Private student loans are a great way to finance the tuition not covered by Financial Aid, or to cover your entire Cost Of Attendance (COA) at your school. However, there are often many questions surrounding these loans and we have included an FAQ list below. If you have any additional questions please do not hesitate to post a question in our comments section at the end of the article.
What are the eligibility requirements for Private Student Loans?
Unlike Federal Student Loans, Private Student Loans are based on creditworthiness. For this reason,various fees and interest rates will depend on the borrower’s credit history and the lender’s approval criteria.
General eligibility criteria for Private Student Loans include:
- Borrower must be a U.S. citizen or permanent resident
- Borrower and co-signer (if applicable) will both need a valid social security number
- Borrower and co-signer (if applicable) must pass a credit check
For more detail on interest rates and creditworthiness please check out our more detailed article, Private Student loans Interest Rates.
Do I need a co-signer for a Private Student Loan?
Although it is not required many times a lender will place your application in a “pending” status and ask you to find a credit worthy co-signer to approve your loan. This means that both you and your co-signers credit will be checked.
How much can I borrow?
You are allowed to borrow up to the total Coast of Attendance (COA) at your school minus Scholarships, Grants and other aid. This is determined by the Financial Aid Office at your school and can easily be seen in your Financial Aid Award letter. We have provided an example below showing that this student would be eligible for $7,000.00 in Private Loan funding as this is the shortfall in tuition that was not covered by Financial Aid.
What are the interest rates?
It is very hard to determine your exact rate will be until you apply. However, you can get a general feel for what your rate might be based on your and/or your co-signers credit report. If you have a history of making payments late, overdrawn accounts, etc…then you will more than likely have a higher interest rate or be denied for the private student loan all together. For more detail on interest rates and creditworthiness please check out our more detailed article, Private Student loans Interest Rates.
Do I need to be in school to receive my Private Student Loan?
Yes. Private lenders will generally conditionally approve you for your loan and the funds will not disburse on your account until your enrollment verification has been sent to the lender. Once your enrollment and positive attendance in school have been verified the lender will then disburse the funds to your school first.
How will I receive my money?
Private student loans are sent to your school first, applied to any unmet direct coast associated with tuition and then disbursed to you in the form of a paper check or Electronic Funds Transfer (EFT) should your school have the option for routing funds electronically.