Private student loans help bridge the gap between federal financial aid and what your college tuition actually costs. First, max out financial aid from other sources – like grants, scholarships, work study, and federal loans. Then, 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 STUDENT LOANS
Federal student loans are funded by the federal government, whereas private student loans come from lenders like banks and credit unions. Other differences include:
- 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 loans generally have less favorable repayment terms. Federal student loans may offer income based repayment plans and other 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 financial aid programs before applying for private student loans. That said, you might need a private loan if federal loans don’t cover the full cost of college.
FINDING LENDERS
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 lenders to find the loan that’s ideal for you.
COMPARE THESE PRIVATE STUDENT LOAN LENDERS:
- Sallie Mae
- SunTrust
- College Ave
- PNC
- Citizens
APPLY FOR A LOAN
Applying for a private loan online doesn’t take long, and you can see your result in a matter of minutes. Apply with one of our loan partners online:
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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. 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 auto pay discount, which is usually a reduction of 0.25 or 0.50 percent off the interest rate. 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 qualify for. And don’t forget to apply to scholarships! If it turns out you need more funds, start the process of choosing a lender and applying for private student loans.
IF YOU’RE ELIGIBLE, HERE’S HOW TO GET A PRIVATE STUDENT LOAN:
- 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.
- Submit Documentation. You’ll need to provide your personal and financial information to your lender. Your lender may require documents like your Social Security number, a pay stub for proof of income or your monthly housing costs. They may also as for your school’s cost of attendance, the amount of financial aid you’ve already received, your cosigner’s details (if applicable), and other information.
- 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 move forward.
- 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.
- Wait for Disbursement. Your private student loans will be sent directly to your college or university. 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 you could 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. College may help you achieve new career goals and pursue a rewarding future. But, it’s important to know your risks and responsibilities as a borrower. You need to ensure you are ready to take out and eventually repay your private loans.