Ibrahim Gardner
Private student loans are available for students enrolled in undergraduate, graduate, certificate, dental, medical, and health profession programs. They are typically issued by banks and financial institutions, as opposed to federal student loans, which are offered by the government. Private student loans can be used to cover up to 100% of school-certified costs, including tuition, housing, books, and other expenses. When considering a private student loan, it is important to research the various options, compare interest rates, and understand factors such as loan limits, fees, and repayment plans. Additionally, having a cosigner can increase the chances of approval and help secure a better interest rate.
| Characteristics | Values |
|---|---|
| Private student loan options | Sallie Mae, Citizens Student Loan, College Ave Student Loans, Ascent, Edvisors, Credible, Earnest Private Student Loans, Custom Choice, ELFI, etc. |
| Loan amount | Up to 100% of school-certified costs or $225,000, whichever is lower |
| Interest rates | Around 5.09% and above |
| Fees | Application, origination, disbursement, prepayment penalty, late fees, etc. |
| Loan term | 5 to 12 years |
| Eligibility criteria | Creditworthiness, credit score, income, etc. |
| Application process | Online |
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What You'll Learn
Private student loan options
Private student loans are typically issued by banks or financial institutions. They can help fill in any gaps in funding after you've exhausted federal aid.
There are several private student loan options available, and it's important to research which option is best for you. Some key information to understand includes annual and cumulative loan limits, interest rates, fees, and loan terms.
- Sallie Mae: Offers a range of student loans for undergraduate, graduate, and specialty degrees, accommodating part-time students and those pursuing continuing education courses or earning professional certifications.
- Ascent: Offers two private student loan products, one for borrowers with a co-signer and one for independent students without a co-signer or credit history.
- College Ave Student Loans: Offers loan options for undergraduates, graduate students, and parents, with flexible repayment options and no application or origination fees.
- Citizens Student Loan™: Provides flexible repayment options and covers up to 100% of school-certified costs.
- Custom Choice Student Loans: Best for upperclassmen who can take advantage of the 2% Grad Reward and returning borrowers who can benefit from a pre-filled application and income verification waiver.
- Edvisors: A platform to compare private student loan options and view competitive interest rates.
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Eligibility criteria for federal and private loans
Federal and private student loans have distinct eligibility criteria. Federal student loans are provided by the government, while private student loans are offered by banks and financial institutions.
To be eligible for federal student loans, you must meet the criteria outlined in the FAFSA (Free Application for Federal Student Aid). The FAFSA assesses your financial information to determine eligibility for need-based aid. Federal student loans are typically available to US citizens, permanent residents, or eligible non-citizens. Additionally, you must be enrolled in an accredited or recognised degree-granting program and meet the school's academic requirements. Federal Direct Loans require at least half-time enrolment. Eligibility for Federal Stafford Loans and subsidized loans does not depend on the borrower's credit score, but Federal PLUS loans require a good credit history.
Private student loans, on the other hand, are based on creditworthiness. Your credit score, income, debt-to-income ratio, and employment history are considered. Private lenders may also have their own unique eligibility requirements, and it is essential to research and compare different lenders. Private student loans typically require the borrower and/or cosigner to satisfy citizenship requirements, and cosigners can improve your chances of approval and obtaining a better rate.
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How to get the best interest rate
Yes, you can get a student loan for a private university. There are a variety of private student loan options, and it is important to research which option is best for you.
- Exhaust federal financial aid options first: It is recommended to max out your federal student loan options before taking out a private student loan. Federal student loans typically have lower interest rates and come with special benefits and protections.
- Compare private student loan providers: Use student loan comparison sites such as Credible, Edvisors, and NerdWallet to find the lowest interest rates that match your criteria.
- Consider a co-signer: Applying with a co-signer can increase your chances of approval and help you get a better interest rate.
- Shop around: Compare rates from different private lenders to ensure you get the lowest rate you qualify for.
- Build your credit score: Private student loan interest rates are typically determined by your credit history. The higher your credit score, the more likely you are to qualify for lower interest rates.
- Look for fixed-rate options: Variable interest rates can change over time, while fixed interest rates stay the same throughout the loan period. Fixed-rate loans offer more stability and predictability in your payments.
- Repayment options: Some lenders may offer lower interest rates if you choose to make interest payments while in school or select a shorter loan repayment term.
- Discounts: Some lenders may offer interest rate discounts for specific conditions, such as enrolling in automatic payments or meeting certain creditworthiness criteria.
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Loan repayment options
Federal Loans
Federal student loans are required by law to provide flexible repayment options. These include income-based repayment plans, income-contingent repayment plans, loan forgiveness, and deferment benefits. Federal loans generally have origination fees, but they are available to students regardless of their income. Federal loans are typically based on a student's financial situation and federal guidelines, rather than credit.
Private Loans
Private student loans are credit-based, meaning lenders will look at the borrower's history of borrowing and repaying money. Private loans may have variable interest rates, which can increase over the life of the loan. Private lenders are not required to provide the same flexible repayment options as federal loans, but some do offer flexibility.
Private lenders may offer a range of repayment options, including:
- Immediate repayment, with monthly interest-only payments while in school.
- Deferred repayment, with no payments required while in school.
- Interest-only payments during school, followed by principal payments after graduation.
- Flexible repayment terms, allowing borrowers to choose a repayment period between 5 and 12 years.
- No late fees or prepayment penalties.
- Loan forgiveness or incentives for certain professions, such as nursing.
Some private lenders may also allow borrowers to skip one payment every 12 months or offer a grace period after graduation before repayments begin.
Co-signers
For both federal and private loans, borrowers with bad credit or no credit history may need a co-signer with good credit. A co-signer can be a parent, relative, or any other creditworthy individual who agrees to take responsibility for repaying the loan if the borrower fails to make payments.
It is important to carefully consider loan repayment options and understand the terms and conditions before taking out any student loan.
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How to apply for a private student loan
Private student loans are offered by banks and financial institutions and are based on your creditworthiness. Your credit—and your cosigner’s credit—are evaluated, along with other information provided in your application. Applying for a private student loan with a creditworthy cosigner may increase your chances of approval and may help you get a better rate.
Before applying for a private student loan, it is recommended that you first exhaust all other financial aid alternatives, including grants, scholarships, and federal student loans. You can fill out the FAFSA to determine eligibility for federal loans.
There are a variety of private student loan options, and it is important to research which option is best for you. Key information to understand includes being aware of the annual and cumulative loan limits, interest rates, fees, and loan terms for the most popular private student loan programs.
Credible and other student loan comparison sites provide tools to help you find loans that match your criteria. You can compare lenders' interest rates, as well as any other perks offered.
Once you’ve found a couple of lenders, you can compare their private student loan options to see what each offers. Consider whether they offer manageable payments, access to your FICO® Credit Score, or other benefits that make their particular student loans valuable.
You can apply for private college loans directly from each lender’s website. You should apply after you’ve made your school decision and once you know how much you need to borrow.
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Frequently asked questions
Yes, there are private student loans for students in undergraduate, graduate, certificate, dental, medical, and health profession programs.
Some private student loan options include Sallie Mae, Citizens Student Loan, Ascent, and College Ave Student Loans.
You can compare lenders by looking at their interest rates, fees, and loan terms. You should also confirm that the lender works with your school of choice.
Private student loans can help fill in funding gaps that federal loans may not cover. They can also offer more flexibility in terms of repayment options and loan amounts.
Private student loans typically have higher interest rates than federal loans and may have different eligibility criteria. They are also based on your creditworthiness, so you may need a cosigner to get approved.
