Are you looking for additional financing, above and beyond federal student loans, for college? Or maybe you’re considering refinancing your student loans with a private lender?
Either way, the process for finding and applying for private student loans is a bit different from the process for federal student loans. With federal loans, your loans are assigned to a loan servicer, and the terms you get are whatever the federal government has signed off on for that school year.
With private loans, on the other hand, you can shop around for your lender and even negotiate for better rates and repayment terms. You might assume that private lenders only offer one student loan option with a set interest rate and repayment terms. But this is actually not the case. Several popular banks and private financing companies offer a variety of interest rates, as well as flexible repayment plans.
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Differences in Repayment Plans
Before we launch into the list of five student loan companies that currently offer flexible repayment options, let’s get something straight. Flexible repayment here isn’t the same thing as flexible repayment under federal student loan programs.
With federal student loans, you can choose from a variety of repayment plans at the time you enter into repayment. And throughout your repayment terms, you can also change your repayment plan when needed. So if you start out with a higher standard payment but run into financial trouble, you can easily switch to an income-driven plan with a lower monthly payment.
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This is not necessarily the case with private student loans. With these loans, you’ll choose your payment plan at the beginning of the loan term. The flexibility comes in your ability to choose between fixed and variable APR, and to also choose your loan term. A longer term and lower APR will result in a lower monthly payment, or vice versa.
But once you lock in an interest rate and payment plan for a private student loan, you’ll need to stick to it unless certain circumstances arise. With some lenders, you can put your payments on hold if you’re in a time of financial stress. But you may have to go through a refinancing process to actually change your interest rate or repayment terms.
With that said, these benefits vary from one lender to the next. It’s always worth asking whether you can change your repayment terms down the road when you’re applying for a private student loan.
Companies that Offer Flexible Repayment Plans
Currently, the market for private student loans is fairly small. This is partially because so many students get their funding needs met with federal student loans. In general, it’s best to start with the government-backed loans, which come with a variety of benefits, and then consider refinancing with a private lender after graduation.
This isn’t always the best scenario, though, especially if you have a good credit score and a solid income. In this case, you may be able to avail yourself of a lower interest rate on a private student loan. This is why it’s important to shop around and understand your options before taking on any student loan debt.
As you’re shopping around, be sure to check out these five companies and banks that offer flexible repayment terms on your educational loans. (All rates shown are current as of December 5, 2016.)
This company started out specifically focused on student loan refinancing, but has expanded to offer other types of financing. It doesn’t offer traditional student loans off the bat, but it does offer student loans for parents. SoFi is also a great option for refinancing your student loans.
Right now, on its student loan refinancing option, SoFi offers variable rates from 2.31% and fixed rates from 3.35% (both with Autopay). As with many other companies, SoFi offers an interest rate discount when you sign up for automatic debit payments. The lower-end rates advertised are available to those who sign up for AutoPay. This lender also has several repayment term options for student loan refinancing.
If you’re a parent looking for additional funding for your child’s education, SoFi does make student loans available for parents. These have variable rates from 5.74% to 14.60% and fixed rates from 5.99% to 16.49%. These loans are available for up to the total cost of attendance, have no origination fees, and have two term options: five years and ten years.
This longstanding bank offers student loans that are available directly to students. It allows students to choose their repayment term at the beginning of the loan, and offers some benefits similar to federal student loans. Benefits include forbearance on payments when you’re in school, on active-duty military service, or volunteering for a qualifying public service organization. Forbearance is also available in times of financial hardship.
Wells Fargo’s student loans offer variable and fixed rates, and give borrowers a .25% interest rate reduction when they sign up for automatic payments.
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Traditionally known for its credit cards, Discover has launched into the realm of student lending. It actually offers a variety of student loans tailored for different purposes, from undergraduate studies to MBA degrees, and law school and medical residency. These no-fee loans offer deferred repayment options similar to federal loans, so that you can put off making payments while you’re still in school.
As with the other companies listed here, Discover student loans offer both variable and fixed APR options. Right now, variable rates are 3.62% to 10.62%, and fixed rates are 6.24% to 11.99%. You can also choose your repayment term when you sign up for the loan.
Discover loans have some interesting additional benefits, too. They offer borrowers the standard .25% interest rate reduction for automatic debit withdrawals. But they also allow for a 1% cash reward on each new student loan that you take out if you have maintained a 3.0 GPA. So if you’ll need private student loans for multiple school years in a row, this could turn into a valuable benefit.
This bank offers student loans through SunTrust, which also services federal student loans. Its private student loans come with repayment terms of 7, 10, or 15 years, and you can choose your repayment term when you sign up for the loan.
Union Federal offers variable interest rates of 3.863% to 8.692% and fixed rates of 4.597% to 9.769%. Borrowers can get up to a .75% interest rate reduction by making on-time payments consistently (.25% reduction), signing up for automatic payments (.25% reduction), and making automatic payments from a SunTrust bank account (.25% reduction).
Citizens Bank offers both private student loans and student loan refinancing. These no-fee loans let you choose your repayment term, either 5, 10, or 15 years. You can also choose your repayment plan while you’re in school. The options include making full payments immediately, paying interest only, or deferring payments altogether until after you drop below half-time enrollment.
As with the other four options listed here, Citizens Bank offers interest rate reduction rewards, including a .25% rate reduction when you have a Citizens Bank account before you apply for your loan and a .25% interest rate reduction for signing up for automatic payments.
Each of the companies listed above are direct lenders. They’re excellent choices, but you may find better options by making multiple applications. The best way to do that is through online student loan marketplace, like Credible. By completing a single application, you’ll get quotes from as many as 10 lenders. You can then choose the lender you prefer, and complete the process.
Lenders participating on the site offer loan terms ranging from 5 to 20 years. Variable rate loans start as low as 1.90% APR, while fixed rates start as low as 3.10% APR. There is no fee to use the Credible site, and participating lenders charge no origination fees or prepayment penalties.
Whether a federal student loan or a private loan is your best option depends on your educational needs, income, and even your credit. If you don’t have a solid income source or your credit is less-than-ideal, a government loan is probably a better place to start. If you (or your parents, if they’ll be taking out your educational loans instead) have great income or credit, you may be able to better find what you need through a private lender.
The five banks shown above each offer a number of repayment option, making your educational debts easier and more flexible to pay back. No matter which route you choose, though, be sure to fully explore all of your options before signing on any dotted lines.