In a significant shift within the private student loan market, Discover has ceased offering new student loans. This change, effective as of January 31, 2026, left many borrowers seeking alternatives. The company’s decision to sell its approximately $10.1 billion private student loan portfolio in marked the end of an era for this once-prominent lender.
The landscape of private student loans is evolving, and understanding these changes is crucial for current and prospective borrowers. Whether you’re managing an existing Discover loan or exploring new options, this guide will help you navigate the current market.
The reasons behind Discover’s exit from student loans
Discover’s departure from the student loan market was influenced by several factors. The company faced federal scrutiny for years, with the Consumer Financial Protection Bureau issuing consent orders in 2015 and 2026. These orders highlighted issues such as overstated minimum payments, inaccurate tax information, and illegal collection tactics. The 2026 order required Discover to provide at least $10 million in consumer redress and pay a $25 million penalty.
Beyond regulatory challenges, student loans represented a relatively small portion of Discover’s The company’s focus on credit cards and banking made the student loan portfolio less strategic. The acquisition of Discover by Capital One in 2026 further solidified this shift in focus.
What current Discover student loan borrowers need to know
If you already have a Discover student loan, rest assured that your loan terms remain unchanged. Your interest rate, balance, and repayment schedule stay the same. However, the servicing of your loan has transitioned to Firstmark Services. Borrowers need to create an account with Firstmark to manage their loans and make payments.
It’s important to note that Discover’s unique perks, such as a 1% cash reward for good grades and a 0.25% auto-pay rate discount were specific to Discover-originated loans. As a servicer, Firstmark does not offer new borrower rewards or issue new loans.
Top alternatives for private student loans
With Discover no longer in the student loan business, several other lenders compete for borrowers. Here are some top alternatives to consider:
College Ave is known for offering some of the lowest rates available, with flexible repayment terms ranging from 5 to 20 years. They also provide in-school deferment or interest-only payment options.
Sallie Mae one of the largest private lenders, offers competitive rates and broad eligibility criteria. They are a well-established option for many borrowers.
Ascent stands out by offering both cosigned and non-cosigned loans. They also provide options for juniors and seniors that consider factors beyond just credit scores.
Earnest is recognized for its rate transparency and flexible repayment plans. They cater to borrowers looking for customized loan options.
ELFI offers competitive fixed rates, particularly for borrowers with strong credit histories.
Before exploring private loan options, it’s crucial to maximize federal student aid by filing the FAFSA. Federal loans offer fixed rates and access to income-driven repayment and loan forgiveness programs, which are not available with private loans.
The shifting landscape of private student loans
Discover’s exit from the student loan market reflects broader trends in the private lending sector. Fewer banks are willing to originate these loans, making comparison shopping more critical for families covering the gap between financial aid and the cost of attendance.
As the market evolves, staying informed about the latest rates, lenders, and refinancing options is essential. Resources like The College Investor track these changes to help borrowers make informed decisions.
