The weight of student loan debt can feel overwhelming, especially for graduates of professional programs like law school and medical school. According to the latest data from the American Bar Association, the average law school graduate owes approximately $130,000 in student loan debt upon graduating. And if you think that’s bad, consider this: The average medical school graduate owes $250,995 in total student loan debt, according to EducationData.org.
Navigating student loans, from getting them to potentially refinancing them later, can be a complex process. This guide is here to help everyone, from first-time borrowers to law school graduates and doctors, burdened with high student loans.
Is there good news for student loans? Absolutely!
Low-interest rates create a double opportunity:
- For prospective students: You can explore private student loans with potentially attractive rates in 2024, giving you more options beyond just federal loans.
- For existing borrowers: You can potentially save money and pay off your student loans faster by refinancing your high-interest student loans with a lower APR.
Understanding your options is key. This guide will walk you through everything you need to know about student loans, from securing the best lenders to strategically refinancing them for a faster payoff.
Student Loan Questions (FAQs)
1. Can I refinance my private student loan?
Like using one of the best debt consolidation companies or the best personal loan lenders to pay off debt, you can refinance your private student loan through a different lender.
Refinancing can potentially lower your interest rate, reduce your monthly payments, or change your loan term. Refinancing is possible whether you have a federal or private student loan. Our top picks for student loan refinancing include the following companies.
Top Student Loan Refinance Companies for 2024
Credible (best option to refinance medical student loans or high law school debt)
Credible offers student loan refinancing options with interest rates from 5.24% to 12.44%. Checking your rate won’t affect your credit score and requires no commitment.
Check student loan refinancing rates for free.
Citizens Bank (best option to refinance federal and private loans)
Citizens offers student loan refinancing rates starting at 7.29% variable or 6.99% fixed. Citizens allows the ability to refinance federal and private loans into one.
Check Citizen’s student loan refinancing rates for free.
MEFA (refinance student loans with a fixed rate)
MEFA provides competitive fixed interest rates with 7, 10, and 15-year term lengths for private and federal student loan refinancing.
Check MEFA student loan refi rates.
ELFI (best student loan refi loan for longer payoff period)
Checking your interest rate through ELFI requires no commitment and won’t affect your credit score. Interest rates vary, starting at 5.48% fixed and 5.28% variable, with loan lengths from five to 20 years, depending on the loan type.
2. How are student loans different from other loans?
Student loans are distinct from other types of loans in several ways.
- Student loans aim to pay for education-related expenses and little more.
- They typically offer lower interest rates than personal loans and even some equity borrowing.
- Depending on your student loan terms, repayment options will likely be more flexible than a standard loan.
- Government-funded loans typically offer income-related repayment plans or deferments to pay later.
- On rare occasions, federal student loans may offer loan forgiveness. However, the occurrences are rare enough to not be much of a factor when deciding which loan to take.
3. What is the difference between federal and private loans for students?
There are several differences between federal and private loans for students. At first glance, federal loans may appear to be the hands-down winner that everybody should choose. However, these loans have limits and restrictions to consider before funding an education solely on federal loans.
As the name implies, federal loans are backed by the government. Most students will submit a FAFSA form before considering any type of school funding. Submitting the form is a prerequisite to obtaining a federal student loan, as well as financial grants. Federal student loans come in three varieties—subsidized, unsubsidized, and PLUS loans for parents or graduate students.
For their part, federal loans offer several perks along with some limitations.
- Moderate interest rates of between 5.5% to 8.05%, depending on loan type
- Flexible payment terms, deferments, and sometimes forgiveness.
- Typically subject to loan origination fees.
- Feature the ability to apply for income-balanced payments, depending on several factors.
- Federal loans aren’t loans through the government. However, the government will choose your loan provider.
- They feature a standard repayment term of 10 years.
- Federal loans are currently limited to $31,000 for dependents as undergrads, $57,000 for independent undergraduate borrowers, and $138,500 for graduate students.
- Additional dollar-amount limitations apply to those with subsidized loans that don’t accrue interest while in school.
Private student loans offer fewer restrictions but are also less flexible than federal loans when it’s time to pay them back.
- Private loans are issued by banks, credit unions, or other financial institutions.
- They often feature fixed or variable interest rates below that of federal student loans
- Repayment terms are negotiable but rigid, between five and 25 years.
- Loan deference or forgiveness is generally not an option without privately arranging the terms with your lending company.
- Private student loans are often issued without origination fees.
- Have less restrictive borrowing capacities.
4. What is FAFSA?
The Free Application for Federal Student Aid (FAFSA) is a form used by students to apply for financial aid for college or graduate school. It assesses the student’s financial need and determines their eligibility for federal student aid, including loans, grants, and work-study programs. Filling out the FAFSA is a critical first step for anyone looking to finance their education through federal aid or federal loan borrowing.
5. Is FAFSA a loan or free money?
FAFSA is neither a loan nor free money; it is an application process. The outcome of submitting the FAFSA form can lead to eligibility for various types of financial aid, including grants, federal student loans, and work-study opportunities. While grants may be considered free money in that they don’t require repayment, federal student loans do require repayment.
6. How do I take out student loans?
To take out federal student loans, start by completing the FAFSA to determine your eligibility for federal student aid. Based on the results, you may be offered loans as part of your financial aid package. From there, you’ll have the opportunity to choose your options. Many students may receive a subsidized student loan offer in which interest won’t accrue while they’re still in school with a student loan balance.
To take out a private student loan, students can go directly to their chosen lender or several of them and shop for the best loan option. Both federal and private student loans will require a credit check when applying.
7. How do interest rates work on student loans?
Interest rates for student loans determine how much you’ll pay on top of the borrowed amount. Interest rates are the difference between the principal and the total amount owed. Federal student loans typically have fixed interest rates set by the government that remain constant over the life of the loan.
Private student loans may have fixed or variable interest rates, which can fluctuate over time based on market conditions. Beyond those parameters, interest dollar amounts for student loans are calculated as simple interest rather than compounded interest.
| Interest rates | Terms | Pros | Cons | |
| Federal Student Loans | Fixed at 5.5% to 8.05%, depending on loan type | 10 years | Flexible terms, potential loan forgiveness, fixed interest rates | Origination fees apply, borrowing limits |
| Private Student Loans | Vary by lender. May be fixed or variable rate | 5 to 25 years, depending on loan agreement terms | Negotiable term lengths at loan origination, little or no origination fees, fewer cap restrictions, lower interest rate potential | Rigid terms, no forgiveness potential |
8. Can you write off student loans?
Under certain conditions, you may be able to deduct the interest paid on student loans from your taxable income, reducing your tax liability. This deduction is subject to income limits and other requirements. Always check with a CPA or financial advisor before writing off deductions of any kind.
Additionally, some loan forgiveness programs may allow for the cancellation of student debt under specific circumstances, such as working in public service or teaching in high-need areas.
Student Loan Pros and Cons
9. What are the pros and cons of private student loans?
While federal student loans cover most expenses for many higher-education students, their limitations often fall short of meeting every need. Graduate students and those attending schools with higher tuition rates often gravitate toward private borrowing to fill in the differences.
Private student loans are also excellent sources for borrowing for those who plan to pay off their student loans quickly, expect to generate sufficient income to cover student loan costs after graduation, or have excellent credit and can secure a lower APR than one offered through a federal loan.
Pros
- Have higher borrowing limits, depending on creditworthiness and income
- Repayment terms are often negotiable and can be short or long-term
- Aren’t subject to federal student loan fixed interest rates
Cons
- Don’t offer protections found in federal student loans, such as potential forgiveness and income-driven repayment terms
- Often require a higher credit score or an established co-signer for approval
Best Private Student Loan Companies
10. Who are the best private student loan lenders?
A large number of private student loan lenders exist. We’ve researched and evaluated the top 20 contenders to generate this list of the best private student loan providers, many of which are also available through Credible.
| Lender | Min Fixed | Max Fixed | Min Variable | Max Variable | Loan Term | Loan Amount |
|---|---|---|---|---|---|---|
| Ascent | 4.13% | 15.46% | 6.16% | 16.10% | 5, 7, 10, 12, 15, 20 yrs | $2,001 to $400,000 |
| Citizens | 4.48% | 13.29% | 6.38% | 14.28% | 5, 10, 15 yrs | $1,000 to $350,000 (depending on degree) |
| College Ave | 4.43% | 17.99% | 5.59% | 17.99% | 5, 8, 10, 15, 20 yrs | $1,000 up to 100% of the school-certified cost of attendance |
| Custom Choice | 4.39% | 14.66% | 5.40% | 15.22% | 7, 10, 15 yrs | $1,000 to $99,999 annually ($180,000 aggregate limit) |
| ELFI | 6.99% | 12.44% | 4.98% | 12.79% | 5, 7, 10, 15 yrs | $1,000 up to 100% of the school-certified cost of attendance |
| INvestEd | 4.56% | 8.34% | 7.76% | 11.80% | 5, 10, 15 yrs | $1,001 up to 100% of school certified cost of attendance |
| MEFA | 5.35% | 7.95% | 10, 15 yrs | $1,500 up to school?s certified cost of attendance less aid | ||
| Sallie Mae – UG | 4.50% | 15.49% | 6.37% | 16.70% | 10 – 20 yrs | $1,000 up to 100% of the school-certified cost of attendance |
Managing Your Private Student Loans
11. Can you pay off student loans early?
You can pay off student loans early without penalty for both federal and private loans. Making extra payments or paying more than the minimum can reduce the amount of interest you pay over the life of the loan.
12. Should you pay off student loans early?
There are no financial or other penalties for paying off student loans early. Deciding whether to pay off student loans early depends on your individual financial situation and goals. If you have high-interest debt or lack an emergency fund, you might prioritize those areas first. However, if you’re financially stable, paying off student loans early can save on interest and reduce your overall debt.
13. Will not paying my student loan hurt my credit score?
Another crucial student loan questions myth is that not making student loan payments on time won’t affect your credit score. That statement is false.
Not paying your student loan can hurt your credit score significantly. Late payments and defaulting on your loan can lead to negative marks on your credit report, making it difficult to obtain credit, buy a home, or even get a job in some cases. Poor marks on your credit report can also increase some insurance premium amounts.
If you’re unable to make your payments on time, contact your lender directly and work out a solution to avoid a negative situation.
Getting Started
14. What do student loans cover?
Perhaps the most crucial of student loan questions is, what will it pay for?
Student loans help cover the cost of higher education, including tuition, room and board, books, supplies, and other related expenses. Federal student loans, which are government-funded, typically offer general coverage and more flexible repayment terms compared to private loans from banks or other financial institutions.
However, federal loans also contain restrictions that most private lenders don’t. Understanding what your student loan covers is essential to budgeting effectively for your education and ensuring you only borrow what you need.
15. How do I get started finding a private student loan?
To find a private student loan, start by researching lenders, such as banks, credit unions, and online lenders, to compare interest rates, fees, repayment options, and borrower protections.
If necessary, consider applying with a cosigner to improve your approval chances and potentially qualify for lower interest rates. Always read the terms and conditions carefully before agreeing to a loan.
Pre-Qualify for the Best Student Loan Lenders for 2024
16. How do I improve my credit score before applying for student loans?
Whether you choose a federal loan, private loan, or a combination, having a good credit score will help reduce the interest rate on your student loan. Having poor credit can affect your ability to become approved for borrowing. For those with poor credit or a short credit history, consider applying for one of the best credit cards with no security deposit to begin building or rebuilding your credit score.
