Private student loans are credit-based, non-federal student loans available for qualified students to help cover education expenses when scholarships, grants, and federal student loans are just simply not enough. Private student loans can help you cover up to 100% of your school expenses — not just your tuition and fees, but other acceptable college expenses like rent, textbooks, etc.
Eligibility requirements for private student loans will vary by each lender, but most lenders require you to be a U.S. citizen or permanent resident, as well as attending an eligible school.
Each lender has established credit requirements in order to qualify for a private student loan. Always ask what these requirements are prior to starting an application to ensure that you meet each individual lenders requirement.
Applying with a creditworthy cosigner is always recommended to ensure borrowers qualify for the lowest interest rate possible based on a lenders credit requirements, even if you are creditworthy without a co-signer.
Minimum and maximum loan amounts will also vary with each lender, but many private student loan programs will cover up to 100% of your cost of attendance, less any other financial aid you’ve received.
Your total cost of attendance may need to be certified by your school. Some lenders may calculate their own cost-of-attendance figures, based on information provided by your school of choice.
Most private student loans are variable-rate loans, with interest rates varying by lender. Your interest rate may adjust monthly, quarterly, annually, or at some other interval as designated by your lender.
The interest rate on a private student loan is generally determined by adding a variable index (such as LIBOR or T-bill) to a fixed margin. The margin used to determine your student loan interest rate can vary depending on your creditworthiness. Borrowers who are deemed more creditworthy typically qualify for lower margins and thus lower interest rates.
Fees, like interest rates, will also vary by lender. The types of fees assessed, as well as the amounts charged, will depend on the lender and may also depend on your creditworthiness.
Here are some common lender fees you may run into, but keep in mind that not all lenders will charge all these fees:
Questions to ask when researching private student loan options:
Some private student loan programs will allow you to defer payments while you’re still in school. Others will require you to begin repayment right away or after a certain grace period. Private student loans that require you to make payments while you’re in school may allow you to make interest-only payments. By paying the monthly interest while you’re in school, you’ll keep that interest from being capitalized and added to your principal balance, which can save you thousands of dollars in interest after graduation.
Most private student loans don’t carry any prepayment penalties. A prepayment penalty is a fee assessed if you pay off your student loan early. Be sure to ask the lender if a loan you are applying for carries a prepayment penalty.
Forbearance and deferment benefits allow you to postpone making your student loan payments. Forbearance and deferment options will vary depending on each lender for private student loans. Be sure to ask the lender if a loan has any forbearance or deferment options, as well as the eligibility requirements.