Private Student Loans

Private student loans help bridge the gap between federal financial aid and what your college tuition actually costs. After you’ve maxed out financial aid from other sources – like grants, scholarships, work study, and federal loans – applying for private loans may be the next step in your college financing plan.

Here’s what you need to know before getting started!

Federal vs Private Loans: What’s the Difference?

Federal student loans are funded by the federal government, whereas private student loans come from lenders like banks, credit unions, and state agencies. Private student loans differ from federal student loans in many ways, including:

  • Overall Cost of the Loan. Private education loans tend to cost more, overall.
  • Interest Rates. Private student loan interest rates may be higher than federal rates. Sometimes, private loans have variable interest rates that change over the life of the loan.
  • Loan Repayment Terms. Private student loans generally have less-favorable repayment terms, whereas federal student loans may offer income-based repayment plans and other potential benefits.
  • Borrower Eligibility. Your credit score may be a factor in determining your eligibility for private student loans. You may also need a cosigner. Most federal loans, on the other hand, don’t require a credit check or cosigner.

You should exhaust all government-sponsored financial aid programs before applying for private student loans. That said, sometimes taking out a private student loan is necessary, if federal loans don’t cover the full cost of college.

Finding Private Student Loan Lenders

If you need private loans for college, finding a reliable lender is key. Many banks, credit unions, and other financial institutions offer private student loans. It’s wise to compare interest rates, terms, and conditions for a few top rated private student loan lenders, in order to find the loan that’s ideal for you.

Compare these private student loan lenders:

  • Sallie Mae Student Loans
  • SunTrust Student Loans
  • Student Loans from Citi
  • Wells Fargo Private Student Loans

Apply for a Private Student Loan

Applying for a private loan online doesn’t take long, and you can see your result in a matter of minutes. 

Sallie Me Private Student LoansLooking for last-minute money for college? Check out the Smart Option Student Loan by Sallie Mae, which offers three repayment options and competitive interest rates to fit your financial needs. Learn more and apply today!Associate’s, Bachelor’s, Certificates, Career Training, Graduate Degrees, Medical, Dental, and Health Professions

Not all private student loans are the same, and some lenders may offer loan products, features, and terms that better suit your goals. As you research potential lenders, here are a few key factors to keep in mind:

  • Your Eligibility. Are you looking for private student loans without cosigner requirements? Do you have low credit? Depending on your credit history and eligibility, some private loans may be a more optimal fit than others. In addition to your credit, lenders may look at your citizenship status, your income, whether you are a part-time or full-time student, and other criteria.
  • Loan Cost. Examine factors like the loan’s interest rate, interest type (fixed or variable), and fees associated with taking out the loan. All of this will figure in the total cost of your loan. For example, be wary of choosing a low, variable interest rate over a higher, fixed rate – particularly if you plan on paying off your loan over a period of many years. Variable rates can spike with the market, meaning you end up paying more than you bargained for.
  • Loan Features. Some private loans offer potential benefits and features like cosigner release, deferment due to financial hardship, or early repayment options. Many lenders even offer an autopay discount, which is usually a reduction of 0.25 or 0.50 percent off the interest rate, if you sign up for automatic payments. Compare several lenders to see what features may be available.

How to Apply for Private Student Loans

Before turning to private student loans, you should always submit your FAFSA and maximize any federal grants or loans you may be eligible for. And don’t forget to apply to scholarships! If it turns out that additional loans are necessary, you’ll need to start the process of choosing a prospective lender and applying for private student loans.

If you’re eligible, here’s how to get a private student loan:

1. Get Ready to Apply. Generally, you can apply for private student loans online. To start, you’ll need to prove your basic eligibility – like citizenship and college enrollment status.

2. Submit Documentation. You’ll need to provide your personal and financial information to your lender. Your lender may require documentation like your Social Security number, a pay stub for proof of income, your monthly housing costs, your school’s cost of attendance, the amount of financial aid you’ve already received, your cosigner’s details (if applicable), and other information.

3. You’ll Receive a Decision. Your lender will need to process your application and analyze your financial and eligibility information, to let you know whether you’re approved. If you’ve applied for your private loan online, you may receive a result pretty quickly – sometimes in minutes! In other cases, a lender may need more information from you to continue processing your decision.

4. Choose and Accept the Loan Terms. Once you’ve been approved for the loan, you’ll need to decide on your interest rate type (fixed or variable), loan term, and repayment plan. You and your cosigner (if you have one) will then sign the loan agreement.

5. Wait for Disbursement. Your private student loans will be sent directly to your college or university, which will schedule disbursement. If you have borrowed more than your tuition actually costs, your school will generally refund the difference to you. You can return that money to your lender or use it to cover other college costs, like room, board, or your textbooks. It’s always best to borrow the minimum amount you need to cover your education-related expenses.

Private Student Loans Are an Important Responsibility

Taking out private loans for college may help make your education possible, so you can work toward new career goals and pursue a rewarding future. However, it’s important to understand your risks and responsibilities as a borrower, to ensure you are ready to take out and eventually repay your private loans.