How Do Discover Student Loans Work

Student loans are a great way to help make your education happen. But how do they work, and what does it mean for you? In this post, we’ll discuss student loan basics and answer some of the most common questions from students looking to get a higher education.

What are Student Loans?

Student loans are funds that you borrow from a lender (usually the federal government) in order to pay for your education. With these loans, you can pay for college tuition and fees, books and supplies, room and board, transportation costs and living expenses while enrolled in school.

How Do I Get Student Loans?

First things first: if you’re interested in getting student loans, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is used by colleges and universities to determine how much money they can offer you in scholarships and grants based on your financial need as determined by your household income level. Once you fill out the FAFSA form online at www.fafsa.ed.gov/fillingout/, it will be processed by the Department of Education’s processor called Institutional Student Information Record Services (ISIRS). You should receive an email informing you whether or not your application has been accepted within

Discover is one of the top credit card issuers in the country. However, Discover offers a wide range of other financial products, including private student loans for undergraduate, graduate, MBA, health profession, law, residency, and bar exam students.

Depending on your program, you can borrow up to the total cost of attendance, making Discover a good choice when you need money to finish your degree. The lender also offers forbearance options—a rarity for private lenders—and rewards for good grades and for graduating from your selected program. But Discover has limited repayment terms, and may not be the right lender for everyone. Here’s what you need to know about Discover student loans to make an informed decision.

KEY TAKEAWAYS
PROS & CONS
COMPANY OVERVIEW

In addition to traditional student loans, medical school graduates can take out residency loans and law school graduates can take out bar exam loans.
Discover doesn’t offer prequalification.
Discover charges no fees whatsoever, not even late payment fees.
Discover offers 3 in-school repayment options but only a 15-year loan term for undergraduate borrowers.
In addition to the standard 0.25% interest rate discount for enrolling in autopay, if you agree to make interest-only payments while in school, you’ll also qualify for a 0.35% rate discount.

Discover Student Loans Available

Undergraduate Student Loans

If you’re an undergraduate student and need additional financing to pay for school, Discover’s undergraduate loans can help fill the gap. Eligible students can borrow up to the total cost of attendance, and can pre-qualify for future loans with multi-year approval. Undergraduate loans have no application, origination, or late fees, and there are no prepayment penalties if you decide to pay off your loan early.¹

Variable Rates	1.79% – 11.09%
Fixed Rates	3.99% – 11.59%
Loan Amounts	$1,000 up to the total cost of attendance
Loan Terms	15 years

Graduate Student Loans

If you’re pursuing a master’s or doctoral degree, you can take out a graduate student loan to cover up to the total cost of attendance. Like undergraduate loans, there are no application, origination, or late fees, and no prepayment penalties.²

Variable Rates	2.49% – 12.49%
Fixed Rates	3.99% – 12.99%
Loan Amounts	$1,000 up to the total cost of attendance
Loan Terms	20 years

MBA Loans

If you intend to go to business school or are pursuing an MBA, you may be eligible for an MBA student loan. With a zero-fee MBA loan, you can apply online in as little as 15 minutes, and borrow up to the total cost of attendance.

Variable Rates	2.74% – 8.84%
Fixed Rates	3.99% – 9.34%
Loan Amounts	$1,000 up to the total cost of attendance
Loan Terms	20 years

Health Professions Loans

Health profession student loans are for graduate students in allopathy, dentistry, nursing, occupational therapy, optometry, osteopathy, pharmacy, physical therapy, physician assistant, podiatry, or veterinary medicine. The loans have no application, origination, or late fees, and there are no prepayment penalties.³

Variable Rates	2.49% – 6.74%
Fixed Rates	3.99% – 6.99%
Loan Amounts	$1,000 up to the total cost of attendance
Loan Terms	20 years

Law School Loans

Graduate students in law school can take out law school student loans to pay for their education. These no-fee loans allow you to borrow up to the total cost of attendance, and you can choose an interest rate type and repayment option that works for you.⁴

Variable Rates	2.49% – 11.09%
Fixed Rates	3.99% – 11.59%
Loan Amounts	$1,000 up to the total cost of attendance
Loan Terms	20 years

Residency Loans

As a residency candidate in medical school, you can use a residency student loan to cover the cost of your residency, internship, relocation, and board exam review. Loan maximums are dependent on your field of study, and loan terms are set at 20 years.⁵

Variable Rates	3.49% – 5.99%
Fixed Rates	4.99% – 6.49%
Loan Amounts (Allopathy, Dentistry, Optometry, Osteopathy, Pharmacy, Podiatry, Veterinary Medicine)	$1,000 up to $18,000
Loan Amounts (Nursing, Occupational Therapy, Physical Therapy, Physician Assistant)	$1,000 to $5,000
Loan Terms	20 years

Bar Exam Loans

If you’re preparing to take the bar exam, you can use a bar exam student loan to cover the cost of your bar study prep classes and living expenses. You can borrow up to $16,000, and there are no application, origination, or late payment fees.

Variable Rates	4.49% – 11.49%
Fixed Rates	5.49% – 11.99%
Loan Amounts	$1,000 up to $16,000
Loan Terms	20 years

Loan Eligibility

To qualify for a student loan from Discover, you must meet the following criteria:

You must be enrolled at least half-time in a bachelor’s or associate’s degree program (or other eligible program if pursuing a graduate, MBA, law, or health professions degree) at an eligible school.
You must be intending to get a degree.
You must make satisfactory academic progress as defined by your college.
You must be a U.S. citizen, permanent resident, or eligible international student with a qualifying cosigner.
You must be at least 16 years old at the time you apply.
You must pass a credit check.

Discover does not disclose its minimum credit score or income requirements. However, you’ll generally need good credit to qualify for any private student loan.

Is Loan Prequalification Available?

Some private student loan lenders offer loan prequalification, a tool where you can answer a few basic questions and get an informal decision from the lender. It can give you an idea of whether or not you’d get approved for a loan and what your interest rate would be without having to submit a full application or undergoing a credit check, which can impact your credit score.

To find out if you qualify for a Discover student loan, you have to submit an application and go through a hard credit inquiry.

Loan Fees

Unlike some other lenders, Discover charges no fees at all. It has no application fees, origination fees, or late fees. And, it doesn’t charge a prepayment penalty, so there’s no downside to paying off your student loans early.

Loan Discounts

Discover offers auto debit rewards. If you sign up for automatic withdrawals for your minimum monthly payment, Discover will reduce your interest rate by 0.25%.

If you agree to make interest-only payments while in school, you’ll also qualify for a 0.35% discount.

Repayment Options

Discover offers 3 loan repayment options:

In-School Interest-Only: While you’re still in school and during the six months after graduation, you’re required to make interest-only monthly payments. By doing so, you’ll qualify for a 0.35% interest rate discount.
In-School Fixed: While you’re in school and during the Deferment period after you graduate, you’re required to make fixed payments of $25 per month.
Deferred: If you prefer, you can defer making any payments until the end of the Deferment period.

The deferment period differs depending on the type of loan that you take out, ranging from 0-9 months.

Rewards

There are 2 possible rewards you can receive:

Good Grades: If you earn at least a 3.0 GPA (or its equivalent), you’ll get a one-time cash reward on each Discover student loan you have. The award is equal to 1% of the loan amount, so if you have a $10,000 student loan, you’d get a $100 reward.
Graduation: If you graduate from your degree program less than 6 years after the loan’s disbursement, you may qualify for a Graduation Reward that is equal to 2% of your outstanding loan balance. If your loan balance was $10,000 when you graduated from college, you’d get $200.

You should still check your eligibility and rates from other lenders every year to make sure you’re getting the best loan.

Discover is one of the few lenders that offers multi-year approval. With this option, eligible borrowers can pre-qualify for future undergraduate loans to cover the rest of their education needs. When it comes time to take out your next loan, you can use a pre-filled application, and there’s no impact to your credit.

Are Cosigners Required?

With Discover, cosigners aren’t required. However, many students lack an established credit history or sufficient income to qualify for a student loan on their own. If that’s the case, asking a friend or relative with good credit and steady income to cosign your loan application can help you qualify for a loan and secure a competitive interest rate.

Forbearance and Loan Discharge Options

If you’re facing a financial hardship, such as losing your job, you may qualify for forbearance options with Discover. Depending on your situation, you could postpone making payments for up to 12 months, or Discover could lower your interest rate to make your monthly payment more affordable.

Not all private student loan lenders offer forbearance options, so it’s important to check into hardship programs before submitting a loan application.

Length of Time for Loan Approval and Disbursement

Once you send in your information, it can take 3 to 5 business days for Discover to process your documents. If approved, it can take up to 5 weeks before your loan is disbursed.

Is Student Loan Refinancing Available?

Discover offers student loan refinancing for both federal and private student loans. You can refinance between $5,000 up to the aggregate amount of your education loan debt (maximum limits may apply). Both fixed and variable-rate loans are available. Repayment terms include 10 years or 20 years.

Customer Service

Your student loan servicer is important; it’s who you go to if you have questions or issues about your account or payments.

According to the Annual Report of the Consumer Financial Protection Bureau Student Loan Ombudsman, the Consumer Financial Protection Bureau handled approximately 1,900 consumer complaints about private student loans from September 1, 2019 through August 31, 2020. Out of those complaints, 76—or about 5%—were about Discover.⁶

That said, Discover’s student loan specialists are available 24 hours a day, 7 days a week. You can reach them by calling 1-800-788-3368, by secure message through your account, or by faxing 1-224-813-5195.

Applying for a Discover Student Loan

Before applying for a private student loan through Discover or another lender, make sure you submit the Free Application for Federal Student Aid and exhaust all of your federal financial aid options. If you still need help paying for school, then you can move forward with your private loan application.

You can apply for a Discover student loan over the phone or online. According to Discover, the application typically takes about 15 minutes to complete.

If you have a cosigner, you both need to fill out a separate application.

To complete the application, you’ll need:

Your Social Security number
Selected school information, including field of study
Loan amount requested
Expected financial aid
Financial information, including rent or mortgage payments and income
Permanent address and in-school address (if applicable)

Once you submit your information, Discover will review your application. In some cases, a representative may reach out to you to ask you to submit additional documentation before they can make a decision. Once they do approve you for a loan, it can take 3 to 5 weeks for your loan to be disbursed.

Paying for College

When it comes to paying for college, it’s a good idea to use all of the scholarships, grants, and federal financial aid available to you first before turning to private student loans.

Discover does offer flexible repayment options, allowing you to defer payments until you graduate. And, it allows borrowers experiencing financial hardships to enter into forbearance and postpone their payments. However, you may find other lenders that offer more repayment terms that meet your needs, so it’s a good idea to shop around and look at multiple private student loan lenders to find the best one for you.FINAL VERDICT

Methodology

Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of student loan lenders. We collected over 45 data points across more than 15 lenders, including interest rates, fees, loan amounts and repayment terms, to ensure that our content helps users make the right borrowing decision for their education needs.

discover student loans requirements

Graduate Student Loans

Cover up to 100% of your school-certified costs with our student loans for graduate school. Aggregate loan limits apply.
Variable Rates
2.49% – 12.49% APR

Fixed Rates
4.49% – 13.99% APR

Lowest APRs are available for the most creditworthy applicants, and include an interest-only repayment discount and Auto Debit Reward.1

Applying with a creditworthy cosigner may improve your likelihood for loan approval and you may receive a lower rate.

Undergraduate Student Loans
Cover up to 100% of your school-certified college expenses with our undergraduate loans. Aggregate loan limits apply.
Variable Rates
1.79% – 11.24% APR

Fixed Rates
4.49% – 13.34% APR

Lowest APRs are available for the most creditworthy applicants, and include an interest-only repayment discount and Auto Debit Reward.1

Applying with a creditworthy cosigner may improve your likelihood for loan approval and you may receive a lower interest rate.