Non-Certified Student Loans

non certified student loansThe terminology that banks use in order to explain their products can be a little baffling to students, especially those who know very little about the financial marketplace. These students may just want to borrow money for school, and when they’re asked if they’d like non-certified student loans, rather than certified options, they are left to wonder what in the world these terms mean.

The Uncertified Student Loan Model

Typically, when a bank provides an education loan, the lender determines how much money the school charges that student, and the required funds are sent directly to the school. Even though the student is required to pay that loan back, the bank and the school work as administrators of the loan, ensuring that the money is used only for the student’s education. Loans that work this way are known as certified loans.

An uncertified student loan, on the other hand, is a private matter between a student and a bank. These loans aren’t dependent on the cost of the student’s education, and the loans aren’t typically handed directly to the school. Instead, a non-certified educational loan amount is set by the student, and the funds go directly from the bank to the student.

Loans like this are helpful for students who face debts that have little to do with tuition, and many students have this need. According to U.S. News and World Report, for example, room and board can cost more than $10,000 at some schools, and rents in the private market can also be prohibitively expensive. Students hoping to use federal loans to cover these costs, or those who hope to use a certified loan, may bump up against lending limits.

Similarly, the cost of textbooks has more than doubled since the year 2001, with no end in sight, according to Bloomberg. Students who want to use their loans to pay these fees may simply be out of luck, or they might also find that their federal loans max out before they’ve purchased everything they need. For students like this, an uncertified student loan may be a better choice.

Finding Uncertified Student Loan Lenders

In the past, uncertified loans were relatively common, but a variety of changes have made them a little scarce, such as:

  • Rising interest rates
  • Lack of qualified borrowers
  • Tightening credit market
  • Bank consolidations

Some banks may want to tie the amount borrowed to the amount needed for school, ensuring that the loans stay relatively small, so they have a better chance of being paid back. Students might also balk at the idea of noncertified school loans, as they tend to have higher interest rates and more fees involved.


Types of Student Loans