Private Student Loans

One of the best programs offered to college students is the federal student loan program, which makes it possible for millions of students to pursue higher education. But federal loans don’t always cover tuition and expenses 100 percent. Many times, federal loans only cover the cost of tuition, leaving such necessities as books, supplies, housing expenses, school fees and transportation for the student to cover. To fill in the gap, private student loans provide the funds needed to cover such expenses. Available through banks, credit unions and other private lending institutions, these loans give students the ability to cover the additional expenses associated with going to college.

What You Need to Qualify for a Student Loan

Because banks make private loans, eligibility and approval is based on good credit. To qualify, you’ll need to meet certain credit requirements and show proof of income or employment. Since most college students typically haven’t established credit, you can increase your chances of being approved by applying with a credit-worthy co-signer. In fact, a co-signer with outstanding credit can help you obtain a loan with a lower interest rate, saving you large sums over the life of the loan.

Applying for Student Loans is Easy

Applying for a private student loan is much like applying for a credit card, car loan or line of credit. And since most lending institutions offer them, a bank representative will be able to assist you in the process. You can even apply for a loan online or over the phone. Just be sure to have all the required documentation, such as checking and savings account information, pay stubs and income tax returns, on hand.

Private Student Loan Amounts

The bank or lender determines the exact amount of a private student loan, which is based on the applicant’s credit standing and financial history. Many of these loans will cover up to 100 percent of the cost to attend, minus any other financial aid you’ve received. Most private student loans are variable-rate loans, with interest rates varying by lender and adjust monthly, quarterly or annually. Fees, such as application, origination and repayment fees, will also vary by lender.

Is a Private Student Loan Right for You?

Private student loans are a good option for students who either don’t qualify for federal loan or grant programs, or who have federal loans that only cover the cost of tuition and not the added expenses. They are easy to apply for and, if you have good credit or can co-sign with someone who does, the chances of being approved are high. However, like with any other loan, private student loans incur interest and need to be paid back within a determined time frame. When it comes to repaying your loan, some lenders allow you to defer payments while you’re still in school. Lenders that require you to pay while you’re in school may allow you to make interest-only payments. It’s important to understand the repayment stipulations before applying for a private student loan.