About Discover Private Student Loans

By J.R. Duren
HighYa Staff Updated on: Sep 12, 2018

Discover’s no-fee student loans are tailored to a variety of different degree programs, each with its own mix of repayment terms and interest rates. The program also offers loan consolidation and refinancing.

Discover is one of the leading private student loan lenders along with other well-known companies like Citizens Bank, Sallie Mae, and Wells Fargo.

The company’s line-up of student loan offerings is pretty comprehensive and, as a result, takes some time to walk through in order to understand all the specifics of your loan’s rates and repayment.

We’re going to walk you through each type of student loan Discover offers, providing you with the interest rates and terms of each loan as they were at the time of publishing.

In addition to providing data and insight about their loans, we’ll also compare them to student loans from the federal government and Citizens Bank.

At the end of our review, we’ll give you an overview of what we feel are the pros and cons of Discover student loans.

The Types of Student Loans Discover Offers

In our introduction, we mentioned that Discover offers all kinds of student loans, all of which are designed for a specific type of degree program (graduate and doctorate students) or for undergrads. Here are their categories as listed at the time of publishing:

  • Undergraduate
  • Graduate
  • MBA
  • Health professionals
  • Law
  • Residency
  • Bar exam
  • Loan consolidation

Before we jump into each of these types of loans, we want to point out that Discover won’t charge any fees for the student loans you take out.

Discounts

They’ll offer a 0.25% discount if you make automatic loan payments from your checking account. You can also get a 0.35% rate reduction if you choose the interest-only repayment plan, in which you pay only interest on your loan while you’re in school full-time.

GPA Bonus

Also, Discover gives you a cash bonus of 1% of your loan amount if you can earn a 3.0 GPA or higher during a semester paid for by your loan. So, if you get a loan to pay for four semesters of school, you’ll get the bonus for your loan amount if you get a 3.0 or higher during those four semesters.

Repayment Options

Discover has three repayment options: interest-only, fixed payments of $25 while you’re in school and a deferment that puts off your payments for nine months after you graduate or you drop below a half-time schedule.

Loan Amounts

According to the bank’s terms and conditions, the amount of student loan money you get is equivalent to the cost of your education, which can include tuition, rent, books and other expenses. The money is sent directly to your school.

These standards do not apply, however, to bar-exam loans (more on that later).

Variable-Rate Options

Each of the loans we’ll cover in the next few minutes has a variable rate option whose interest rates start out lower than the fixed-rate numbers we show: 4.59% as opposed to 6.59% for graduate loans, for example.

The reason these loans are called “variable-rate” is that they go up and down with a baseline international interest rate known as the “LIBOR.”

Every three months, Discover calculates your interest rate based on the LIBOR. If the LIBOR has gone up in the past three months, then your interest rate will go up and stay that way until Discover calculates your interest rate again in three months.

One of the main arguments for choosing a variable-rate loan over a fixed-rate loan is that it’s a great way to get a lower interest rate if you can pay off the loan in, say, five years.

Discover, however, doesn’t offer five-year loans. Therefore, it’s hard to say that getting a variable-rate student loan is a good strategy unless you’re certain the economy will falter at some point in the next 20 years and interest rates drop enough to where you’d end up paying less or the same amount of interest as you would with a fixed-rate loan.

Note: All the examples of interest rates we’re about to show reflect the cost of a $10,000 student loan with 0.60% in discounts.

Undergraduate Loan Rates

The repayment period for undergrad student loans is 15 years. At the time of publishing, the rates were:

  • Deferred payment plan: 6.59% - 12.99%
  • $25 fixed in-school payment plan: 6.59% - 12.99%
  • Interest-only payment plan: 5.99% - 12.64%

Remember, the lowest interest rates for undergrad loans and other loans on this list are given to those with excellent credit scores (720+). If you’ve got scores below 700, you may not get the lowest rate.

Graduate Loan Rates

The repayment period for graduate loans is 20 years. At the time of publishing, the rates were:

  • Deferred payment plan: 6.59% - 13.99%
  • $25 fixed in-school payment plan: 6.59% - 12.99%
  • Interest-only payment plan: 5.99% - 13.64%

MBA Loan Rates

The repayment period for MBA student loans is 20 years. At the time of publishing, the rates were:

  • Deferred payment plan: 6.59% - 12.99%
  • $25 fixed in-school payment plan: 6.59% - 12.99%
  • Interest-only payment plan: 5.99% - 12.64%

Health Professional Loan Rates

The repayment period for health professional loans is 20 years. At the time of publishing, the rates were:

  • Deferred payment plan: 6.59% - 11.24%
  • $25 fixed in-school payment plan: 6.59% - 11.24%
  • Interest-only payment plan: 5.99% - 10.89%

According to Discover’s fine print, these loans are intended for students who are enrolled at least half-time in a graduate program in the following areas: allopathy, dentistry, nursing, occupational therapy, optometry, osteopathy, pharmacy, physical therapy, physician assistant, podiatry or veterinary medicine.

Law School Loan Rates

The repayment period for law school loans is 20 years. At the time of publishing, the rates were:

  • Deferred payment plan: 6.59% - 11.34%
  • $25 fixed in-school payment plan: 6.59% - 11.34%
  • Interest-only payment plan: 5.99% - 10.99%

Bar Exam Loan Rates

The repayment period for bar exam loans is 20 years. At the time of publishing, the rates were:

  • Deferred payment plan: 6.59% - 12.99%
  • $25 fixed in-school payment plan: 6.59% - 12.99%
  • Interest-only payment plan: 5.99% - 12.64%

According to the fine print, these loans are intended for those who’ve graduated from law school in the past six months or are “in their final year of study in a graduate law degree program.”

The cap on the loan amount is $16,000 and, unlike the other loans on this list, Discover sends the money directly to your checking account.

Medical Residency Loans

The repayment period for medical residency loans is 20 years. At the time of publishing, the rates were:

  • Deferred payment plan: 7.09% - 9.99%
  • $25 fixed in-school payment plan: 7.09% - 9.99%
  • Interest-only payment plan: 6.49% - 9.64%

The total loan amount you can get depends on your specialty. There is an $18,000 cap for the following specialties:

  • Allopathy
  • Dentistry
  • Optometry
  • Osteopathy
  • Pharmacy
  • Podiatry
  • Veterinary medicine

There is a $5,000 cap for the following specialties:

  • Nursing
  • Occupational therapy
  • Physical therapy
  • Physician assistant

You’re eligible for the loan if you’ve graduated from medical school in the past year or you are “enrolled in your final year of study in a graduate health professions program. Like the bar exam loans from Discover, the residency loan is deposited directly to your checking account.

Discover Loan Consolidation

The final product that Discover offers is loan consolidation, which means that Discover will buy one, some or all of your loans and lump them into one big loan with one interest rate.

Consolidation loans are available in two repayment terms: 10 years and 20 years. The following data lists the interest rates on consolidation at the time of publishing:

  • 10-year fixed rate: 5.24% - 8.24%
  • 20-year fixed rate sleep: 5.49% - 8.24%

It’s important to point out that Discover student-loan consolidation is more restrictive than their student loans.

For example, you can’t consolidate your loans if your existing loans paid for a degree that was in any of the following areas, Discover’s fine print says:

  • K-12 education
  • Post-graduate loans
  • Student loans for a schedule that was less than half-time
  • Student loans from other countries

Also, unless you studied in certain fields, Discover won’t consolidate your student loans if you have more than $150,000 in student loan debt.

Finally, you don’t have deferment and interest-only options with consolidation. You have to make your first payment, according to the fine print, within around 30-45 days of being approved.

Discover Private Student Loans Customer Service

While there are no specific independent rankings for student loan lender customer satisfaction, we’ve done research on Discover’s ratings as a credit card company which, we believe, is relevant because you get U.S.-based customer service for your student loans just like you would for your credit card.

Their student-loan customer service office is based in Phoenix, just like their credit-card customer service office.

According to J.D. Power’s 2017 credit card customer satisfaction survey, Discover ranked second to American Express. However, in 2015 and 2016 it ranked first.

We believe this is a distinct advantage for you if you choose Discover for a private student loan. They have an established reputation for being excellent at customer service, whereas competing private student-loan lender Wells Fargo ranked eighth out of eleven of the main credit card issuers.

How Do Discover’s Rates Compare to Citizens Bank and Federal Student Aid?

One of the big differences between student loans from private lenders and student loans from the federal government is how your interest rate is calculated.

Private lenders like Discover and Citizens Bank calculate your interest rate by using several different factors, the most important of which is your credit score. If you have a low score (650 and below), there’s a good chance you will get an interest rate above 10%.

The federal student aid program doesn’t use credit scores to calculate your rate. Instead, they have one rate for undergrad loans, one rate for graduate loans and one rate for parent loans (Discover does not offer parent loans).

Discover Citizens Bank Federal Aid
Undergrad Loans 5.99%-12.99% 6.45% - 12.05% 5.05%
Graduate Loans 5.99% - 13.99% 6.39% - 11.44% 6.6%
Law/MBA 5.99% - 12.99% 6.05% - 10.05% 6.6%
Medical Doctorate 5.99% - 11.24% 5.56% - 9.21% 6.6%

In our opinion, Discover’s student loans are the best choice for someone enrolled in an MBA program or law school and who has credit scores above 720, simply because the bank’s best rate for these types of loans is better than both Citizens Bank and the federal student loan program.

The Final Word: Pros and Cons of Discover Student Loans

We believe, based on our research of Discover’s student loan offerings, that the lender’s greatest strength is that they offer some of the best rates on graduate loans.

For those who have the credit scores to get the 5.99%, you can save yourself thousands in interest payments over the course of 20 years by choosing Discover over federal student loans and Citizens Bank.

We also like how they’ll give you a cash bonus equal to 1% of the amount you borrowed if you can get a 3.0 or better. And, the 0.60% in discounts you can get on a deferred loan is better than the 0.50% discount you get with Citizens Bank.

Also, the company’s customer service track record is excellent, which means there’s a good chance you’ll have a positive experience when you call their customer service line at 1-800-STUDENT.

In our opinion, Discover is a strong choice for someone who wants to get a private student loan for their law degree or MBA and who has credit scores that are good enough to earn you the lowest possible APR.

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