Sallie Mae and Discover are two of the biggest names in student loans, offering private student loans to undergraduate and graduate students. Sallie Mae offers borrowers a range of repayment options and numerous online resources to help students navigate financial aid. Discover, on the other hand, is a more traditional bank that offers several discount options.
Take away key
Sallie Mae is best for borrowers with excellent credit to qualify for the lowest rates, while Discover is best for borrowers who need multiple years of funding.
Sallie Mae vs. Discover
|Interest rate||2% to 12.35% variable, 3.75% to 13.72% fixed (with automatic payment)||2.99% to 12.59% variable, 4.99% to 13.99% fixed (with automatic payment)|
|Repayment Terms||10 to 20 years||15 to 20 years old|
|Loan amounts||$1,000 at 100% of the total cost of participation||$1,000 at 100% of the total cost of participation|
|Advantages||Four free months of Chegg; Quarterly FICO score; loans for students attending less than half-time||Rewards for good grades; multi-year loan option; no loan fees|
|Disadvantages||No clear opt-out policy; few disclosed eligibility criteria; several fees||A repayment term option per loan; high rate caps; no co-signer release|
Details accurate as of July 21, 2022
Sallie Mae Student Loans: Pros and Cons
Sallie Mae is one of the best known companies offering student loans. Here’s what to know if you’re considering the lender.
- Flexible repayment options for graduate students: Sallie Mae college loans come with a number of repayment flexibilities. Its MBA loans, for example, allow borrowers to make 12 interest-only payments after their grace period ends and take 48 months of deferment during an internship.
- Co-signer quick release: If you are applying with a co-signer, you may be able to remove them from the loan after making only 12 one-time payments and meeting other eligibility requirements. Most other lenders that offer co-signer release require 24 or 36 payments.
- Students who attend less than half-time are eligible: Sallie Mae gives loans to students who attend school less than half the time, which is rare for student lenders.
- Vague forbearance program: Sallie Mae does not disclose any information about her forbearance program. There are no details on how to qualify for forbearance or how long it lasts.
- Unable to get custom rates without credit check: Unlike many other lenders, Sallie Mae does not provide specific interest rates unless you complete a full application, which will result in a thorough investigation of your credit file.
- Few eligibility criteria disclosed: Sallie Mae does not disclose credit score or income requirements, making it harder for borrowers to determine if the lender will work for them.
Learn about student loans: pros and cons
Discover offers a variety of student loans, although it’s not the right choice for everyone. Here are some of the pros and cons of the lender.
- Cash back bonus available: One of Discover’s biggest perks is its cash back bonus for students who achieve a GPA of 3.0 or higher. This one-time bonus is worth 1% of the loan amount.
- Multi-year approval: Students can apply for a loan from Discover and be approved for multiple years of funding with the company. In subsequent years, only a soft credit check is required.
- No late fees: While most student loan companies don’t charge an application or origination fee, Discover goes a step further and doesn’t charge any late fees.
- Only one repayment term available: Discover only offers a 15-year repayment term for undergraduate students and a 20-year term for graduate students, while other lenders offer a variety of repayment terms. If you want to change your repayment term, you will need to refinance with another lender.
- Co-signer release is not available: If you take out a student loan through Discover with a co-signer, you won’t be able to release them from the loan without refinancing.
- High rates for borrowers with bad credit: Borrowers with low credit scores can be charged incredibly high rates with Discover – around 14% with a fixed rate.
Which is better: Sallie Mae or Discover?
Sallie Mae and Discover can be good options for a student loan; they are two reputable companies that have been in the student loan business for years.
Because Discover does not offer a co-signer release, Discover is a better choice for students who take out a loan independently – although this is only true for students with a good credit score, as the caps on Discover rates are high. Discover can also be a good choice for borrowers who want to stick with one lender for each year they need student loans, as subsequent years of funding only require a soft credit check.
On the other hand, Sallie Mae may be best for students who want a little more flexibility with their repayment. Graduate students in particular can benefit from longer grace periods, interest-only payments after graduation, and options to defer loans during residency or internships.
To get a better idea of which company is best for you, it’s best to compare the actual rates you might receive. Unfortunately, neither Sallie Mae nor Discover offer prequalification, which means you have to go through a rigorous credit check to see your offers. You may want to start your search by prequalifying with lenders who only do a soft credit check; this will give you reference interest rates. Then, if you’re interested in Sallie Mae or Discover, apply to both within the same week. Although you will still be subject to a rigorous credit check, two close requests can be treated as one request and should minimize the damage to your credit score.