Best Small Student Loans for the 2025 School Year

by Alex Hillsberg , MA

Student Finance & Loan Expert

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As college costs continue to rise, many students are looking for ways to finance their education without taking on overwhelming debt. The average loan amount for first-time full-time degree/certificate-seeking undergraduate students at public 4-year institutions was $7,492 in the 2020-21 school year.

For many, finding the right small student loan can make a significant difference. In this article, I'll provide insights and practical advice on the best small student loans for the 2025 school year, helping you navigate your options and make informed decisions about your financial future.

Key Things You Should Know About the Best Small Student Loans for 2025 School Year

• Small student loans are typically defined as loans that provide a lower amount of funding compared to standard student loans. They are often used to cover gaps in tuition costs, fees, or living expenses without taking on large amounts of debt.
• For the 2025 school year, interest rates for small student loans vary significantly. They vary widely based on the borrower's creditworthiness, often ranging from 3% to 12%.
• Students can choose from various small student loan options, including federal loans (Direct Subsidized and Unsubsidized Loans), private loans from banks or credit unions, and state-based loans designed to support residents of specific states.
• Federal small student loans typically offer fixed interest rates, income-driven repayment plans, and forgiveness options, making them more predictable and flexible. Private small student loans, on the other hand, often have variable interest rates and fewer repayment options but can be an option for those with strong credit.
• Interest rates are critical. Federal loans (4.50% to 8.05%) are typically lower than private loans (some start around 5% but can reach 17% and even more). Borrow responsibly to ensure repayment after graduation.

Table of Contents

1. Best Small Student Loans for the 2025 School Year
2. What are small student loans?
3. What are the typical interest rates for small student loans in 2025?
4. What are the different types of small student loans available for 2025?
5. How do federal small student loans compare to private small student loans?
6. How do state-based small student loans differ from federal options?
7. What are the eligibility requirements for small student loans in 2025?
8. Do you need a cosigner for private small student loans?
9. How can you obtain student loans without a cosigner?
10. What are the long-term financial impacts of small student loans?
11. What are the common pitfalls to avoid when considering small student loans?
12. What financial documents are needed to apply for small student loans?
13. Can small student loans be refinanced or consolidated?
14. How do you apply for small student loans for the 2025 school year?
15. What are the repayment options for small student loans?
16. Are short-term degree programs a viable alternative to minimize student loan dependency?
17. Tips for Getting the Best Small Student Loan Rates
18. Can small student loans support the pursuit of advanced degrees?
19. What are the differences between subsidized vs unsubsidized student loans?
20. Can small student loans cover essential living expenses?
21. Should I seek professional guidance when applying for small student loans?
22. Other Things You Should Know About the Best Small Student Loans for 2025 School Year

Best Small Student Loans for the 2025 School Year

College costs can feel overwhelming, and even with scholarships and grants, a funding gap might remain. To help you bridge that gap, our team of financial aid experts has researched and compiled a list of the best small student loan options for the 2025 school year. We've compared factors like interest rates, fees, repayment flexibility, and borrower benefits to identify the loans that offer the most value and support for your educational journey.

1. Ascent

Ascent stands out for offering loans based on your academic profile (GPA, major, school) for college juniors and seniors, even without a credit history. They also have flexible repayment plans and allow cosigner release after only 12 on-time payments (not available for international students).

• Fixed APR: 4.29% to 15.96%
• Loan Amounts: $2,001 to $400,000
• Minimum Credit Score: Undisclosed

2. Citizens

Citizens simplifies future funding by allowing you to potentially get approved for loans in future school years with a streamlined process after your initial application. They offer standard deferment options and an interest rate reduction for setting up autopay. Additionally, you can qualify for an extra discount if you're already a Citizens customer.

• Fixed APR: 4.39% to 15.45%
• Loan Amounts: $1,000 to $350,000 (depends on degree choice)
• Minimum Credit Score: 720

3. College Ave

College Ave boasts a high approval rate for additional loans with a cosigner. They also have a unique 8-year repayment option and extended grace periods for graduate and medical students. However, removing a cosigner can be challenging compared to other lenders on this list.

• Fixed APR: 4.17% to16.69%
• Loan Amounts: $1,000 to full school-certified cost of attendance
• Minimum Credit Score: Undisclosed

4. Custom Choice

Custom Choice offers private loans with a low minimum amount and allows cosigner release after 36 on-time payments. They also provide autopay discounts and a principal reduction after graduation. Plus, they have forbearance options for qualifying hardships.

• Fixed APR: 4.43% to 14.04%
• Loan Amounts: $1,000 to $99,999 yearly (with $180,000 aggregate limit)
• Minimum Credit Score: Undisclosed

5. INvestEd (Indiana Residents Only)

INvestEd caters specifically to Indiana students by offering private loans with competitive interest rates. This can be a good option for Indiana residents seeking an affordable private loan. Their streamlined application process allows for quick eligibility checks, and borrowers who consistently make on-time payments can potentially remove their cosigner after only 12 payments.

• Fixed APR: 4.56% to 8.34%
• Loan Amounts: $1,001 to full school-certified cost of attendance
• Minimum Credit Score: 670

6. MEFA

MEFA offers private loans with potentially lower interest rates than some competitors. While cosigners are helpful for lower rates, removing them later can be difficult. Only one repayment plan allows cosigner release with strict requirements.

• Fixed APR: 5.75% to 8.95%
• Loan Amounts: $1,500 to full school-certified cost of attendance (minus aid)
• Minimum Credit Score: 670

7. Sallie Mae

Sallie Mae offers undergraduate and graduate loans with the option to apply once for the entire academic year. They also have a high potential for reapproval for future years and cosigner benefits. Additionally, they have loan options for specific graduate programs like MBA and medical school.

• Fixed APR: 4.25% to 15.49%
• Loan Amounts: $1,000 to full school-certified cost of attendance (minus aid)
• Minimum Credit Score: Undisclosed

What are small student loans?

Small student loans are designed to bridge the gap between your financial aid and the total cost of attendance for a particular school year. Unlike traditional federal loans, which may cover a larger portion of your educational expenses, small student loans typically offer lower loan amounts. This can be helpful if you only need additional funds to cover specific costs such as textbooks, housing, or living expenses. It's important to remember that any loan adds to your overall debt burden, so responsible borrowing is crucial.

In SY 2023-2024, the average tuition and fees for full-time undergraduate students was $11,260. The chart below shows a breakdown of costs for attending 4-year institutions for in-state undergraduate students. 

What are the different types of small student loans available for 2025?

Navigating college costs often involves filling the gap between financial aid and total expenses. Small student loans can be a solution. There are three main types available for the 2025 school year: federal direct loans, private loans, and state-based loans. Understanding these options will help you make informed choices about financing your education.

• Federal Direct Loans. Offered by the U.S. Department of Education, these loans come with fixed interest rates and flexible repayment options.
• Private Loans. Issued by banks, credit unions, and online lenders, private loans often have higher interest rates than federal loans. However, they can be an option if you cannot qualify for enough federal aid or need additional funds.
• State-Based Loans. Some states offer loan programs specifically for students who are residents of that state. These loans can be a good option to explore if you're eligible.

Small student loans can be used to supplement other costs you will incur in college like books and other supplies. In SY 2023-2024, the average budget of undergraduate students for books and supplies was $1,250. 

How do federal small student loans compare to private small student loans?

Federal and private small student loans have key differences that can significantly impact your borrowing experience. Here's a breakdown of some key points to consider:

• Interest Rates. Federal loans typically offer lower and fixed interest rates compared to private loans. Rates for federal direct loans range from 4.99% to 6.54% for the 2024-25 school year, while private loan rates can vary depending on your creditworthiness and may reach as high as 12%.
• Repayment Terms. Federal loans generally have more flexible repayment options than private loans. This can include income-driven repayment plans that adjust your monthly payments based on your income. Private loan repayment terms can be less flexible and may not offer deferment options during times of hardship.
• Eligibility Requirements. Federal loans typically have fewer eligibility requirements compared to private loans. You may qualify for federal loans regardless of your credit history, while private lenders often require a good credit score or a cosigner.
• Borrower Benefits. Federal loans come with borrower benefits such as loan forgiveness programs and income-based repayment options. These benefits are typically not available with private loans.

In short, federal small student loans are generally the more borrower-friendly option due to their lower interest rates, flexible repayment terms, and access to federal benefits. However, private loans may be an option if you cannot qualify for enough federal aid or need additional funds but be prepared for potentially higher costs and less flexibility.

Do note that one cannot apply for federal student loans for attending private for-profit institutions. As such, if you plan to attend one, small student loans can help balance other costs such as housing and food.

In SY 2023-2024, the average estimated housing and food budget for undergraduate students in private 4-year nonprofit institutions was $14,650. See the chart below for a breakdown of other costs. 

How do state-based small student loans differ from federal options?

State-based small student loans can be a valuable alternative to federal loans, but there are some key differences to consider. They are:

• Eligibility. Unlike federal loans, which are available nationwide, state-based loans typically have residency requirements. This means you must be a legal resident of the state offering the loan program to qualify.
• Interest Rates. State-based loan interest rates can vary. They may be comparable to federal loan rates or even slightly lower in some cases. However, it's important to compare rates offered by your state with those of federal Direct Loans to see which option is more affordable.
• Repayment Terms. Repayment terms for state-based loans can be similar to federal loans, but it's always a good idea to check the specific details of each program. Some state loan programs may offer unique repayment benefits, while others may have stricter terms.
• Benefits. Some state loan programs may offer additional benefits on top of what federal loans provide. These could include loan forgiveness programs specifically for careers in high-demand fields within the state or scholarships that can be combined with the loan.

State-based loans, as well as small student loans, can help you balance out other expenses such as room and board charges. So, what is room and board in college? Room and board refers to on-campus college housing (room) and a meal plan (board) offered by the school. In SY 2023-2024, the estimated room and board charges range from around $9,000 to $15,000. See the chart below for details. 

What are the eligibility requirements for small student loans in 2025?

Private small student loans in 2025 come with their own set of eligibility requirements. To qualify, you'll typically need:

• Enrollment. Typically, you need to be enrolled at least half-time in a degree or certificate program at an accredited school. However, some lenders may have their own enrollment requirements, so be sure to check directly with them to avoid any surprises.
• Creditworthiness. This is a key factor for private lenders. Typically, a good credit score is essential for securing a loan without a cosigner. If your credit history isn't strong, consider finding a cosigner with a good credit standing. A cosigner can significantly improve your chances of approval and potentially qualify you for more favorable interest rates.
• Income Documentation. In some instances, lenders might request documentation of your income or your cosigner's income. This helps them assess your ability to repay the loan comfortably. The goal is to ensure you can manage the monthly payments without financial strain.
• Additional Considerations:
  • Citizenship/Residency. Some lenders may have specific citizenship or residency requirements for borrowers.
  • School Approval. Your school might need to be on a pre-approved list of eligible institutions for the lender to offer you a loan.

Remember that eligibility details can vary depending on the lender and the specific loan program you're interested in. Before applying for a private small student loan, take the time to research and compare different lenders. Always visit their official websites to access the most up-to-date eligibility information to ensure a smooth loan application process.

Do you need a cosigner for private small student loans?

Whether you need a cosigner for private small student loans often depends on your financial profile, including your credit score and income. Private lenders typically use your credit history to assess your ability to repay a loan. For students lacking an established credit history or steady income, having a cosigner with strong financial credentials can significantly improve approval chances and even lead to more favorable loan terms.

That said, not all lenders require cosigners; some offer loans specifically designed for students without credit or cosigners by considering non-credit factors like GPA or field of study. However, keep in mind that loans without cosigners may come with higher interest rates due to increased risk for the lender.

For more insights, consider reading this comprehensive guide: Do you need a cosigner for student loans?

Regardless of whether you use a cosigner, it’s essential to carefully evaluate the loan terms and ensure you can meet repayment obligations. Some lenders even allow the release of cosigners from the loan after a specific number of on-time payments, offering added flexibility for both the borrower and cosigner.

How can you obtain student loans without a cosigner?

Lenders that offer loans without a cosigner evaluate factors beyond traditional credit history, such as academic performance, enrollment status, and anticipated future earnings. These institutions often adopt alternative underwriting processes that prioritize non-credit data, enabling students with limited credit history to qualify. Explore options like student loans that don't require a cosigner for competitive terms and structured repayment plans that align with your financial goals.

What are the long-term financial impacts of small student loans?

Small student loans can influence your future financial flexibility by affecting your credit profile and debt-to-income ratio. Establishing a clear repayment plan is critical to maintain a positive credit history, which is essential for future financial investments. Proactive planning and continuous monitoring of your financial health can form a strong foundation for both academic achievement and post-graduation opportunities. Consider how your educational path aligns with your financial goals, and explore best college majors to make informed career choices that support long-term stability.

What are the common pitfalls to avoid when considering small student loans?

When evaluating small student loans, borrowers must carefully review all terms to prevent unexpected fees, rigid repayment structures, and hidden costs. Inadequate comparison of fee structures and interest accrual methods can lead to long-term financial strain and negatively affect your credit profile. Thoroughly verifying repayment flexibility and ensuring transparency in cosigner obligations are critical steps before commitment. Additionally, explore alternative financing options such as 2 year degrees that pay 100k to assess if a shorter, high-return educational pathway can better support your financial goals without incurring excessive debt.

What financial documents are needed to apply for small student loans?

The financial documents required to apply for private small student loans in 2025 can vary depending on the lender, but some common ones include:

• Enrollment Verification. This document, typically from your school's registrar's office, confirms your enrollment status (at least half-time) in a degree or certificate program at an accredited institution.
• Proof of Income (if required). Some lenders may request documentation of your income to assess your ability to repay the loan. This could include paystubs, tax returns, or bank statements.
• Cosigner Information (if applicable). If you need a cosigner to improve your chances of approval, the lender will likely require similar documentation for your cosigner, such as proof of income and employment verification.
• Financial Aid Award Letter (optional). Including your financial aid award letter can help the lender understand how much financial aid you're receiving and determine the remaining gap that the loan would cover.

In addition to these documents, you may also need to provide basic personal information such as your Social Security number, driver's license, and proof of address. Moreover, always check the specific requirements of the lender you're interested in applying with. Their website should have a clear list of required documents. Also, gather all the necessary documents beforehand to avoid delays in processing your application. And, of course, make sure all documents are clear, legible, and up to date.

Can small student loans be refinanced or consolidated?

Refinancing and consolidating small student loans can streamline repayment and possibly lower overall costs once you have an established credit history. Evaluate available refinancing options by comparing interest rates, fees, and new repayment terms offered by multiple lenders. Assess whether consolidating loans might simplify your financial management without compromising key borrower benefits. Consider your credit improvement and repayment performance when determining if a refinancing solution aligns with your long-term financial goals. For further career flexibility and earnings potential, explore trade school highest paying jobs.

How do you apply for small student loans for the 2025 school year?

Securing private small student loans for the 2025 school year involves a series of steps to ensure you find the right loan option and navigate the application process smoothly.

1. Research and Compare Lenders

Before diving into applications, take time to research different lenders. The goal is to find the one that aligns best with your financial situation by offering favorable terms like interest rates, repayment options, and loan amounts. Consider factors like your creditworthiness, whether you have a cosigner available (if needed), and any borrower benefits the lender might offer. Online resources and student loan comparison websites can be valuable tools for researching lenders and comparing their offerings.

2. Gather Required Documents

As mentioned earlier, the specific documents required can vary depending on the lender, but some common ones include enrollment verification from your school, proof of income (if requested by the lender), cosigner information (if you'll be using a cosigner), and your financial aid award letter (optional). It's best practice to check the lender's website for their exact list of required documents and gather them beforehand to avoid delays in processing your application.

3. Complete the Loan Application

Once you've chosen a lender and compiled the necessary documents, you're ready to fill out the loan application form. This typically involves providing personal information, financial details, and educational information. Be sure to fill out the application accurately and completely to avoid any holdups in processing.

4. Await Approval and Loan Terms

After submitting your application, the lender will review your information and creditworthiness. This process can take a few days or even weeks. If your application is approved, the lender will send you a loan offer outlining the interest rate, repayment terms, and the loan amount.

5. Review and Sign the Loan Agreement (if approved)

This step is crucial. Carefully review the loan agreement before signing. This document details the loan terms, including the interest rate, repayment schedule, and any associated fees. Ensure you understand all the terms and conditions before signing on the dotted line.

6. Receive Loan Funds

Once you've signed the loan agreement, the lender will typically disburse the loan funds directly to your school. In some cases, you may receive the funds directly. The disbursement process can take some additional time.

By following these steps, you can navigate applying for private small student loans better. Remember, being a responsible borrower and understanding the full financial implications before taking on any student loan debt is crucial. Below are some tips that you should keep in mind. 

Additional Tips:

• Apply Early. Starting your research and application process early in the school year is wise, especially if you anticipate needing time for processing or if you require a cosigner to secure the loan.
• Federal Loans First. Always prioritize federal student loans before turning to private lenders. Federal loans typically offer lower interest rates and more flexible repayment options compared to private lenders.
• Borrow Responsibly. Carefully consider the amount you borrow and ensure you can comfortably afford the monthly payments after graduation. Don't take on more debt than you can manage and find ways to save for college such as getting a summer job.
• Understand Repayment. Be aware of the repayment schedule and any potential penalties for late payments. Familiarize yourself with all the terms of your loan agreement.

What are the repayment options for small student loans?

Repayment options for private small student loans (2025) typically won't offer the same level of flexibility as federal loans. Here's what to expect:

• Standard Repayment. This is the most common option, with fixed monthly payments spread out over a set loan term. The term length can vary by lender and loan amount, but it's generally shorter than federal loan repayment terms, often ranging from 5-10 years.
• Graduated Repayment. Some lenders might offer graduated repayment plans. These plans start with lower monthly payments that gradually increase over time. This can be helpful if you anticipate your income rising after graduation, but keep in mind you'll end up paying more interest overall compared to a standard repayment plan.
• Extended Repayment. An extended repayment plan may be available with some lenders. This option extends the loan term, resulting in lower monthly payments. However, similar to graduated repayment, this will also lead to you paying more interest in the long run.
• Deferment and Forbearance. Deferment and forbearance options may be available depending on the lender and your circumstances. Deferment allows you to temporarily postpone your loan payments, usually for qualifying reasons like enrollment in school or military service. Forbearance is a temporary reduction or suspension of payments due to financial hardship. It's important to note that interest typically continues to accrue during deferment and forbearance periods.

Do note that, unlike federal loans, private lenders aren't required to offer flexible repayment options. Be sure to check with the specific lender you're considering to understand their available repayment plans and terms to avoid any surprises later. You want to be confident you can afford the monthly payments after graduation. Recent student loan statistics show that the average federal student loan debt was $37,338 in 2021. So, don't hesitate to ask the lender any questions you might have about the repayment terms before signing the loan agreement. 

Are short-term degree programs a viable alternative to minimize student loan dependency?

Short-term educational programs offer an accelerated path to entering the workforce, potentially lowering the overall need for extensive borrowing. These focused programs can lead directly to employment in high-demand industries, thereby reducing long-term debt risks. Evaluating a concise curriculum may reveal opportunities where a specialized program, such as the 6 months degree course, provides a cost-effective alternative to traditional, longer-term degrees without compromising career prospects.

Tips for Getting the Best Small Student Loan Rates

To secure the best rates for small student loans, consider these actionable tips:

Leverage a Strong Credit Score

Your credit score plays a critical role in determining the interest rates offered by private lenders. A higher credit score often qualifies you for lower interest rates. If you don’t have a strong credit score, consider applying with a cosigner who does to improve your chances of securing better terms.

Compare Multiple Lenders

Researching and comparing rates across several lenders is essential. Each lender assesses your credit profile differently, which can lead to varying rates and loan terms. Some online platforms provide comparison tools that allow you to view multiple offers side-by-side, making it easier to identify the most cost-effective option.

Apply Early

Lenders often provide more favorable rates to borrowers who apply early. Since last-minute options can come with higher costs, plan and apply in advance. If you find yourself in a time crunch, consider exploring the best last minute student loans for quick approval processes without compromising much on competitive rates.

Utilize Discounts and Incentives

Many lenders offer discounts for setting up automatic payments or for being a returning customer. Check for these opportunities before finalizing your loan. Even a small discount can significantly reduce the total cost of borrowing.

Assess Loan Repayment Flexibility

While securing low interest rates is important, repayment flexibility can be just as crucial. Opt for lenders that allow for early payments without penalties, as this can help you save on interest costs over the life of the loan.

By following these strategies, you can maximize your chances of obtaining a loan with the most favorable rates and terms, ensuring your education financing remains an affordable and manageable investment.

Can small student loans support the pursuit of advanced degrees?

Evaluating small student loans as a stepping stone for further education involves a detailed cost–benefit analysis. Borrowers should compare the immediate benefits of bridging funding gaps with the long-term financial implications of additional debt when considering advanced studies, such as online doctorates. This section encourages a review of future career prospects, post-graduation earnings, and alternative funding sources to ensure that extending one's education aligns with a sustainable financial strategy.

What are the differences between subsidized vs unsubsidized student loans?

Understanding the distinctions between subsidized and unsubsidized options is vital for making wise borrowing decisions. Subsidized loans offer an interest benefit during deferment, potentially reducing the overall repayment amount, whereas unsubsidized loans accrue interest from the outset, impacting long-term costs. Evaluating factors such as interest accrual, eligibility, and repayment implications can help determine which option aligns best with your financial strategy. For a deeper analysis, refer to the comprehensive resource on subsidized vs unsubsidized student loan.

Can small student loans cover essential living expenses?

Small student loans can be allocated toward non-tuition costs, including housing, utilities, and daily living expenses. Borrowers should carefully review each lender’s guidelines to confirm that funds may be directed toward such essential expenses. Evaluate the terms and consider verifying (as covered in our article Can financial aid be used for rent?) to ensure your funding strategy accommodates your overall financial needs.

Should I seek professional guidance when applying for small student loans?

Evaluating your options can benefit from expert insights beyond basic comparisons of interest rates and repayment terms. Professional guidance can help identify nuanced fee structures, clarify complex contractual terms, and tailor financial strategies to your academic profile and future earnings potential. Consulting an admission consultant may also reveal additional financing opportunities or alternative pathways that align with your long-term financial goals.

Key Findings

• Even with in-state public colleges averaging $28,840, the overall cost of college can be significant. For many students, small student loans may be necessary to cover remaining expenses after scholarships and grants.
• Private colleges are substantially more expensive, with an average budget of $60,420 for out-of-state students. This makes small student loans even more likely for students attending private institutions.
• Choosing an in-state public college saves money. Out-of-state students and those at private colleges may need larger or multiple small student loans to bridge the funding gap.
• Small student loans can cover not just tuition and fees (public in-state average $11,260) but also essential living expenses like housing and food.
• The significant tuition gap between public and private schools ($30,000+) means even in-state students may need small student loans depending on scholarships and grant aid.

Other Things You Should Know About the Best Small Student Loans for 2025 School Year

What is the smallest student loan you can get?

There isn't a single answer to this question because loan providers can set their minimums. It's important to check directly with the lenders you're considering to see what their minimum loan amount is. That being said, private lenders often offer smaller loan options to cover specific expenses, so finding a loan for a smaller amount is possible.

How to get the smallest student loan payment?

The loan amount you borrow directly affects your monthly payment, but there are other strategies to minimize it. Federal student loans have repayment plans that base your monthly payment on your income. This can be a good option if you anticipate a lower income after graduation. Additionally, deferment and forbearance options might be available to temporarily pause your payments if you're facing financial hardship. Remember, interest may still accrue during these periods.

Is there a minimum for student loans?

Yes, there typically is a minimum loan amount set by each lender. However, there's no universal minimum across all lenders.

Are there any tax benefits available for student loan interest payments?

In the United States, there may be tax benefits available for student loan interest payments. You might be eligible to deduct a portion of the interest you paid on your federal student loans from your taxable income. The exact amount you can deduct and the eligibility requirements can change over time, so it's best to consult with a tax professional or visit the IRS website for the latest information.

References:

1. Hanson, M. (2023, May 22). Average student loan debt [2023]: By year, age & more. Education Data Initiative. Retrieved June 27, 2024, from EDI.
2. Ma, J., & Pender, M. (2023). Trends in College Pricing and Student Aid 2023. College Board.
3. National Center for Education Statistics. (2024). Fast facts: Student debt (900). NCES.