loans regardless of financial need. Students are responsible for interest payments.
- Direct PLUS Loans: There are two types of PLUS loans, parent PLUS loan, and Grad PLUS loan. These federal loans are offered to graduate students, professional students, and parents. These student loans require a credit check, and those with adverse credit history need to meet additional requirements.
- Direct Consolidation Loans: Student loan borrowers can combine multiple federal loans into one loan to lower their monthly payments. There is no application fee to consolidate your federal student loans.
Private Student Loans
It's crucial to examine as many private lenders as you can to find the best private student loan for your requirements. Unlike federal student loans, private student loan borrowers can have fixed interest rates or variable interest rates. There is no direct consolidation loan, but you have the option to refinance. Ultimately, the best private student loans will best suit your financial situation.
Different student loan lenders have different requirements. Each provides different interest rates, terms, limitations, and other things. Below we have gathered a small list of private student loans with some of the best options for student loan borrowers.
Best Private Student Loan Lenders
PNC Bank: PNC student loans offer fixed and variable interest rates ranging from 4.49% - 12.89%. These loans offer a discount for automated monthly payments, and repayment begins six months post-graduation.
SoFi: SoFi student loans offer fixed and variable interest rates ranging from 4.49% - 14.75%. These loans offer four repayment options, including term options, and offer unemployment protection.
Citizens Bank: Citizen's student loans offer fixed and variable interest rates ranging from 4.59% - 14.25%. These loans offer multi-year approval, so you don't have to reapply each year.
Discover: Discover's student loans offer fixed and variable interest rates that range from 5.49% - 15.12%. The lowest APRs have an interest-only repayment discount and an auto debit reward, accessible to applicants with the best credit ratings.
Sallie Mae: Sallie Mae graduate student loans offer fixed and variable interest rates ranging from 5.25% - 15.10%. The lowest rates include an auto debit discount. These loans have a 94% approval rate and offer 48 months of deferment during an internship or fellowship.
When applying for private student loans adding a co-signer can help you achieve a lower interest rate and loan term. Not everyone has the option to have a co-signer, so below are some tips to consider when looking into private student loans.
Tips to Compare Private Student Loans
Don't wait for your school to tell you how much you'll need to cover your educational costs. Do yourself a favor and do the due diligence. According to experts, you should only borrow as much as you'll likely earn in your first year after college. Doing so will help you manage your monthly payments post-graduation.
Consider the following factors when researching private lenders:
- Interest rates and fees
- The amount you can borrow
- When repayment begins
- Loan term
- Your credit score
- Financial help the lender offers if you have trouble paying
- Discounts
What Type of Student Loan Is the Best?
Generally speaking, a subsidized loan is one of the best student loan options. With these loans, the federal government covers the interest payments while you're in school at least half-time, during deferment, and the six-month grace period post-graduation. You don't have to make monthly payments on these loans while in school, either.
Sometimes, private student loans can be the better option for students as they can offer lower interest rates and benefit the borrower with certain loan terms, given the borrower's financial situation.
Student loans with low-interest rates will be the best loans to take out. If you have a lower interest rate, you pay less overall for borrowing money. Learn more about student loan interest rates to better grasp the costs of taking out a student loan.
Ultimately, the best student loan will be the loan that best suits a student's needs and assesses their financial situation. Be sure to research your financial aid options to secure financial support sufficiently.
What Is the Most Popular Type of Student Loan?
The most popular student loan type is federal student loans. Though, many students opt for private loans to cover the remaining costs that financial aid doesn't cover. Federal student loans are generally the easiest to get if you have financial need. These loans don't require a co-signer or a credit check. Nearly every student with a high school diploma is eligible for federal student loans.
Student loan debt is at an all-time high at 1.7 trillion US dollars. The majority of this debt is federal loans.
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Frequently Asked Questions About the Best Student Loans
During your academic journey, you may have additional questions about the best student loans or how Bold.org can help you. Below you will find answers to some of the most frequently asked questions about the best student loans.
What are the negatives of student loans?
Student loans can help you pay for your college education; however, student loan payments can also become financially crippling. One negative of student loans is receiving high-interest rates. A higher interest rate means more money paid over the lifetime of the loan and typically higher monthly payments.
Additionally, defaulting on student loans can tank your credit score. Penalties for defaulting can lead to added fees or wage garnishment and more. Essentially, student loan debt can get in the way of other financial and life goals.
Is it best to pay off student loans earlier?
Student loans accrue interest, so it is important to understand your student loan interest rates. Understanding the interest rates allows you to calculate the amount of money you will have to pay in addition to the money borrowed. Student loan interest accrues daily, so the sooner you pay the loan off, the less money you will pay overall.
Paying your loan payments sooner and paying more on your monthly payments will give the student loan debt less time to accrue interest. Hence, making on-time payments more than the minimum payment due is the best way to pay off student loans.
What is the lowest student loan repayment?
If you opt for income-driven repayment plans for federal student loans and your income is significantly low, you could have a monthly payment as low as $0. However, you should still pay more than your monthly payment to pay off your student loans sooner to save money.
Each student loan repayment will vary. Research loan providers and federal student loans to better understand your loan repayment options.
Is there a better option than student loans?
Scholarships and grants are better options than student loans. You should strive to dedicate a significant amount of time searching for scholarships and grants to save money on college costs. Check out how to get scholarships for grad school to peruse financial aid options.
Scholarships and grants do not have to be repaid, which makes them the best financial aid option a student can receive. Here at Bold.org, many scholarships are waiting to be awarded to students.
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About Candace
As the Managing Editor at Bold.org, Candace oversees the creation of valuable, well-crafted content and supports the Writing Team in delivering accurate and relevant information to assist students in navigating their academic and financial paths. She brings years of experience in writing and editing to the platform.
Candace graduated cum laude from Columbia University in the City of New York with a major in Creative Writing and a minor in English, focusing on nonfiction writing and Russian language studies.
Experience
Candace has participated in a variety of writing workshops and seminars, including those focused on nonfiction and fiction writing, novel writing, technical writing, poetry, and editing. She has managed multiple blogs, overseeing their editorial work and SEO optimization, along with content creation, management, writing, and publications. Candace has also written multiple short stories, personal essays, and a children's book.
With a passion for uncovering opportunities and combating student debt, Candace is dedicated to informing students about financial support and resources. She possesses in-depth knowledge of private and federal student loans, institutional scholarships, grants, and fellowships. She leverages this knowledge alongside her editorial expertise and love for storytelling to create engaging and informative content that empowers students.
Since joining the Bold.org team in 2022, Candace has worked as a Content Writer and has since become a Managing Editor. She leads the Writing Team, guiding them to produce high-quality content that informs and empowers students.
Her firsthand experience with the challenges of student debt gives her a unique perspective and a strong commitment to helping others navigate similar situations. This background fuels her dedication to identifying funding opportunities and offering valuable resources to students seeking financial aid and college insights.
Quote from Candace
“To attune co-creatively with our ever-transforming neighborhood, we must learn to re-learn.”
Candace is no longer with the Bold.org Editorial Team, but we continue to value and appreciate her contributions.