Discover Student Loans Review: Cash Awards for Good Grades
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Discover student loans not only feature competitive interest rates and no fees, but they also offer something no other student loan company does: a one-time cash reward worth 1% of your loan balance if you maintain a 3.0 grade point average (GPA) or the equivalent.
Discover student loans is well-suited for high-performing students pursuing a variety of degrees — including international students without a Social Security number — who value repayment protections like deferment and forbearance.
Discover is also a top option for consolidating and refinancing student debt, whether you’ve already earned your degree or are pursuing it. Refinancing student loans allows you to streamline your repayment, and potentially save money or lower your monthly payment.
Discover student loans review
Discover offers the fixed and variable interest rates on the following student loans to current and prospective students, parents and existing student loan borrowers:
Undergraduate loans Graduate loans MBA loans Health professions loans Law loans Residency loans Bar exam loans Consolidation loans
Each of these loans allow borrowers to apply with a cosigner to qualify or access lower interest rates.
Borrowing limits
If you’re an undergraduate looking for just a little help, Discover student loans could be ideal, as it allows customers to apply for as little as $1,000 in education funding.
With most Discover student loans, you can also borrow up to 100% of the school-certified cost of attendance. Here are the exceptions:
You can borrow up to either $5,000 or $18,000 with a residency loan, depending on your area of focus. You can borrow up to $16,000 for bar exam preparation, with a minimum of $1,000 per loan. You can borrow up to the total amount of your existing education debt with a consolidation loan (higher limits might apply for certain fields of study), with a minimum balance of $5,000. Repayment options
For all loans except consolidation loans, you have four repayment options:
Fixed $25 payments Interest-only payments Principal-and-interest payments Deferment while you’re enrolled at least half-time
With a consolidation loan, your first payment is due within 30 to 45 days after the loan is disbursed.
What to like about Discover student loans
1. Competitive interest rates and no fees 2. Cashback reward for grade point average 3. Variety of repayment protections 4. Multiyear approval for undergraduate loans 5. In-school refinancing available 6. Easy-to-use Discover student loans online platform
1. Competitive interest rates and no fees
Before you choose a student loan, it’s best to compare interest rates and fees to make sure you’re getting your best deal.
Here’s the good news: Discover doesn’t charge any fees whatsoever – not even late fees.
The bank’s interest rates, which can be fixed or variable, are also reasonable. You’ll even get a 0.25% interest rate reduction if you choose autopay for your monthly payments.
Here’s how interest rates for each loan type break down… (Note: Rates below are current as of Sept. 14, 2020, except for those marked with an asterisk.)
Undergraduate loans* | – | – |
Graduate loans* | – | – |
1.87% – 9.87% | 4.49% – 10.74% | |
Health professions loans | 1.87% – 7.02% | 4.49% – 7.99% |
Law loans | 1.87% – 8.24% | 4.49% – 9.49% |
Parent loans | 4.37% – 13.74% | 5.74% – 14.74% |
Residency loans | 5.12% – 7.87% | 6.74% – 8.74% |
Bar exam loans | 6.12% – 11.87% | 7.24% – 12.74% |
Consolidation loans | 1.87% to 5.87% | 3.49% to 6.99% |
1Lowest APRs shown for Discover undergraduate and graduate student loans are available for the most creditworthy applicants and include an interest-only repayment discount and Auto Debit Reward. Lowest APRs shown for Discover undergraduate, Graduate, MBA, Health Professions, Law, Parent, Residency, Bar Exams, and Consolidation loans are available for the most creditworthy applicants and include a 0.25% interest rate reduction while enrolled in automatic payments. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of October 1, 2020. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APR is only available to customers with the best credit and other factors. Your APR will be determined after you apply. It will be based on your credit history, which repayment option you choose and other factors, including your cosigner’s credit history (if applicable). Learn more about Discover Student Loans interest rates.
2. Cashback reward for grade point average (GPA)
Although it’s easy to focus on the interest rates and fees, there are other features to consider that Discover student loans offer.
Discover is a good choice if you’re a stellar student. As long as you maintain at least a 3.0 GPA (or equivalent) while you’re in school, you’ll get a one-time, 1% cash reward based on the loan balance2.
So, if you have $30,000 in student loans, you’ll get a $300 cash reward to use for whatever you want.
This perk is available for the following loans:
Undergraduate loans Graduate loans MBA loans Health professions loans Law loans
You can apply to redeem the reward within six months after the academic term covered by the loan has ended or six months after the final disbursement is made on the loan, whichever is later.
²Students who get at least a 3.0 GPA (or equivalent) can get a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please click here for applicable terms and conditions.
3. Variety of repayment protections
No matter your loan type, Discover packages each with an extensive list of repayment protections. These safety nets could come in handy should you struggle to make your monthly payment, whether because of a lost job or other financial hardship:
Early Repayment Assistance Program | Put off repayment for three months, if you’re in your grace period or just beginning repayment. |
Deferment | Postpone payments while you’re in school at least half-time, working in the military, public service or a medical residency. |
Forbearance | Postpone payments for up to 12 months over the life of your loan. |
Hardship | Reduce your interest rate for six months, lowering your monthly payment to as little as $50. |
Reduced Payment | Decrease your monthly dues to as low as $50 for an “initial period of six months.” |
Payment Extension | Remove the delinquent status of your loan by making three consecutive and on-time minimum monthly payments. |
4. Multiyear approval for undergraduate loans
If you plan on attending school for multiple years, Discover could ease your future borrowing. The bank’s multiyear option allows you to prequalify for future loans, whether you’re a wide-eyed freshman or coming up on your last couple years of college.
This simplifies the application process should you desire to borrower Discover student loans on multiple occasions, though you would need to pass a credit check each time.
Discover isn’t the lone lender with this benefit. Citizen Bank’s multiyear approval is also an appealing option.
5. In-school refinancing available
Discover student loan consolidation isn’t just accessible to former students. Discover is one of few lenders – a group that includes EdvestinU – that allows current students to group and refinance their loans.
This could be a helpful option if you’ve borrowed multiple student loans already, are prioritizing in-school payments and want to streamline your debt repayment.
Just be aware that refinancing student loans with Discover while you’re enrolled would erase your previous loan protections, such as access to federal loan programs like income-driven repayment and basic features like a traditional grace period. With that said, you could defer repayment on your newly consolidated Discover loan if you…
Return to school Serve in the military Work in public service Take up a health professions residency 6. Easy-to-use Discover student loans online platform
To apply for Discover student loans, you’ll start by entering your school, and the type of loan you want.
From there, you’ll share information about yourself, including your:
Full name Email address Phone number Date of birth Citizenship status
The full Discover student loan application process takes just 15 minutes. Keep in mind, you might need to share some documents to support your income and residence information.
If approved, you can manage your account online directly through Discover. The bank no longer contracts Great Lakes to handle servicing.
What to keep in mind about Discover student loans
Like other private student loans, Discover student loans don’t include access to federal loan features like income-driven repayment plans and forgiveness programs.
Unlike some other private loans, however, Discover is unique in the following ways.
1. Eligibility requirements accessible for some (not all) borrowers 2. No ability to prequalify for rates 3. Limited repayment term options 4. Option to apply with a cosigner – but no cosigner release available
1. Eligibility requirements accessible for some (not all) borrowers
For all Discover student loans, you must be at least 16 years old to apply and pass a credit check. For the consolidation loan, however, you have to be at least 18.
International students are welcome to apply for Discover student loans, but they need a cosigner who is a U.S. citizen or permanent resident to get approved. If you’re a noncitizen but can’t find a cosigner, Prodigy Finance could be a better lender option.
Discover stands out because it doesn’t require borrowers to have a Social Security number.
If you’re applying for an in-school loan, you need to be seeking a degree and making satisfactory academic progress, which is determined by your school. You also need to be enrolled at least half-time.
To be eligible for a residency loan, you must’ve graduated from medical school in the past 12 months. For a bar exam loan, you must’ve graduated from law school within the past six months.
2. No ability to prequalify for rates
Some student loan companies, such as SoFi, allow you to see interest rate offers with a soft credit check before you officially apply, which gives you an idea of which lender might offer your best deal.
However, you have to apply with a hard credit check to see what Discover can offer you. Hard credit checks can ding your credit score, so it’s wise to keep them to a minimum.
3. Limited repayment term options
Most loans have a 20-year repayment period. The only exceptions are undergraduate loans with a 15-year period and consolidation loans with 10-year and 20-year periods.
With that said, you could always prepay your Discover student loans. There’s no penalty of paying it off ahead of schedule.
If you’d like to customize your loan length, however, you might be better off with a lender that allows for more flexibility. College Ave, for instance, awards 5, 8, 10 and 15-year terms on student loans. And if you’re in the market for student loan refinancing, Earnest is the king of flexibility: You could choose from one of 180 options spanning five to 20 years.
4. Option to apply with a cosigner – but no cosigner release available
Applying for Discover student loans with a cosigner can help you qualify and, perhaps, score a lower interest rate. Unfortunately, however, the cosigner would be on your loan agreement permanently.
This is one major feature the Discover student loan program is missing. A cosigner release allows cosigners to be removed from the loan after a period of on-time payments and a re-evaluation of the primary borrower’s creditworthiness.
Without that feature, cosigners are stuck with the loan on their credit report until it’s paid off or the borrower refinances with another lender.
Discover student loan review: Is it right for you?
Although the Discover student loans cash reward perk is nice, don’t let it drive your decision. If you can score a lower interest rate somewhere else, you’d likely save more on interest over the life of the loan than you’d get from the one-time cash bonus.
Even considering its expansive menu of repayment protections, Discover’s lack of a cosigner release policy and prequalification process also makes it more restrictive than some other lenders. Your best bet is to shop around and compare several student loan lenders for private student loans or, if you’re inclined, student loan refinancing.
The more time you spend doing the research, the more likely it is that you’ll find the best deal for you.
Andrew Pentis contributed to this report.
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