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Private Student Loans

An Overview of Private Student Loans

Private student loans, or alternative loans as they are sometimes referred to, are not part of any federal loan program. They involve you taking out a loan from a student lender to help pay for college. They do not have interest rates that are set by the government (like PLUS or Stafford loans).

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Private Loans and Other Financing Options

You typically want to exhaust your other financing options before taking out private loans. Make sure you've done a search for scholarships and taken advantage of Stafford loans before getting private loans. Private student loans are typically a better option than paying for college on your credit card, though.

Private Student Loan Limits

In most cases, student lenders will allow you to borrow up to the cost of attendance minus other financial aid. Some will allow for expenses like a new computer or study abroad. You will need to check with the specific lender regarding the loan limits. As a good rule, you want to minimize the amount of student loans that you take out. Remember, you will have to pay this money back at some point.

Private Student Loan Interest Rates

There are no set interest rates for private student loans. Interest rates may differ from lender to lender. They will also differ depending on your credit score, your parents' credit score (if they are a co-signor), and other factors decided upon by the specific lender. Moreover, these interest rates tend to be variable interest rates, meaning that they can change over time, based on changes in certain financial indexes (like the PRIME rate and the LIBOR rate).

Upfront Fees on Private Student Loans

Unlike federal loans, there are no standardized fee structures for private loans. The upfront fees may differ from lender to lender. Your credit history or your parents' credit history may also affect the upfront fees you are charged.

Borrower Benefits for Private Student Loans

Many lenders will offer rewards or benefits as part of their loan package. Examples of borrower benefits include graduation benefits, interest rate reductions for on-time payments or auto-debiting on your bank account. It's important that you are realistic about whether you will actually earn these benefits or rewards. What are the chances you will make 48 on-time payments in a row? They may be low. What are the chances you will earn the graduation benefit? We hope the chances are high that you will get this one. Our Student Loan Marketplace can help you compare loans with and without Borrower Benefits.

Applying for a Private Student Loan

You do not need to complete the FAFSA to apply for a private student loan. However, we do recommend that you complete a FAFSA and take advantage of the federal loan programs (e.g., Stafford and Perkins loans) prior to applying for private loans. Many lenders will require that you have a co-signer on your loan. A co-signer is basically someone with better credit than you who takes responsibility for paying back the loan if you are unable to. A co-signer with a good credit history will typically allow you to get a much better interest rate on your private loans. For most students, your parents are going to be your co-signers.

Many financial aid offices will provide a Lender List for you to use as a reference in your search for a lender. The school will also provide a document explaining how it selected this list. It can often be a good idea to use this list or to use a Student Loan Comparison tool that allows you to investigate a number of lender options and make an educated decision about which is right for you. You are not required to use a lender off the school's Lender List. You definitely should do some research and compare your student loan options.

Find a Private Student Loan

You can use our Student Loan Marketplace to find and compare student loans!