Private Loans: Financing Options
Private Education Loans
There are a variety of lenders that offer non-federal, or private, education loans. These loans are typically borrowed by students who are not eligible or do not qualify for federal loans or who have exhausted their federal loan eligibility. Private loans often carry higher interest rates and fees than federal loans and may have less attractive repayment terms. Approval of the loan is typically based on your credit rating and debt-to-income ratio and may require a co-signer. The interest rates are variable, meaning they can change on a monthly basis, and are determined by the information in your credit report.
Because the interest rates for Federal Direct Stafford and PLUS Loans tend to be the lowest rates available over the long term, we recommend that you exhaust your Federal loan eligibility before considering a private loan. Always consider the long-term cost of the loan, interest rates, and approval requirements before you begin the application process.
If after exhausting all sources of federal funding you decide to borrow a private loan, ask questions and compare lenders to ensure you are making the best choice for you.
Looking for a Private Loan?
Here Are Some Questions You Should Ask:
- Interest Rate:
- What is the current rate?
- Is it fixed or variable?
- If variable, how often will it be adjusted?
- Is there an interest rate cap?
- Are there reduced interest rates for on-time payments?
- When does interest capitalize and how often?
- Will I need to pay the interest while enrolled in school?
- Will having a co-signer lower the interest rate?
- Fees:
- Is there an application fee?
- Is there a disbursement fee?
- Are there any repayment fees?
- Is a co-signer required?
- Are there any enrollment requirements (Full-Time, Half-time, less-than half-time, Satisfactory Academic Progress)?
- Repayment:
- When does repayment begin?
- What is the length of the repayment term?
- What will the minimum payment be?
- Is there a pre-payment penalty?
- Are there options available to postpone payment in the event of financial hardship?
- Disbursement of Funds:
- How long does it take for the funds to disburse to the school?
- Will the loan funds be sent electronically or by check?
- If sent as a check, will it be payable to the student, or the school?