Best small student loans: Options and tips for managing minimal debt

As of March 2023, 32% of borrowers owed less than $10,000 in federal student loans, according to the College Board. Whether you receive a significant scholarship or get help from your family, you might have most of your educational costs covered, but not everything. You may need additional funding to pay for books, transportation, and all the unexpected expenses associated with being a student.

If that's the case, you can turn to small student loans, which typically start as low as $1,000, to fill the gap. Keeping your student debt at a minimum can make the cost of borrowing more affordable. Find out more about where and how to get small education loans.

Current private student loan rates

Best small student loans

Ascent: Best for no-cosigner loans

Citizens: Best for multi-year approval

Custom Choice: Best for discounts and rewards

College Ave: Best for extended grace periods

Methodology

We evaluated these student loan lenders based on interest rates and origination fees, loan amounts, loan terms, discounts, whether cosigners are accepted, and more. Our team of experts gathered information from each lender's website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

What are small student loans?

Small student loans refer to the size of the loan amount. If you only need to borrow a low amount, say between $1,000 and $5,000, that would qualify as a small student loan. Sometimes you need just a little extra funding to pay for all your educational costs.

You might have gotten family support that's just shy of covering everything, or generous scholarships and grants that don't quite pay for all your expenses. Taking out small education loans can bridge that gap.

Federal small student loan options

You can get federal student loans through the U.S. Department of Education. These loans have fixed interest rates and an abundance of repayment options, including income-driven repayment (IDR) plans. You may even qualify for student loan forgiveness in some cases.

These benefits make federal loans the go-to option if you need student loans, but federal loans work especially well for small student loans. This is because you can easily request a lower loan amount if you find out your expenses aren't going to be as high as you thought.

There are two main federal student loan options:

• Direct Subsidized Loans: These loans are available to undergraduate students who demonstrate financial need. The primary benefit is that the federal government pays the interest that accrues while you're in school, during your grace period, and in deferment.
• Direct Unsubsidized Loans: Both undergraduate and graduate students can borrow these loans, and there's no financial need requirement. While these loans are more accessible, they don't have an interest subsidy.

Private small student loan options

Small student loans are available through private online lenders, banks, and credit unions. Private student loan lenders have set minimum loan amounts, typically around $1,000 to $2,000.

It's best to exhaust your federal student loan options before turning to private student loan options, since federal loans offer more benefits and protections. But if you do opt to take out private student loans, be aware of the pros and cons before borrowing.

Pros

• Fixed or variable interest rates available
• Typically no origination fees
• Can get a lower rate than you would on federal loans if you have excellent credit

Cons

• Credit-based, so can be harder to get approved
• Limited repayment and hardship options
• Private student loan forgiveness not available

How to apply for small student loans

After you've decided which type of student loan is best for you, the next step is to apply.

Federal student loans

To apply for federal small student loans, here are the steps you'll need to take:

1. Create a Federal Student Aid (FSA) ID.
2. Gather personal and financial information.
3. Submit the Free Application for Federal Student Aid (FAFSA).
4. Receive a federal financial aid package from the schools that accept you, which can include federal student loans, grants, scholarships, and work-study.
5. Accept the loan amount you need.

Private student loans

The application process for private small student loans will vary from lender to lender, but you can generally expect the following steps:

1. Research private lenders.
2. Prequalify with multiple lenders - this allows you to get a rate quote without affecting your credit.
3. Choose the loan that's best for you.
4. Gather documentation and personal information.
5. Fill out the application.
6. Submit to a credit check.
7. If approved, sign the loan agreement and accept the small student loan.

If you have yet to establish a credit history or your credit score is on the lower end, getting a cosigner with strong credit can improve your chances of approval. Cosigners share legal responsibility for the loan with you, which means they're on the hook for the loan if you can't make your payments.

Managing small student loan debt

Managing small student loans can be much easier than tackling a six-figure balance. Your monthly payments will be lower and you'll pay less in interest when you only borrow a low amount.

However, it's still important to prioritize repayment. Some tips for repaying small student loans include:

• Make biweekly payments: If you cut your monthly payment in half and make biweekly payments instead of 1 monthly payment, you can chip away at the debt faster.
• Make interest-only payments: Private student loan lenders typically give you the option to make interest-only payments while in school. Doing so can lower the cost of the loan.
• Pay by the due date: Whether you take out small student loans or large student loans, missing payments negatively affects your credit score. Signing up for automatic payments ensures you make your payments by the due date, and could even result in an interest rate discount.
• Pay more than the minimum: If you can afford to put more money toward your loan payment each month, you could shave off years of repayment and save money on interest. The example below illustrates how much time and money you could save with a higher monthly payment.

Alternatives to small student loans

If you only need to take out a small amount, there are some viable alternatives to student loans, including:

• Grants: Need-based aid like grants can provide "free money" to help you pay for college, since it doesn't have to be repaid. Submit the FAFSA to see if you qualify.
• Scholarships: Whether the scholarships are need-based or merit-based, you can find additional funding based on your academic excellence, athletic achievements, or artistic talent.
• Work-study: As part of your federal aid award package, you may qualify for work-study, which provides employment opportunities to offset the cost of college.
• Part-time work: You can find additional part-time work through an off-campus job, gig work, or freelancing to earn extra money.
• Family support: Your parents, grandparents, or other family members may be able to provide some financial assistance. If you typically get money from a family member for a birthday or Christmas, consider asking if you can get help for college instead.
• Crowdfunding: If you only need a low amount of student loans, you can harness the power of community and get peers, friends, colleagues, and family to support you via a crowdfunding platform like GoFundMe. 

FAQ

What is the minimum amount for a student loan?

Many private student lenders have a minimum loan amount of $1,000. However, every lender has different requirements, so some private lenders may have higher minimum loan amounts.

Can you get a student loan for less than $1,000?

If you're looking into private student loans, you likely can't borrow less than $1,000. Private lenders often set a minimum loan amount of $1,000 or more. Federal student loans or other financial aid options may help you if you need less than $1,000.

How do I apply for a small student loan?

To apply for small student loans, start by filling out the FAFSA. If your needs aren't covered by federal student aid, you can apply for private small student loans from a private lender to bridge the gap.

Are private loans better for small amounts?

Ideally, it's best to max out your federal student loans before taking out private student loans. But if you need small education loans to cover a gap, taking out small loans with a private lender is more affordable than taking out a large sum.