Private Loans

Consider This

1. Exhaust your eligibility for federal loans before taking a private loan:

  • Private student loans usually have a higher interest rate, and can have a variable interest rate, unlike federal student loans, which have fixed interest rates.
  • Interest rate on a private student loan begins to accrue upon disbursement, unlike subsidized federal student loans which begin to accrue interest after your graduate, drop below half time enrollment, and/or have used up your grace period.
  • Federal student loans offer better repayment and forgiveness options.

2. Check to see how frequently your intended lender compounds interest on private loans. A low interest rate that is compounded daily is usually a costlier loan.

3. Fees charged by some lenders can significantly increase the cost of the loan. A loan with a relatively low interest rate but high fees can cost more than a loan with a higher interest rate and no fees. (Lenders that do not charge fees often roll the difference in the interest rate.) A good rule of thumb is that 3% fees is about the same as a 1% higher interest rate.

4. Private loans require that you have a credit history and verifiable income; if you do not meet the qualifying requirements, a co-signer may be required.  It is better to apply for a private student loan with a cosigner, even if you could qualify for the loan on your own. Applying with a cosigner usually results in a slightly lower rate, because the loans are not as risky for the lender.

5. Keep in mind that private student loans are only available to students whose cost of attendance has not already been met with other aid.