What Are Private Student Loans?

In this article explain what private student loans are, types of student loans, how to apply and eligibility requirements for obtaining student loans.

Private Student Loans

Private student loans, commonly referred to as personal student loans, are non-federal loans offered by private lenders that provide funds to pay for educational expenses. Unlike federal student loans, these loans do not come with the same level of repayment flexibility or borrower protections. Private loans are typically extended by entities like banks, credit unions, state agencies, or educational institutions.

Types of Private Student Loans

1. Undergraduate private loans
2. Graduate private loans
3. Parent loans

Undergraduate private loans

These are loans commonly given to students straight out of high school who are pursuing bachelor degree at a university or a community college. These are the most common type of private loans offered in the US.

Graduate Private Loans

These are loans offered to graduates of degree programs either from a community college or university who would like to further their educational pursuit through a masters or doctorate degree including medical school, master’s of business administration (MBA) programs and law school.

Parent loans

These are loans taken out in the name of the parent or legal guardian of a student they can be used to pay for both undergraduate and graduate programs. They are usually taken out when a prospective student doesn’t have a credit history, as is commonly the case with lenders without prior credit history. It is important to note that the student has no legal obligation to repay the loan; it’s solely in the parent or family member’s name.

How To Apply For Private Student Loans

To apply for private student loans, follow these steps:

1. Check Eligibility:
   • Private lenders assess your creditworthiness. Factors include:
     • Credit Score: Most private lenders require a credit score in the high 600s. A higher score leads to lower interest rates.
     • Income: You or your co-signer must demonstrate stable income.
   • Unlike federal loans, private lenders don’t require the FAFSA form.
2. Find a Lender:
   • Research non-federal lenders such as banks, credit unions, and online entities.
   • Some nonprofit organizations, state agencies, and colleges also offer private student loans.
3. Prepare Documents:
   • Gather necessary information:
     • Social Security Number
     • Financial Forms
     • Employment Details
     • Desired Loan Amount
   • If you have a co-signer, provide their personal and financial information.
4. Apply Directly:
   • Visit the lender’s website or apply via mail or phone.
   • Submit your application with accurate details.
   • If approved, loan proceeds are disbursed directly to your university.

Private Student loan Lenders

Private student loan lenders are companies that provide private student loans to lenders, here are some important lenders:

1. College Ave
2. Sallie Mae
3. Earnest
4. SoFi
5. Citizens Financial Group
6. Custom Choice
7. Funding U
8. LendKey

This is not an exhaustive list as there are other private lenders that provide private student loans to lenders.

Conclusion

Private student loans, offered by lenders, help cover education costs. Eligibility often requires good credit or a cosigner. Interest rates are based on creditworthiness, with flexible repayment options. Loan limits are higher than federal loans. Fees may apply. Understanding terms and responsibilities is crucial before borrowing.