With college costs at record highs and 1 in 5 graduates delinquent on their students loans, it has never been more important to be smart about picking student loans. One company attempting to make life with student loans a little bit easier is Discover. Though the Discover student loans do suffer from the same shortcomings as all private loans, they do offer a couple features to separate themselves from the competition. One feature, the graduation reward, makes these loans especially attractive.
Discover offers a wide variety of student loans. They offer fixed and variable rate student loans, with the fixed rates currently starting out at 6.74% APR and the variable rate loans as low as 3.25% APR. Loans are offered for undergraduates and graduates, with special programs for health professionals, law students, and MBA students. Undergraduates can borrow up to $100,000 and the limits for graduate programs are higher. These loans can be used for tuition, housing, and books. The length of repayment varies based upon the total amount borrowed.
Discover advertises that their loans have zero fees. This includes a 0% loan origination fee. They also do not require any payments while the student is still in school.
The biggest advantage to Discover student loans is their graduation reward. Students who complete their degree get a one time check from Discover when they complete their program of study.
The way it works is fairly simple. If the student completes the program after 90 days but before 6 years, and their loan is current, they get paid to graduate. Students can get the money via electronic deposit to an account of their choice, or they can apply it as credit to their account.
Example: The graduation reward is 2% of the principal balance. This means if that a student has $20,000 in discover student loans, when they graduate they will get $400 from Discover.
Though 2% of the principal may not seem like much, it is money at a time when a recent grad may need it most. Transitioning between college and the real world can be difficult, and expensive. Having a graduation reward also provides students with an additional incentive to complete school.
At present, Discover is the only student lender to offer a graduation incentive. However, Discover only offers this program to people who select variable rate loans.
Another advantage, offered by Discover and many other lenders is the auto-debit discount. If you sign up for automatic withdrawals from your bank account each month, discover will lower your APR by .25%.
Discover also offers 24/7 customer support for their student loans, a feature not offered by most lenders.
Discover private loans still suffer from the same disadvantages that apply to all private lenders. Even with the graduation reward, Federal government loans are still a better alternative for most students, largely because the Federal loans have the most forgiving repayment plans. Therefore, students should first maximize FAFSA funds prior to selecting any private loan.
Discover also lacks a co-signer release program with their student loans.
Discover private loans are not without their flaws, but they do offer some of the lowest rates currently available, have no origination fees, and they are the only ones to offer a graduation reward for students.