Private Student Loans
Private student loans are a source of college funding intended to supplement (not replace) federal student loans. However, for many students, federal loans aren't enough to cover college costs. In this case, private student loans can be a good option.
How Much Can You Borrow?
You should only borrow what you absolutely need, not a penny more. Private loans are available to cover up to the full cost of attendance, minus any financial aid received by the student. For example, if college costs $20,000/yr and you have been offered a financial aid award of $12,000, you may borrow up to $8,000 for that year.
Key Facts
- Private student loans usually have interest rates that are variable and higher than Stafford Loans.
- They often have higher borrowing limits than Stafford Loans.
- They are taken out in the student's name, usually with a co-signer.
- A credit check is required during the application process.
- Loan payments can be deferred (postponed) while the student is enrolled in school.
How to Apply
Use SimpleTuition's loan comparison tool to search, compare, and apply for the best student loan for you. Here are some tips on how to select the right private student loan:
Compare Private Student Loans
There are many private loans available, and interest rates, fees, and other terms can vary widely from lender to lender. So it really pays off to compare among them!
Look at the APR - The Annual Percentage Rate
("APR") on a loan bakes in all the costs associated with the loan so that you can compare one loan to another on an apples-to-apples basis. Interest rate alone is not an adequate point for comparison. For example, a loan with a high interest rate might look worse than a loan with a lower interest rate, but high fees on the lower-rate loan mean that it might actually be more expensive. The APR would reflect this difference.
Compare Total Cost ("Price") of the loan
This takes repayment terms such as interest rates and timeline for repayment into consideration. Your need for $5k today may cost you considerably more if paid back over the course of 10 years. APR expresses a similar point of comparison, but it's often useful (and sobering) to see how much a loan might cost you over time. Remember loans with shorter repayment terms will usually cost less than those with longer repayment terms.
Apply with a creditworthy cosigner
In the current credit crisis a cosigner will almost always be required for an application to get approved. And not just anyone will fit the bill the cosigner must have strong credit (credit score of 700 or higher) and verifiable income.
Applying for a Private Loan
After selecting the lender of your choice at SimpleTuition, you can either call the lender via the toll free number listed, or click through to the lender's site to begin an application. The approval and processing of applications varies greatly from lender to lender so it is hard to put a timeline to it. However, some lenders offer e-signatures, which will allow you to complete the process online and receive your funds faster. Some banks will mail the necessary documents to you to complete the loan. As with federal student loans, you will be required to sign (or e-sign) a promissory note whereby you agree to accept the terms of the loan and then repay it.
FAQs
A private loan is a non-governmental loan made from a bank to an individual for the purposes of paying for college expenses such as tuition, room and board and other associated costs. Traditionally, private student loans are used to cover unmet need or the "gap" (costs not covered by scholarships or other loans offered by your school).
Private student loans are an excellent, affordable way of paying for education costs that are not covered by other aid received from your financial aid office.
Many students and families use private loans to supplement other aid and to cover costs associated with the estimated family contribution, or EFC. In some cases, you can also use private loans to cover any outstanding balances owed to your school.
No, you are not required to file a FAFSA before applying for a private loan. This may make it more convenient to finance a large portion of your tuition bills. However, if you have filed, you may want to exhaust other forms of aid (such as federally guaranteed Stafford loans) before taking out a private loan.
After selecting the lender of your choice at SimpleTuition, you can either call the lender via the toll free number listed or click through to the lender’s site to begin an application. The approval and processing of applications varies greatly from lender to lender so it is hard to put a time-line to it. However, some lenders offer e-signature, which will allow you to complete the process online and receive your funds faster. Some banks will send or express mail the necessary documents to you to complete the student loan.
As of February 14, 2010, a new form is required before a private loan can be disbursed. In compliance with the Federal Reserve and Department of Education rules and regulations, students who borrow private loans are required to complete the Private Loan Self-Certification Form for each loan. This form is available at your financial aid office or directly from the Department of Education. As with federal student loans, you will be required to sign (or e-sign) a promissory note for each private loan whereby you agree to accept the terms of the loan (rate/fee/APR/repayment) and then repay it.
To increase your chances of approval and possibly improve the rate you receive, you are strongly recommended to apply with a credit-worthy co-signer. Some lenders require you to apply with a co-signer regardless of your income or credit rating. You'll need to look at each loan program for these requirements. Applying with a co-signer may also help you receive a lower interest rate and better terms on your loan offer.
How do I know if I need a private loan?
Do I have to file the FAFSA before I apply for a private education loan?
How does the private student loan application process work?
Why should I use a co-signer for a private student loan?
A private loan is a non-governmental loan made from a bank to an individual for the purposes of paying for college expenses such as tuition, room and board and other associated costs. Traditionally, private student loans are used to cover unmet need or the "gap" (costs not covered by scholarships or other loans offered by your school).
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Finding the right student loan doesn't have to be a complicated process. Use SimpleTuition's resources to learn the top tips for getting the best student loan results.
