Discover Student Loans and Refinancing Review in 2020

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Discover Student Loans and Refinancing Review in 2020

With so many other private student loan lenders in the market, Discover student loans stand out because they tend to reward good grades and offer scholarship sweepstakes.

A lot of students today ponder over graduate studies since they don’t know how to pay for college. That is why Discover Bank started providing private loans and student loan refinancing services.

Read on to get more details on Discover’s private student loans and refinancing.

Discover Private Student Loans

Discover student loans provide one of the best private student loan rates in the market. The best thing about them, however, is that they reward borrowers for good grades and provide a $5,000 scholarship opportunity through sweepstakes.

With undergraduate loans and graduate student loans at both fixed and variable rates with no fees, the company also provides several deferment options.

Discover Student Loan Options and Interest Rates

While the interest rates and general options of Discover’s student loans are different than that of their credit cards and personal loans, the servicer remains the same (Discover Bank).

Here is a summary of the loan details:

  • Loan Terms: The only loan terms available are of 15 and 20 years.
  • Loan Amounts: You can borrow a minimum of $1,000 and up to 100% of the cost of attendance, however, aggregate loan limits apply depending on whether you’re in law school, medical school, etc.
  • Age Requirement: You have to be at least 16 years old to apply.
  • Residency Requirements: You have to be either a permanent resident or a U.S. citizen. If you’re applying as an international student, your co-signer should be a U.S. citizen or permanent resident.
  • Repayment Options: You can either defer payment or opt for in-school repayment terms.
  • Fees: There are no disbursements, application, origination, or late fees.
  • Penalties: There are no outstanding penalties such as a prepayment penalty.

If you opt for auto-pay, you will receive a 0.25% interest rate reduction. Along with automatic payments, if you choose to make interest-only payments while in school and during grace periods, you will receive a further 0.35% repayment discount.

You can also get a one-time cash reward for every graduate or undergraduate loan if you achieve a GPA of 3.0 or above. However, the reward redemption period is limited.

If you don’t have a good credit score or credit history, you can get a co-signer. However, their credit check has to pass Discover’s scrutiny.

Discover Private Student Loans Review

Known to provide one of the lowest rates in the private student loan market, Discover also has a relatively simple application process.

Qualifying for the Loan

To qualify for Discover’s student loans, you have to be enrolled half-time, at least, in a degree program at an eligible college or graduate school.

You should also be making good academic progress, should pass the residency requirements, be 16 years or older, and pass their credit check.

Discover doesn’t disclose its credit requirements and students don’t tend to have good credit, so it’s best to opt for a co-signer.

Repayment Options

However, you can only opt for 15 and 20-year repayment terms, and there are three different repayment plans you could go for.

Deferred Repayment: You can choose not to make any monthly payments until 6 months after graduation (9 months for graduate programs). However, this would inflate your overall loan balance because of increased interest charges.

In-School Interest Repayment: If you choose to pay the interest amount during school and your grace period, you can stop the accrual of interest so your loan balance remains the same. You will also get an interest rate discount with this plan, saving you a good amount of money in the long run.

In-School Fixed Repayment: In this plan, you just make fixed monthly payments of $25 while enrolled and during your grace period. This plan reduces the accrual of interest over time.

If your source of income is credible enough, you can also choose to pay the principal amount during school.

Discover Private Student Loan Competitors

Here are a couple of Discover’s private loan competitors and how they hold up against the company.

Sallie Mae: It’s best for part-time undergraduate students and for borrowers who can make interest-only payments while in school and during the grace period.

Ascent: It’s best for students who don’t have a co-signer. There are no outstanding fees and you can get perks like 1% cashback graduation rewards and an auto-pay discount of up to 2.00%.

Discover Student Loan Refinancing

Discover’s student loan refinancing is best for borrowers who haven’t graduated yet or people who need some breathing room while making payments.

You can refinance any federal student loan or private loan considering you pass some of the checks like the life of the loan and if you have received financial aid and other personal information.

Discover Refinancing Loan Details and Interest Rates

There is a lot of range on the interest rate you can receive as it depends on several factors like your credit history, current financial situation, number of federal loans you’ve taken out, etc.

Here is a summary of the loan details:

  • Loan Terms: You can only choose between loan terms of 10 and 20 years.
  • Loan Amounts: You can refinance anywhere between $5,000 to $150,000 in student debt.
  • Loan Types: You can refinance any private loan or federal loan.
  • Residency Requirements: You have to be a permanent resident or a U.S. citizen.
  • Loan Transfer/Death & Disability Discharge: The parent loan can’t be transferred to the child. The loan can be discharged in case of the borrower’s death or permanent disability.
  • Fees: There are no disbursements, application, origination, or late fees.
  • Penalties: There are no outstanding penalties such as a prepayment penalty.

You can also receive the 0.25% auto-pay discount with student loan refinancing. You can also get the 0.35% repayment discount if you make interest payments while in school.

While you do have a co-signer option, there is no co-signer release option, yet.

The loan servicer is Discover Bank.

Discover Student Loan Refinancing Review

Refinancing student loans with Discover is a good option for stable borrowers who need better payment options. Along with a wide range of refinance options, Discover also provides repayment assistance and the option to temporarily reduce payments.

Qualifying for Refinance

While the details are not exactly disclosed, it’s understandable that you need to have good credit and a decent income statement.

The minimum credit score and income numbers aren’t disclosed either, however, the typical credit score of approved co-signers and borrowers is 660 and above.

Neither the debt-to-income ratio nor the income of the approved borrowers are disclosed.

Furthermore, you can qualify for refinancing if you’re bankrupt, however, a recent bankruptcy may reduce your chances.

You should have a valid social security number, be US-based, and should be attending an authorized school.

Repayment Options

There are a lot of repayment options available depending on your background. For example, there are four different types of deferment.

  • Academic deferment lets you postpone payments if you return to school half-time or more.
  • Public service deferment is when you postpone payments while serving a public service organization.
  • Medical residency deferment lets you postpone payments while you’re on medical residency.
  • Military deferment is available if you’re on active military duty.

You can also apply for forbearance and postpone payments for up to 12 months if you’re facing financial hardship, unemployment, a disability, or excessive debt. However, you can’t get forbearance for 12 consecutive months.

You can also opt for a temporary payment reduction and pay only the interest at a $50 minimum for up to 6 months, however, the payments have to be less than 60 days late.

Or you can apply for a temporary interest rate reduction where you get a lower interest rate for up to 12 months. You have to make lower monthly payments, however, the minimum is $50 per month.

Discover Student Loan Refinancing Competitors

Here are a couple of Discover’s loan refinancing competitors and how they hold up against the company.

CommonBond: It’s best for borrowers looking for a forbearance of 24 months. The minimum credit score is 660 and the loans aren’t available if you’re based in the state of Mississippi or Nevada.

Figure: It’s best for borrowers who need the loan amount as early as possible. There is a minimum credit requirement of 680. However, you can’t refinance loans without a bachelor’s degree, can’t apply with a co-signer, and can’t get a loan if you’re in the states of New York or Mississippi.

Pros and Cons of Discover

Like all other loan programs, Discover has its pros and cons that you should consider before making a decision.

Pros of Discover

The following are some reasons why you should consider Discover.

  • There are no late fees, origination, application, or disbursement fees involved.
  • You can refinance your student loans without a degree.
  • There are a lot of repayment options, especially for struggling borrowers.
  • You will find that there is a loan for everyone, whether you’re in the health profession, a MBA student, or a law student seeking to take care of expenses while they prepare for their bar exam.
  • The company provides rewards for good grades.
  • You have a chance to win a $5,000 scholarship through a sweepstakes contest.

You will also find a lot of helpful tools on Discover’s website that can help you understand your options and can provide information on student loan forgiveness programs.

Cons of Discover

The following are some reasons you might want to consider looking at alternatives.

  • There are only 10 and 20-year repayment terms available when you refinance your loans and 15 and 20-year terms when taking out a new private student loan.
  • The credit information isn’t disclosed, which means you have no way of knowing whether you qualify for the loan or what interest rate you will get.
  • There is no co-signer release option, so the co-signer is liable for the loan for the entire loan term.
  • There are a lot of benefits you won’t receive with Discover’s loan, for example, you can’t opt for an income-driven repayment plan.
  • There is a good chance that if you apply without a co-signer, you will be denied.

While the company provides helpful material, you won’t find information on things like grad school scholarships and grants.

Should You Go for Discover?

Discover is a sold private student loan and refinancing provider since it’s backed by a bank. With benefits like rewards for good grades and sweepstakes scholarships, it provides some good opportunities to borrowers.

However, while Discover provides a lot of repayment options, it doesn’t have enough repayment terms. The fact that is has loan terms of 10, 15, and 20 years and no co-signer release is very discouraging for potential co-signers.

Furthermore, the provided rates aren’t exactly the best in the market, either. That’s why it’s best to take a look at the alternatives before making a decision.

If you’re still unsure about student loans and refinancing, you can enlist the help of FutureFuel and we’ll help you figure out how to pay off student loans, and what options would work best for you.

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