Discover Private Student Loans: Pros, Cons, and Reviews

Written by: Kristyn Pilgrim
Updated: 10/29/20

CollegeFinance Score: ★★★★☆

 

Students looking for low fixed and variable rate borrowing options can find what they need with Discover. Although a hard credit inquiry will be required to determine eligibility for private student loan funding through Discover, various in-school repayment structures allow for flexibility in education financial planning. A single repayment timeline of 15 years is applied to all loans.

Pros:

  • Prequalify for multi-year undergraduate options
  • No origination, application, or late fees
  • Custom funding options for public service career paths
  • Auto-debit and good grade rewards
  • Deferred, flat-rate, and interest-only in-school repayment options

Cons:

  • Hard credit inquiry required to access applicable rates
  • Restrictive 15-year loan life
  • Does not currently offer co-signer release

Discover: What You Need to Know

Discover has been a recognizable name in credit and direct banking since its founding in 1985. Discover officially acquired The Student Loan Corporation (SLC) in 2010, greatly expanding its presence in the student loan market.

In any search for the best private student lenders, Discover is worthy of consideration. Discover features an exceptionally quick and easy application process, multiple viable avenues to address financial hardship, and committed interest in serving a variety of qualified borrowers from undergraduates to medical residents. With a strong reputation in the financial industry and a slew of specified borrowing options for different types of students, Discover offers reliability and time-tested loan strategies.

Discover’s BBB Rating: A+

Some applicants may require more than a trusted name and a long history of doing reputable financial business. Is Discover known to provide customers with a positive overall borrowing experience?

A quick way to get a clear idea of how a business has consistently performed in vital areas such as customer service is to investigate their rating with the Better Business Bureau (BBB). A private nonprofit established in 1912, the BBB is responsible for keeping records of customer complaints, both justifiable and not, and providing information on how companies have responded to such scenarios in the past. Based on information such as this, the BBB gives each business a rating to signify its success or need for improvement with regard to customer relations.

It is helpful to understand how the BBB arrives at such a rating before reviewing any business. The criteria utilized to determine a score include everything from a company’s time in business, transparency of practices, and relationship to licensing/governmental requirements. 

Potential private student loan borrowers can rest easy in the knowledge that Discover has earned an A+ rating, the most impressive mark offered by the BBB. This ranking reflects Discover’s healthy, responsible habits when it comes to addressing customer complaints. It also lets borrowers know that Discover has had relatively few customer complaints compared to other equivalent lenders.

Discover: Potential Benefits for Borrowers

When measured against the offerings of other private student loan entities, Discover’s main attraction is its streamlined ease of use. From its 15-minute application to the fact that it deals directly with colleges and universities when dispersing money, Discover removes many of the common snags that can plague student loan borrowers with other lenders. Discover goes out of its way to reward good credit, good grades, and long-range planning, making it one of the more solid options in any discussion about college financing.

  • Discover allows you to prequalify for multi-year undergraduate options. This means that your credit is not impacted beyond the initial check at the start of the borrowing process. It also removes the need to requalify each academic year.
  • Discover imposes no origination, application, or late fees. You do not have to spend money to borrow money with Discover, whether you have just recently applied or have been a customer for an extended time. There are multiple available options on offer if a situation arises, and payments cannot be immediately made.
  • Discover has custom funding options for public service career paths. You can apply for custom funding if you plan to enter a health profession, the field of law, a medical residency, an MBA program, or intend to take a bar exam. Discover has specialized loans available with unique terms and offerings designed to serve each of these distinct post-collegiate career paths.
  • Discover rewards borrowers who use auto-debit and/or earn good grades. You qualify for a 1% cash reward on every new Discover private student loan when you earn a 3.0 GPA or higher in college or graduate school. Incoming freshmen enjoy an additional reward if arriving at college with a 3.0 GPA or higher from high school. Student, co-signer, and parent borrowers receive a 0.25% interest rate reduction while enrolled in automatic payments.
  • Discover offers deferred, flat-rate, and interest-only in-school repayment options. Choose to postpone payments to a designated time, pay a nominal monthly fee, or pay only the interest you owe while still actively studying. Discover lets you elect the repayment plan that best serves your educational needs.

Discover: Potential Drawbacks for Borrowers

Although Discover private student loan options stack up admirably against equivalent competitors, fairytale scenarios where everything is golden, of course, only exist in storybooks. There are a few areas with room for improvement in Discover’s current strategy, and these are worth consideration prior to making any final borrowing decisions.

  • Discover requires a hard credit inquiry to access applicable rates. This means you will only have a range, and perhaps a vague one, when it comes to knowing your potential rates prior to finding out, impacting your credit.
  • Discover adheres to a restrictive 15-year loan life mandate. While there are no early payoff penalties, there are also no alternative loan life options here.
  • Discover does not currently offer co-signer release. Unlike many lenders who have programs instituted to transfer co-signer obligations directly to the primary debtor once the loan is stabilized, Discover has not yet added this feature to its offerings.

Discover: The Details

Loan Amounts and Term Lengths

Minimum loan amount: $1,000

Loan term options: 15 years

Multi-year approval available: Yes

Interest Rate Ranges

Fixed and variable rates available: Yes

Fixed low APR: 4.24%

Fixed high APR: 12.39%

Variable low APR: 1.12%

Variable high APR: 10.87%

Repayment Options

In-school payment options: Choose from four in-school repayment options, including

  • Deferred payments while in school
  • Full monthly payments (interest and principal)
  • Interest-only monthly payments
  • Fixed monthly payments of $25

Grace period: 6 months

Co-signer release available: No

Bank Lender of Record: Discover Bank

Other Perks and Options

Interest rate discounts: Discover offers a 0.25% discount when enrolled in automatic payments.

Other rewards or services: Earn 1% cash back for maintaining a GPA of 3.0 or higher.

Discover: Eligibility and Application Requirements

Eligibility Details

Income requirements: Not disclosed

Credit score requirements: Not disclosed

Eligibility for international borrowers: International borrowers require a co-signer who is a creditworthy U.S. citizen or permanent resident who meets application eligibility requirements.

Application Details

Application or origination fees: None

Soft pull rate check availability: No

Private Student Loans: Understanding Your Options

With Discover’s multitude of attractive features and safeguards, it is likely finding its way onto your shortlist for educational funding. However, before you commit to borrowing money from Discover or any other private lender, make certain that you have done due diligence on your eligibility for federal student loans.

Backed by the U.S. government, federal student loans are administered with oversight provided directly by the Department of Education. Colleges and universities receive this funding as a small component of the much larger federal financial aid system for as long as borrowers are formally enrolled in school. When borrowers finish school, any outstanding federal loans fall under the repayment management provided by outside companies.

You may wonder why it is considered so much more prudent to exhaust federal loan options before seeking private student loan funding. The first and most important answer to that is: ease. Federal student loans are far less tricky to obtain than private student loans for the primary reason that they are designed specifically to support aspiring college students.

Another aspect of federal student loans that makes them a good resource is that your credit history will be much less in the driver’s seat when it comes to determining what kind of funding you can get. The government does not have the interest a private bank would in your repayment abilities, co-signer possibilities, or income. Your only true requirement will be to get into the school of your choosing and complete the Free Application for Federal Student Aid (FAFSA). Based on your answers to the FAFSA, the government establishes your financial need, which is the main determinant of your eligibility for federal student loans.

Even if your financial resources are such that you can obtain almost any student loan you want, a few impactful reasons remain to go federal first. The Department of Education, in its capacity as a federal entity, can offer protections and options that private lenders simply cannot. The following list contains a few more of the unique advantages associated with federal student loans:

  • A variety of income-based repayment options won’t infringe on your ability to pay your other bills or diminish your overall quality of life with harsh minimum monthlies.
  • Extended repayment plans can allow you to take up to 25 years to repay what you owe. This translates to more interest paid overall but much smaller monthly payments.
  • Loan forgiveness programs reward borrowers entering public service-related fields and who remain there for a minimum of 10 years.

These extraordinary benefits place federal student loans heads and tails above what most private lenders can provide. The time to start looking at private lenders is once you see what, if any, part of your college funding total is not coverable by federal loans or financial aid. Utilize private lenders to make up the difference or supplement for other school-related costs not covered by federal funding.

Lenders like Discover can deliver financial peace of mind throughout your college experience by removing the worry about how you will pay for remaining tuition or cost-of-living expenses. Should you find yourself needing funding beyond what the FAFSA deems you eligible for, a private student loan may be just the stopgap you need.

Is Discover Right for You?

As explained here, Discover’s merit as a private lender rests on its long-standing, positive reputation in the financial industry and its ability to get potential borrowers through the loan application process with impressive expediency. Whether you are looking for undergraduate funding or are headed to law school, Discover has unique loan options to serve a wide range of educational funding needs.

In taking the guesswork out of loan location and management, Discover saves borrowers time and stress. With bonus features that reward automatic payments and good grades, you will enjoy getting something extra out of your student loan agreement with Discover.

Discover Could Be a Good Option for You If:

  • You want an industry name with a strong history behind it.
  • You require adaptable repayment options in the event of financial hardship.
  • You plan to enter a health profession, the field of law, a medical residency, an MBA program, or intend to take a bar exam. 
  • You appreciate rewards for timely payments and scholastic effort.

 

While Discover may already seem like a shoo-in, don’t make a final decision until you have fully evaluated other private student loan options. Taking the time to actively compare Discover to other possible lending institutions allows you to make an educated assessment of their true benefits relative to your distinct funding needs.

Let CollegeFinance.com help you formulate fact-based decisions about private student loans with our reviews. We can provide everything from expertise regarding a specific lender to up-to-date research on the best private loan options overall

Making wise decisions about financing your education can affect much more than your college years, so we are also here to guide you through the repayment or refinancing processes when needed. No matter your question or interest regarding college funding and building healthy fiscal habits, you can rely on CollegeFinance.com to supply thorough support.