When students or parents need to borrow money to pay for college, they typically begin by taking out loans from the federal government.
That’s because federal loans come with several advantages, such as income-driven repayment plans, loan forgiveness and relatively low fixed interest rates. Most don’t require a credit check.
But federal loans don’t always cover the full cost of school, and students who need to fill funding gaps can do so through private lenders. Private loans account for less than 10% of all student loans, but that is expected to increase starting this year as more restrictive loan limits leave more borrowers in need of extra financing.
New caps on federal student loans that go into effect on July 1, 2026, will limit the size of loans that some borrowers — particularly graduate students and parents — can take out. Those restrictions are expected to result in more borrowers turning to private lenders to fill student loan gaps.
And while private student loans may not offer the same benefits you’ll get with the government’s loans, some private lenders dangle rewards and discounts that you should know about. In some cases, these discounts can considerably reduce the total amount you pay on the loan.
Many of the best private student loans come with the potential to earn multiple rewards or discounts. Some lenders reward you for reaching milestones such as graduating, and some offer discounts for on-time payments.
One of the most common discounts you’ll find is for setting up automatic monthly payments. Many lenders will knock 0.25 of a percentage point off your interest rate if you enroll in auto pay, but some will discount your rate even further.
“If you get any payment from a student per month, as low as a dollar, they will be aware of their obligation, and they will default less,” says Ken Ruggiero, CEO of Ascent Funding, which offers a 0.5-percentage-point discount for borrowers who set up auto pay, even if the payment is, as he notes, as low as a dollar.
Rewards tend to attract students who are motivated and determined to succeed, which aligns with the interest of lenders, says Steve Winnie, chief operating officer at Monogram, the company that operates the private student loan lender Abe.
“I think these appeal to borrowers who are very conscientious and believe that they are going to perform,” he says.
Winnie says that when comparing discounts or rewards, it’s important to consider how early in the repayment process the discount is applied. For example, a reward that trims your interest rate or reduces your principal balance soon after graduation can add up to significant savings over the life of the loan.
“These benefits are literally making the loan cheaper and making the loan cheaper earlier,” says Winnie. “They’re reducing your monthly payment, total interest paid and in some cases allowing you to pay off sooner.”
[Read: Best Private Student Loans.]
Four Private Lenders that Give Rewards and Discounts on Student Loans
There are various factors to consider when comparing student loans, including interest rate, repayment terms, fees, grace periods and customer service. But don’t overlook potential discounts. These private student loan lenders offer some of the most generous discounts available.
Abe
Three separate rewards and discounts are available to Abe borrowers, and Winnie estimates that they can add up to thousands of dollars in savings, depending on the size of the loan.
— Graduation reward. Abe reduces your principal balance by 2% once you get your degree. Note that you’ll need to request the reduction and provide documentation showing you graduated.
— Auto pay discount. Like many competitors, Abe trims your interest rate by 0.25 percentage point if you set up automatic payments.
— On-time payment discount. This discount grows as your streak of on-time payments does. After six months of on-time payments, your interest rate is reduced by 0.05. The rate continues to drop by 0.05 for every consecutive six-month period, up to a maximum discount of 0.25.
Ascent Funding
Few lenders take as active of a role in the career success of their borrowers as Ascent does. It offers career training and coaching, and it has a program that places some borrowers into internships at potential employers. Ascent provides two rewards and discounts for customers.
— Graduation reward. Upon graduation, Ascent gives back 1% of your principal balance.
— Auto pay discount. Ascent offers one of the more generous auto pay discounts available, reducing your interest rate by 0.5 percentage point if you set up automatic payments. That discount rises to 1 percentage point for its noncosigned outcomes-based student loans.
[Read: Best Student Loan Refinance Lenders.]
SoFi
Boasting a dizzying array of products and some creative reward options, SoFi also provides some incentives for its student borrowers.
— Good grades bonus. Students who earn a GPA of 3.0 or higher can get a reward of up to $250 per academic year if they have a student loan with SoFi. You’ll need to be a SoFi Checking and Savings customer to receive the bonus, which gets transferred into your SoFi deposit account.
— Auto pay discount. SoFi also provides a 0.25-percentage-point discount off your interest rate when you make automatic payments.
Citizens Bank
Banks and credit unions often give preferred rates to customers who have multiple accounts with the institution. Citizens does this for clients seeking student loans.
— Loyalty discount. Customers with a qualifying account at Citizens can get their student loan interest rate reduced by 0.25 percentage point.
— Auto pay discount. Citizens also offers a 0.25 rate reduction when you set up auto pay.
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Private Student Loan Lenders That Offer Rewards originally appeared on usnews.com
