Sallie Mae vs Funding U: Private student loans compared

When searching for private student loans to bridge the gap between financial aid and the cost of college, most families encounter a common hurdle: the need for a creditworthy cosigner. This is where the comparison between Sallie Mae and Funding U becomes critical. These two lenders represent fundamentally different approaches to student lending. To answer the core question immediately: Sallie Mae is a traditional lender best suited for borrowers with a strong credit history or a creditworthy cosigner, while Funding U is a specialized lender designed specifically for undergraduate students who want to borrow independently based on their academic merit rather than credit score.

Choosing the right path depends entirely on your specific financial profile. If you have access to a cosigner with excellent credit, a traditional lender like Sallie Mae often provides the lowest possible interest rates and a wide variety of repayment terms. However, for students who cannot find a cosigner—or who wish to take full responsibility for their debt immediately—Funding U offers a vital alternative by evaluating “future earnings potential” rather than past credit history.

In this guide, you’ll learn the specific eligibility requirements for both lenders, how their interest rates and fees compare, and the distinct borrower benefits each company offers. We will break down loan limits, repayment flexibility, and the application process to help you decide which financial partner aligns with your goals. By understanding the trade-offs between these two distinct lending models, students and families can make a confident, informed decision about how to fund their education responsibly.

Overview: Two different approaches to private student lending

To make an informed choice between Sallie Mae and Funding U, it is essential to understand that they are not just different companies; they utilize entirely different business models. This difference in philosophy dictates everything from who gets approved to what interest rate is offered.

Sallie Mae is a market leader in the private student loan space and operates as a traditional financial institution. Their underwriting model—the process used to decide if a borrower qualifies—is based heavily on credit history and debt-to-income ratios. Because most college students have thin credit files and limited income, Sallie Mae generally expects a cosigner to be part of the application. The lender evaluates the risk based on the cosigner’s ability to repay the loan if the student cannot. This traditional model rewards established credit stability with competitive rates and high loan limits.

According to Mark Kantrowitz, financial aid expert, “Most students will need a cosigner to qualify for a private student loan.” This reality is the foundation of Sallie Mae’s business model, which serves millions of families who have the financial backing to co-sign.

Funding U (short for Funding University) was created to disrupt this traditional model. They operate as a “no-cosigner” lender. Instead of relying on FICO scores or parental income, Funding U uses merit-based underwriting. They evaluate a student’s academic performance, course load, major, projected graduation date, and the historical earnings data of graduates from that specific college. Their philosophy is that a student who is performing well academically and is on track to graduate is a good investment, regardless of their family’s credit history.

This approach serves a specific segment of the market: the “gap” students. These are often high-achieving undergraduates who may not have a creditworthy cosigner available or who prefer to keep their finances separate from their parents. While Sallie Mae casts a wide net over the general student population, Funding U focuses narrowly on students who demonstrate strong academic potential but lack access to traditional credit avenues.

Eligibility requirements: Who qualifies for each lender

Determining eligibility is the first practical step in choosing a lender. Because their underwriting models differ so drastically, a student who is instantly rejected by one lender might be the ideal candidate for the other. The most significant differentiator is the cosigner requirement, but academic and citizenship criteria also play major roles.

According to Sallie Mae’s lending guidelines, they generally require a credit score in the mid-to-high 600s or higher for approval. Since most students do not have this credit history, the eligibility burden usually falls on the cosigner. If the cosigner has a strong credit history and sufficient income, the student is likely to be approved. Conversely, Funding U does not have a minimum credit score requirement because they do not base their decision on FICO scores. Instead, as reported by Funding U, they look for a minimum GPA (typically a 2.5 or higher) and evidence of academic progress.

Another crucial distinction is school eligibility. Sallie Mae lends to students attending a vast network of Title IV degree-granting institutions across the country. Funding U is more selective; because they base approval on graduation and employment data, they only lend to students attending schools on their approved list, which consists of four-year non-profit colleges with strong graduation rates.

The following table outlines the key eligibility differences to help you see where you fit:

Source: Sallie Mae and Funding U eligibility guidelines (current as of 2025)

It is important to note that Funding U is strictly for undergraduate students at this time, whereas Sallie Mae offers loans for graduate programs, career training, and professional degrees. For more details on general requirements, you can review our guide to private student loan eligibility.

Interest rates and APR comparison

Interest rates are often the deciding factor for families, as they determine the total cost of the loan over time. Because Sallie Mae and Funding U assess risk differently, their rate structures and ranges vary significantly.

Sallie Mae offers both fixed and variable interest rates. As of early 2025, their rates are highly competitive for borrowers (or cosigners) with excellent credit. A variable rate may start lower but can fluctuate with market conditions, potentially increasing your monthly payment. A fixed rate remains the same for the life of the loan. Sallie Mae determines your specific rate based on the “creditworthiness” of you and your cosigner. The better the credit score and financial history, the lower the rate.

Funding U, in contrast, offers fixed interest rates only. They do not offer variable rate loans. This provides stability, as students know exactly what their payments will be after graduation. However, Funding U’s rates typically start higher than Sallie Mae’s lowest advertised rates. This is due to “risk-based pricing” without a cosigner. Because lending to a student with no credit history is statistically riskier than lending to a parent with a 20-year credit history, Funding U charges a premium to offset that risk.

Here is how the rate structures generally compare:

Source: Lender rate disclosures (as of January 2025)

When comparing APRs (Annual Percentage Rates), remember that the APR includes not just the interest rate but also the effect of any fees or discounts. While Sallie Mae rewards high credit scores with lower rates, Funding U provides access to capital for those who cannot utilize a credit score to secure funding. For many students, a slightly higher rate with Funding U is a worthwhile trade-off for the ability to borrow independently.

Loan amounts and borrowing limits

Once you know if you are eligible and what rates to expect, the next question is usually: “How much can I borrow?” Both lenders aim to fill the gap between federal aid and the total cost of college, but they define their limits differently.

According to Sallie Mae, students can typically borrow up to 100% of the school-certified cost of attendance (COA). The COA includes tuition, fees, room, board, books, and miscellaneous personal expenses. The minimum loan amount is generally $1,000. Because approval relies on the cosigner’s financial strength, Sallie Mae does not publish a strict aggregate (lifetime) limit, though the total amount borrowed must be certified by the school and align with the cosigner’s credit capacity.

Funding U takes a more regulated approach to loan amounts, reflecting their focus on responsible borrowing for students without financial backers. As reported by Funding U for the 2025-2026 academic year, they typically offer loans ranging from $3,001 to $20,000 per academic year. They also enforce an aggregate lifetime limit (often around $75,000) to prevent students from taking on unsustainable debt loads. Importantly, Funding U’s loan offers are also capped by the school’s certified cost of attendance.

For students needing to cover a small gap—such as $5,000 for housing or a remaining tuition balance—both lenders are viable. However, for students attending expensive private universities who need to finance the entire cost of attendance, Funding U’s annual caps may not cover the full deficit, whereas Sallie Mae is designed to cover the entire bill. For help calculating your gap, see our guide on how much to borrow for college.

Repayment terms and in-school payment options

Flexibility during repayment can make a significant difference in a graduate’s monthly budget. This section compares how each lender expects you to pay back the loan and what options you have while still in school.

According to Sallie Mae’s loan terms, borrowers can often choose between loan terms of 5, 10, or 15 years. This flexibility allows families to choose between paying off the debt quickly (saving on interest) or extending the term to lower the monthly payment. Furthermore, Sallie Mae provides four distinct repayment options while the student is enrolled in school:

• Deferred Repayment: No payments are required while in school and during the grace period (interest accrues and is added to the balance).
• Fixed Repayment: Pay a flat fee (e.g., $25/month) while in school to keep interest in check.
• Interest-Only Repayment: Pay the interest charges every month while in school to prevent the balance from growing.
• Immediate Repayment: Pay full principal and interest immediately.

Funding U offers a simpler, albeit less flexible, menu of options. Their loan term is typically set at 10 years, which is the industry standard for student loans. Regarding in-school payments, as reported by Funding U, they usually require students to make either interest-only payments or a fixed payment (often $20) while enrolled. They generally do not offer a fully deferred option where $0 is due while in school. This policy aligns with their mission of responsible borrowing; making small payments during school builds credit history and prevents the loan balance from ballooning before graduation.

Both lenders offer a 6-month grace period after graduation before full principal and interest payments begin. When choosing between them, consider your cash flow during college. If you absolutely cannot make payments while studying, Sallie Mae’s deferred option is the solution. If you can manage a small monthly payment, Funding U’s requirement helps enforce financial discipline.

Borrower benefits and discounts

Beyond the raw numbers of rates and terms, private lenders often compete by offering borrower perks. These benefits can reduce the total cost of the loan or provide safety nets during difficult times.

Both Sallie Mae and Funding U offer an autopay discount, typically a 0.25 percentage point reduction in the interest rate if you sign up for automatic monthly payments. This is a standard but valuable way to lower the cost of borrowing.

Sallie Mae’s most significant benefit is the Cosigner Release option. Since most of their loans involve a cosigner, this feature is critical. According to Sallie Mae’s program terms, after the student graduates and makes 12 consecutive on-time principal and interest payments, they can apply to have the cosigner removed from the loan. This releases the parent or guardian from financial legal liability. According to Mark Kantrowitz, financial aid expert, “Cosigner release is a valuable feature offered by some private lenders, rewarding responsible repayment.” Additionally, Sallie Mae offers free quarterly FICO scores and death/disability discharge, which forgives the loan if the student passes away or becomes permanently disabled.

Funding U offers benefits tailored to their merit-based model. As reported by Funding U, their standout perk is often a Graduation Reward, where borrowers may receive a rate reduction or principal reduction upon proof of graduation. This incentivizes students to finish their degree. Because there is no cosigner on a Funding U loan, there is no need for a cosigner release program. Funding U also focuses heavily on credit building, reporting payments to credit bureaus to help students establish a score that will help them rent apartments or buy cars post-graduation.

Fees and application process

Understanding the fee structure and application workflow helps avoid surprises when you are ready to apply.

Fortunately, both Sallie Mae and Funding U are “no-fee” lenders in the most important categories. Neither lender charges an origination fee (a fee deducted from the loan proceeds before you receive them) or a prepayment penalty (a fee for paying off the loan early). This means 100% of the money you borrow goes to your school, and you can save money by paying the loan off ahead of schedule.

The application processes, however, are quite different. Sallie Mae utilizes a highly automated, streamlined digital application. A student and cosigner can often complete the application in 15 minutes and receive a credit decision within minutes. Verification of income and employment is standard, but the speed is comparable to applying for a credit card.

Funding U’s application is more manual and document-intensive because they must verify academic metrics rather than just credit scores. Students will need to upload transcripts, proof of enrollment, and financial aid award letters. The underwriting team reviews the specific school and major data. Consequently, the approval timeline can be longer—often taking a few days to a week rather than a few minutes. Students applying to Funding U should plan ahead and not wait until the day tuition is due.

Both lenders will certify the loan amount with your university’s financial aid office before disbursing funds. This ensures you do not borrow more than the cost of attendance.

Loan types offered by each lender

While this article focuses on undergraduate loans, it is helpful to know the full scope of what each lender provides, as your needs may change over time.

Sallie Mae is a full-service student lender. Their product lineup includes:

• Undergraduate Student Loans
• Graduate School Loans (including MBA, Law, Medical, and Dental School Loans)
• Parent Loans (an alternative to federal Parent PLUS loans)
• Career Training Loans (for trade schools and certificate programs)
• Bar Study and Residency Relocation Loans

Funding U has a much narrower focus. They specialize almost exclusively in Undergraduate Student Loans. Their proprietary risk model is built specifically to predict the success of undergraduate students. While they occasionally pilot other products, they do not currently offer the wide array of graduate and professional loans that a bank-scale lender like Sallie Mae does. If you are planning for medical school or a master’s degree later, you will likely need to look at other lenders at that stage.

For more information on other loan types, you can read our guides on graduate student loans and private parent loans.

Pros and cons: Sallie Mae vs Funding U

To summarize the comparison, here are the primary advantages and disadvantages of choosing each lender. This breakdown can help you weigh which features matter most to your family.

Pros:

• Availability: Lends to students at almost all accredited Title IV schools.
• Competitive Rates: Excellent rates for borrowers with strong credit or cosigners.
• Flexibility: Multiple repayment terms (5-15 years) and in-school payment options.
• Cosigner Release: Offers a clear path to remove a cosigner after 12 on-time payments.
• High Limits: Can cover up to 100% of the cost of attendance.

Cons:

• Cosigner Hurdle: Difficult for most undergraduates to qualify for without a cosigner.
• Credit Check: Hard credit inquiry required; those with poor credit are denied.
• Variable Rate Risk: While offered, variable rates can increase over time.

Pros:

• No Cosigner Needed: One of the few viable options for independent students.
• Merit-Based: Rewards hard work and GPA rather than credit history.
• Fixed Rates Only: No risk of interest rates rising in the future.
• Credit Building: Helps students establish their own financial identity early.

Cons:

• Limited Eligibility: Only available at specific non-profit 4-year schools.
• Lower Limits: Annual caps may not cover full tuition at expensive private colleges.
• Stricter Payments: Usually requires some payment while in school (no full deferment).
• Higher Starting Rates: Rates are generally higher than cosigned loans to account for risk.

Which lender is right for you?

Making the final decision comes down to your specific constraints and resources. Here is a framework to help you choose the right path.

You should choose Sallie Mae if:

• You have a willing cosigner with a credit score of 670+ and steady income.
• Your priority is securing the lowest possible interest rate.
• You need to borrow a large amount (e.g., over $20,000) for a single year.
• You want the option to fully defer payments until after graduation.
• You are attending a community college, trade school, or graduate program.

You should choose Funding U if:

• You do not have a cosigner, or your family prefers not to co-sign.
• You have a strong GPA (2.5+) and are on track to graduate on time.
• You attend an eligible 4-year non-profit university.
• You want to build credit in your own name exclusively.
• You prefer the safety of a fixed interest rate and want to avoid variable rate volatility.

Consider both options if:

If you have a cosigner but want to see if you can qualify on your own, it is worth checking your eligibility with Funding U first. If you qualify, you can compare the “independent” rate from Funding U against the “cosigned” rate from Sallie Mae. You can then decide if the independence is worth the potential difference in cost.

Ready to compare your options? Check rates from multiple private lenders to find your best fit.

Frequently asked questions

Yes. Funding U is specifically designed for students without cosigners. They use your academic performance, school data, and projected earnings to approve the loan rather than your credit history or a parent’s income.

Yes. Sallie Mae offers one of the shortest cosigner release periods in the industry. You can apply to release your cosigner after making 12 consecutive on-time principal and interest payments, provided you meet their credit requirements at that time.

Sallie Mae typically offers lower interest rates for borrowers who have a creditworthy cosigner. Funding U’s rates are generally higher because they are lending to students with limited credit history, which carries higher risk for the lender.

Funding U generally looks for a minimum GPA of roughly 2.5 to 3.0, though this can vary. They evaluate your overall academic trajectory and likelihood of graduation, not just a single grade point average.

Sallie Mae offers a wide range of loans for graduate, medical, dental, and law school students. Funding U primarily focuses on undergraduate students and typically does not offer graduate loan products.

No. Neither Sallie Mae nor Funding U charges origination fees or prepayment penalties. This means the full loan amount is disbursed to your school, and you can pay off the loan early without a fee.

Choosing between Sallie Mae and Funding U is less about comparing features and more about assessing your financial reality. These two lenders serve different needs in the student loan ecosystem.

Here are the key takeaways to remember:

• Different Models: Sallie Mae is for credit-based borrowing (usually with a cosigner); Funding U is for merit-based borrowing (independent students).
• Access vs. Cost: Sallie Mae generally offers lower costs for those who qualify. Funding U offers access to capital for those who otherwise couldn’t get a loan, even if the rate is slightly higher.
• Gap Funding: Both lenders are effective tools for closing the gap between federal aid and the cost of attendance.
• Shop Around: If you have a cosigner, you should always compare rates from multiple lenders to ensure you are getting the best deal.
• Federal First: Always exhaust your federal Direct Subsidized and Unsubsidized loans before applying to either lender.

Private student loans are a legitimate and helpful tool when used responsibly. By understanding the eligibility requirements and terms of these two major players, you can secure the funding you need to complete your degree with confidence.

Ready to find your best rate? Compare personalized offers from Sallie Mae, Funding U, and other top private lenders in minutes. Join thousands of students and families who’ve found the right loan for their situation.

References and resources

For further research and to verify current terms, consider visiting the following resources:

• Sallie Mae Official Website – For current rates, terms, and application details.
• Funding U Official Website – To check school eligibility and merit-based requirements.
• StudentAid.gov – The primary source for all federal student loan information.
• CFPB Student Loan Resources – Unbiased guides on navigating college costs.
• College Finance Guide to Federal Loans – Our comprehensive guide to federal aid options.