Discover Student Loans

Are they really a good option

Discover student loans provide a great back up in case the federal loan you received is unable to cover all of your college fees. They also provide for you options to refinance your loans, if you are overwhelmed at competitive interest rates.

This company has no processing fees, low-interest rates, and forbearance options. For these reasons, they have become a market leader when it comes to private student loans.

It is however not very easy for you to qualify for a discover loan. The first requirement for qualification is an outstanding credit report with an excellent credit score. If you don’t have good credit, then you can opt to use a cosigner with a good credit score.

One of the benefits of using Discover student loans is that they are a part of the Credible platform. Which is a platform that allows you to compare different student loan lenders and make a decision on which one you wish to use. You can do this in under two minutes.

Good for: Borrowers who want a long grace period

Their grace period is 9 months, compared to other lenders who give only 6 months.

They also offer some of the best repayment options to its customers. For a private lender, this is quite a solid back up for people who are looking for a longer repayment period, and for students who have tapped out their federal funding.

Their rates may be higher compared to their competitors, but it is the only company you shall find offering to refinance your loan for a 10 – 20-year repayment period.

In addition, they offer a 1% cash reward to all students with a 3.0 GPA. This is a welcome feature and an exciting incentive.

Their 1% incentive is available to any amount of student loan you take out, and this money you can use for whichever purpose you wish, not necessarily college fee-related.

Bad for: Cosigners

Discover hasn’t specified the credit score they require for you to qualify for one of their loans, but they do specify that if you are going to have a cosigner, he should at least have a score of 733.

One of the limitations you will find with this company is that they never release the cosigners, but they offer a longer forbearance period.

Now, other student loan companies will mostly release the cosigner after a certain period of on-time payments, but with Discover, if you decide to cosign a loan with a student, you shall not be released from the obligation until the loan is fully paid.

They talk about increasing the forbearance period instead, but the time they offer is only 12 months, which is a very short period compared to other lenders.

Features of Discover Student Loans

Discover student loans, rates, and fees:

They charge no fees for their loans, which means that the installment you pay per month goes towards reducing the interest or the principal amount on your loan. The rates their offer are also consistent across their many loan categories, which we shall look into now.

Discover Undergraduate loans;

Loan type Private student loan
Loan amount range Minimum of $1,000 and they offer to finance of up to 100% school-certified expenses (the maximum loan amount is $120,000 plus other financial aid)
APR range 5.49% – 12.99%* Fixed APR

4.12% – 11.87%* Variable APR

Fees Late fee: none Prepayment penalty: none

Application fee: none

Loan terms 15 years for Undergraduate

20 years for Graduate

In addition, they also offer options for private consolidation of your loans under their refinancing umbrella of products. Most of their loans as you can see above, come with a repayment period of between 10-20 years.

Discover graduate loans:
These loans will cover your college fees for Health professional school, such as medical or dental, law school, MBA programs, Ph.D. and Traditional graduate programs. They are able to offer you up to 100% financing on your needs.

These graduate loans are similar to undergraduate loans but have very few differences. While they continue to offer the in-school deferment, they will only give you a 9-month grace period after you graduate. This means that you must resume repayment 9 months after you leave college. This is in comparison to the 6 months given for undergraduate loans.

You can also opt for the $25 monthly repayment while still in school, similar to what is offered for undergraduate loans.

Graduate loans don’t necessarily require a cosigner, but you must have a very good credit score in order to qualify for one of their loans.

They have a 0.25% interest rate reduction if you decide to sign up for a direct debit, where you pay on the same day each month from your account directly. There is also a 1% reduction on your principal amount if you have attained a 3.0 GPA.

The loans come with a 20-year repayment plan, and they currently have the lowest interest rates.

Variable Rate: 3.99% to 12.99% APR

Fixed Rate: 5.99% to 13.99% APR

Discover Residency loans:

Once you are done with medical school, most students will go on to a residency in a hospital. Most residency programs come with pay but discover understands that you must pay for rent, food, and moving costs.

Due to the high costs of starting a new life, and most probably a family during your residency period, discover has come up with a loan program for this particular reason.

The discovery loans will cover the cost of your internship, residency, board exam review, and relocation.

There are different limits when it comes to residency loans, which include;

  1. $18,000 for, Dentistry Allopathy, Osteopathy Optometry, Podiatry Pharmacy, and Veterinary Medicine.
  2. $5,000 for Occupational Therapy, Nursing, Physical Therapy, and Physician Assistant

If you have good credit history, these loans do not require a cosigner. You can also choose to make the $25 per month repayment. The loan comes with a 20-year repayment period.

They have the following interest rates;

Variable Rate: 5.12% to 8.87% APR

Fixed Rate: 6.49% to 9.99% APR

Discover Private Consolidation Loan Features:

Loan type Refinance/Consolidation
Loan amount range $5,000 – $150,000
APR range 5.74% – 8.49%* 10-year Fixed APR

5.99% – 8.49%* 20-year Fixed APR

4.62% – 7.62%* 10/20-year Variable APR

Fees Late fee: none

Prepayment penalty: none

Application fee: none

Loan terms 10 or 20 years
Discounts 0.25% rate discount with autopay

Repayment plans:

The company gives its borrowers two choices. You can either defer all loan payments during your time in school, or you can make fixed monthly payments of $25 while you are in school. I would advise you to take the second option of repaying while in school, and the figure is quite manageable.

You will be surprised at how much you will have paid by the time you graduate.

The deferring option is quite common with most lenders, while the monthly repayment is less common and only available with some companies, but a very good option.

Both of these repayment plans are offered for all their loans, except the private consolidation loan.

Their flexible repayment terms can easily be customized before getting approval for your loan. They give you plenty of control to pick your repayment period and the rate that you want if you qualify.

You can actually customize your repayment according to your financial status. Students normally have the options of paying back the loans either at 5, 8, 10, 15, or 20 years.

The best advice I can give you with student loans is to always choose a longer repayment period because this ensures that you pay the least amount of installment per month, and seeing as you are still a student with a limited amount of income, you do not need a big burden on your hands.

Later, when you leave college and have stable employment, you can always reduce the period and pay more in terms of the monthly installment.

Here are some more repayment tips;

  • When you receive your loan, start repaying it immediately while still in school, because this will help in lessening your financial burden as early as possible.
  • Choose the repayment of $25 per month while still in school.
  • Make repayments of the interest-only while in school.

Servicing of loans:

If you compare Discover student loans to federal loans, there is a big difference. Federal loans are normally serviced by a third party, while the discover loans are service in-house by the company’s staff themselves.

This is a one on one management of the loans and rarely do they pass you off to a third party to handle your loan request. It, therefore, eliminates the errors associated with federal loans as a result of third-party management.

Their on-hand loan officers will call you and talk to you about the loan you have applied, which makes it easy for you to negotiate for your loans.

Their underwriting:

This is a technique that helps borrowers who have trouble getting loan approvals.

In addition to credit score evaluation, they go a step further and look at other issues such as the borrowers’ education level, their financial aspects, and work history.

In addition to all this; Discover Student Loans;

  • Do not charge extra fees for early or late repayments of the loans.
  • You can repay the loans weekly, which enables you to save money on interest.
  • Have a mobile app for tracking and managing your repayment.
  • Give a 0.25% discount if you are enrolled in their autopay system.
  • Gives you the ability to switch from variable and fixed rates every six months.

Forbearance and Deferment of Discover Student Loans:

They offer many industry-standard deferment options that you can explore. What distinguishes this company from others is their 9-month deferment period that is not very common. Most companies will give you only 6 months.

Permitted Deferments Limit
Period upon leaving school 6 months for Undergraduate

9 months for Graduate

While in school or after entering undergraduate school. Up to 48 months
Residency Up to five years

This is how Discover Student loans Compare with other lenders:

Lender Interest rates Loan terms
Discover
Student Loans
  • Fixed: 5.49% – 12.99% APR
  • Variable: 4.12% – 11.87% APR
Loan term

15, 20 yrs12

Ascent  

Loan term

  • Fixed: 4.55%
  • Variable: 4.14%
5, 10, 15 yrs.
Citizens Bank     
  • Fixed: 4.90%
  • Variable: 3.96%
5, 10, 15 yrs.
College Ave 
  • Fixed: 4.72%
  • Variable: 3.96%
5, 8, 10, and 15 yrs8
EDvestinU    
  • Fixed: 4.50%
  • Variable: 4.40%
7, 10, 12, 15, 20 yrs.’
INvestEd       
  • Fixed: 4.63%
  • Variable: 3.70%
5 – 15 yrs.’
MEFA    Fixed: 3.95% 10, 15 yrs.’
Sallie Mae   
  • Fixed: 5.49% – 11.85%
  • Variable: 4.25% APR – 11.35%
5 – 15 yrs10

Analysis:

Well, from the table above, it is clear to see that Discover student loans actually have the highest interest rates. This is not good, but when you consider all of the other options that you get from Discover, such as a longer deferment period and a wide variety of loan products to suit your needs, you may be able to consider them.

Our thoughts on Discover Student Loans:

Discover Student loans figures Rating Review
Fixed APR

5.49% – 12.99%

Not Good This is very high if you compare it with the other companies, and therefore it is not a good option for some students.
Loan amount:

$5,000 – $150,000

fair This is just fair, but some companies such as Earnest will give you up to $500,000.
Loan repayment terms:

5-20 years

Good This is good, and very high compared to some that can only go up to 15 years.
Loan Percentage

100%

Very good They will give 100% refinancing on the cost of your college attendance. This will include books, tuition fees, meals, housing, and all other college-related expenses.
Origination fees:

None

Very good Most other lenders charge this, and therefore it is a big plus for College Ave loans.

Conclusion

Discover student loans have received plenty of criticism, and most customers claim that they have poor customer service. Well, this may be true, but remember that everyone is likely to have a different experience with them, and so, I would suggest that you try them out, especially if you are in the medical field as this is where they excel.

If you are also looking for an option that gives you more grace period before you can actually start repaying the loan, then Discover is the best for that.

I would, however, recommend that when you are looking to apply for a loan, evaluate your needs critically and only apply for what you need, to avoid getting into a financial mess that you will need to clean up later on.

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