Private Student Loans
A student loan is a special type of low-interest loan that is issued to students in order to help pay for college tuition, books, and other expenses. Student loans are tailored to student borrowers, and as a result, are distinguished from other types of loans by their borrower-friendly application processes, favorable interest rates, and flexible repayment terms. Private student loans are offered by banks and other financial institutions, from leading national lenders to local banks and credit unions, so you will have many options when searching for funding for college. Private student loans are intended to supplement federal student loans, not replace them; for many students, federal loans aren’t enough, and in this case, private loans can be a good final source of funding.
How do I know if I need a private student loan?
Private student loans are a good option if after exhausting your federal loans, scholarships and grants you still have a gap in college funding. For example, let’s take this scenario. A typical student has a $32,000 annual college bill and receives $10,000 in scholarships and other reductions, leaving a balance of $22,000. The student in maximizing his federal loans is able to get $5,500, leaving a balance of $16,500. The parents may then contribute $8500 from their income, savings or parent loans leaving a typical gap of $8,000. The student can use a private student loan to fill that gap. Now, there are many available and interest rates, fees and other terms can vary widely from lender to lender. So, it really pays off to compare among them and to find the most competitive one for you. According to the Chronicle of Higher Education, of the nearly 20 million students attending college 60% of them will borrow loans. If you find you need a private student loan, you should use SimpleTuition to compare loans available for your school and apply for the best private student loan for you.
What are the benefits?
College has never been more important, and yet a college education has never been so expensive. Students and their families currently face this unpleasant conundrum; what’s more, financial aid resources are quite limited at the overwhelming majority of institutions in the country, an issue which only compounds the problem of affording college. Fortunately, private student loan options exist to provide students and families a final source of funding to fill the financial gap between one’s tuition bill and any financial aid received.
Key Facts About Private Loans
- Usually have interest rates that are variable and higher than Stafford loans.
- Often have higher borrowing limits than Stafford Loans.
- Are taken out in the student’s name, usually with a co-signer.
- Require a credit check during the application process.
- Offer deferment of loan payments while the student is in school.
- SimpleTuition provides a free, user-friendly search and comparison tool for anyone looking to finance their educational expenses.
- Enter in basic information and discover a variety of loan options available to you from our lending partners.
- This tool helps you cut through the marketing messages and compare the stats that matter, like interest rates and repayment periods. We even calculate the total cost of the loan for you!
How to Choose the Right Loan for You
Here are a few pointers on how to choose the best private student loan for you. First, compare, compare, compare. There are many different loans out there, and it is extremely important to thoroughly research all of your loan options so you are aware of the specific details of each individual loan. Consider the loan’s APR (Annual Percentage Rate), which bakes in all the costs associated with the private student loan so you can compare one loan to another on an apples-to-apples basis. Be aware of the total cost of the loan, which factors in interest rates and repayment timelines to calculate just how much borrowing will cost you when all is said and done.
Before applying for a private student loan, as we mentioned above, it’s important to compare your options. To search for and compare your loan options, use our student loan comparison tool right on this page. It will provide you with transparency regarding all of your different loan options, and once you find the loan that’s right for you, you can apply for it.
How do I apply for private student loans without a cosigner?
You can apply for most loans even if you don’t have a cosigner. Just use the regular paper or online application. However, it’s important to note: if you don’t have a cosigner, you’ll probably need a good credit history or your loan application may be denied. If you don’t have a cosigner and don’t have a good credit history, you may have better luck with federal student loans, which don’t require either.
What are the benefits of getting private student loans with a cosigner?
Private student loans with a cosigner means you’ll have an easier time qualifying for a student loan and may get a lower interest rate when you do. Getting a private student loan without a cosigner, on the other hand, is quite difficult since the lender may be apprehensive about lending to a student without a cosigner. In addition, your interest rate may be higher, increasing the total cost of your student loan.
What is a private student loan?
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).
How do I know if I need a private loan?
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.
Do I have to file the FAFSA before I apply for a private education loan?
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.
How does the private student loan application process work?
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.
Is there a credit check for private student loans?
Yes. Private loans are personal loans issued to individual borrowers by lending institutions. Much like a mortgage or an auto loan, your credit will determine if you are approved and also what rate (and possibly fees) you may receive. These loans are not guaranteed by the federal government and therefore are treated like any other consumer loan but with a special purpose. Additionally, most lenders will require the presence of a credit-worthy co-signer or co-borrower whose credit will also be checked.
Will applying for a student loan hurt my credit score?
Each time you apply for a loan, whether it is a student loan, a car loan, a mortgage or other, the lender may request your credit report from one or all three credit reporting agencies. Each time an inquiry is made, it is noted on your report. Too many inquiries may have a negative impact on your credit score. However, most recently developed credit scores recognize when a consumer is shopping for the best rates and either ignore multiple inquiries or count them as only one inquiry if they occur within a specific period of time. In such cases, shopping around will have little or no impact on a credit score.
What information do I need to apply for a loan?
In order to complete an application for a private student loan with most lenders, you will need the following information:
- Your full name, social security number and date of birth
- Your permanent address and the number of years you have lived there (no P.O. boxes)
- The amount of your monthly rent or house payment
- Your home phone number
- Your current occupation and position
- The name of your employer and how long you have been employed by them
- The business phone number of your employer
- Your gross annual income
- The contact information for a reference (name, address, home/business phone number)
- The name of your school (or the school the student for whom the loan is for is attending)
- The social security number, contact and employment information for your co-signer (if applicable)
Applying for federal student loans may require somewhat less information, but does require completion of the FAFSA.
Will the money from the private loan be sent to the school or to me?
When you apply for a private student loan, look for whether the loan is certified or uncertified. A certified loan requires verification by your school that you are not borrowing more than the total cost of education, less other aid received. Loan funds for certified loans are generally sent directly to the school. An uncertified loan does not require your school to certify any aspect of the amount borrowed (but will require verification of your enrollment at that school). The loan funds are usually sent directly to you. Make sure to speak with the financial aid office at your school for the school’s refund policy, including how and when the refund would be sent to you.
I don’t have a co-signer. What do I do?
Obtaining a private student loan without a credit-worthy co-signer or your own positive credit history is very difficult. The following information about co-signers might help: Tips on Co-Signing a Private Student Loan.
Our advice would be to try one of the following:
- Talk to the financial aid office at your school, which could help you find options for financing your education.
- Ensure that you have already maxed out all of your federal financial aid options – including loans that do NOT require a co-signer, such as Stafford Loans. This means you need to fill out the Free Application for Federal Student Aid at http://www.studentaid.ed.gov.
- Consider investigating alternative sources of funding for your education, such as scholarship programs, work-study, and more.
- Lastly, you may want to consider reducing the costs of your education.
- Is it possible to take classes part-time so you can work more?
- Consider transferring to a lower-cost school, or to a school able to award more financial aid.
Again, your school’s financial aid office may be able to help here with a work-study job or other grant opportunities.
I still have questions about student loans. Are there more resources I can read?
We have an extensive Student Loan FAQ that covers all sorts of topics that we did not have enough space to cover here.
Types of Student Loans
- Student Loans Home
- 911 GI Bill
- Alternative Schools
- Credit Union
- Flight School
- For Bad Credit
- For Community College
- For Single Mothers
- Funding Graduate School
- GI Bill
- Interest Free
- Low Interest
- Medical School
- No Cosigner
- No Credit Check
- Obama Loan Forgiveness
- Parent Plus
- Part Time Students
- Post 911 GI Bill
- Private Loans with No Cosigner
- Private School
- Subsidized Loans
- Without Cosigner