Types of private student loans
There are private student loans for undergraduates, graduates, students pursuing certificates, dental, medical, and health professions students, as well as loans for graduates studying for the bar exam, or relocating for medical or dental residencies. There are also parent loans, taken out by a parent, relative, or another creditworthy individual (not the student) that can help you pay for college.
Private student loans are issued by a bank or financial institution, (as opposed to federal student loans, which are offered by the government).
What a private student loan can be used for
Private student loans—as well as federal student loans—should be used to pay for your education expenses:
- Tuition
- Room and board
- Fees
- Books
- Supplies and equipment
- Computers and electronics for school
- Transportation
- Personal needs at school
Don’t borrow more than you need. Your federal or private student loans shouldn’t be used for vacations, entertainment, or items that aren’t directly needed for your education. Only borrow what you can afford to pay back later.
Eligibility for private student loans
Federal and private student loans use different eligibility criteria.
Federal student loans, offered by the government, are based on your financial and family situation, as provided in your FAFSA.
- For Subsidized Loans, the US Department of Education pays the interest while the student is in school at least half time, grace (if offered) and authorized deferment periods.
- For Unsubsidized Loans, the borrower is responsible for paying interest during the in-school or grace periods, or a post-school deferment.
Private student loans, offered by banks and financial institutions, are based on your credit profile. Your credit—and your cosigner’s credit—are evaluated, along with other information provided on your application.
Federal student loans usually have lower interest rates than private student loans and can offer different benefits. You should generally consider them first, and then take out a private student loan if you still need money for college.
Applying for private student loans
You can apply for private student loans directly from each lender’s website. You should apply after you’ve made your school decision and once you know how much you need to borrow, so you won’t have to submit separate student loan applications for schools you’re considering.
There’s no cost to apply for private student loans.
- You’ll fill out basic personal information and financial information.
- You’ll be asked to choose the interest rate type and repayment option for your loan.
- You generally can apply with a creditworthy cosigner during the application process. If your parent is a cosigner, they’ll have to supply their financial information in the student loan application.
Our private student loan application process only takes about 15 minutes to receive a credit result.
Understand the student loan application process
How much should you borrow
In terms of how much you should take out for college, borrow only what you think you can afford to pay back later. Think about your future career and how much you may make in your chosen field. The College Board® suggests that your monthly payments should be no more than 10 – 15% of your starting monthly salary. To help estimate your future income potential, you can visit the US Department of Labor at bls.gov.
The amount of money you can receive from a private student loan varies by lender. If your lender requires “school certification,” your school verifies your enrollment and ensures that you’re not borrowing more than the cost of attendance (including your federal student loans, scholarships, and grants).
The role of credit in private student loans
Private student loans are credit-based. That means that a lender will look at your history of borrowing money and paying it back. Federal student loans, on the other hand, are generally based on financial situation and federal guidelines rather than credit. (Note: A credit check is conducted for the Federal Parent PLUS Loan.)
If you don’t have a credit history, you’ll need a cosigner. A cosigner can be a parent, relative, or any other creditworthy individual. Their good credit history may help you get a loan.
Along with you, a cosigner accepts responsibility for repaying your private student loan. If you keep your loan in good standing, making on-time payments, it can be a great way to build your own credit. If you fall behind or don’t pay back your loan, your cosigner’s credit can suffer if they don’t make payments.
What happens after applying for a private student loan
After you apply for our private student loans, you’ll typically get a credit approval within 15 minutes of applying. You’ll also get notices to review, accept, and e-sign your loan terms.
Your school will have to certify your loan amount before it can be disbursed (paid to the school). Then you’ll get a Final Disclosure spelling out the details.
You have the right to cancel your loan before it’s disbursed (sent) to your school.
Learn what happens after your loan is approved