View Full Version : Private Student Loans

08-12-2011, 09:11 PM
Private Student LoansPrivate student loans are credit-based, non-federal student loans that can help you cover any school expenses you have remaining when scholarships, grants, and federal student loans aren’t enough.
Many private student loans will help you cover up to 100% of your school costs — not just your tuition and fees, but other acceptable college expenses like rent (or room and board), textbooks, a laptop, and your trips home.



U.S. citizen or permanent resident
Enrolled at a lender-eligible school
Creditworthy (or applying with a creditworthy co-signer)
Eligibility requirements for private student loans will vary by lender, but most private loan programs require you to be a U.S. citizen or permanent resident. You’ll also need to be attending a lender-eligible school.
Because private student loans are credit-based loans, you’ll need to meet credit requirements, which vary by lender. In general, you’ll need to provide a credit history, as well as income and employment information.
Since most college students typically have little or no established credit, you can increase you chances of meeting a lender’s credit requirements by applying with a creditworthy co-signer.
Loan AmountsMinimum and maximum loan amounts will also vary by lender. But many private student loan programs will cover up to 100% of your cost of attendance, less any other financial aid you’ve received.
Your total cost of attendance may need to be certified by your school. Some lenders may calculate their own cost-of-attendance figures, based on information provided by your school.
Rates & FeesMost private student loans are variable-rate loans, with interest rates varying by lender. Your interest rate may adjust monthly, quarterly, annually, or at some other interval as designated by your lender.
The interest rate on a private student loan is generally determined by adding a variable index (such as LIBOR or T-bill) to a fixed margin. The margin used to determine your student loan interest rate can vary depending on your creditworthiness. Borrowers who are deemed more creditworthy typically qualify for lower margins (and thus lower interest rates).
Fees, like interest rates, will also vary by lender. The types of fees assessed, as well as the amounts charged, will depend on the lender and may also depend on your creditworthiness.
Here are some common lender fees you may run into, but keep in mind that not all lenders will charge all these fees:

Application Fees: Fee charged in order for you to apply for a private student loan. Paying an application fee doesn’t guarantee approval of your application.
Origination Fees: Fee charged in order for a lender to issue you (“originate”) your private student loan. Origination fees are often added into your loan amount. The origination fee you pay may vary depending on your creditworthiness — borrowers with stronger credit may pay lower origination fees than those borrowers with weaker credit.
Repayment Fees: Depending on your creditworthiness, some lenders may assess a repayment finance charge at the time that your private student loan goes into repayment.
RepaymentQuestions to ask when you’re researching your student loan options:

When does repayment begin?
Are there any prepayment penalties?
Are there any forbearance or deferment benefits?
Repaying Your Private Student LoanSome private student loan programs will allow you to defer payments while you’re still in school. Others will require you to begin repayment right away or after a certain grace period.
Private student loans that require you to make payments while you’re in school may allow you to make interest-only payments. By paying the monthly interest while you’re in school, you’ll keep that interest from being added to your principal and capitalized, which can save you thousands of dollars in interest once you graduate.
Prepayment PenaltiesMost private student loans don’t carry any prepayment penalties. A prepayment penalty is a fee assessed if you pay off your student loan early.
Forbearance & DefermentForbearance and deferment benefits can allow you to postpone making your student loan payments when you encounter financial hardship, such as losing your job. Unlike federal student loans, private student loans don’t come with any automatic forbearance or deferment benefits; these benefits will vary by lender.
While some lenders may offer forbearance and deferment benefits, others offer no forbearance or deferment options, while still others may address forbearance requests from borrowers on a case-by-case basis.
Before ApplyingBefore you apply for a private student loan, make sure you’ve taken advantage of all your free-money options and federal financial aid first. Since private student loans are typically more costly than federal student loans, you want to make sure you’ve taken advantage of all your low-cost federal student loan options first — Perkins student loans, [URL="http://www.nextstudent.com/federal-student-loans/stafford-loans/"]Stafford student loans (http://www.nextstudent.com/get-a-student-loan/), Grad PLUS loans (http://www.nextstudent.com/federal-student-loans/grad-plus-loans/) for graduate students, and PLUS loans (http://www.nextstudent.com/federal-student-loans/plus-loans/) for parents.

Apply for scholarships and free money. The NextStudent Scholarship Search Engine (http://www.nextstudent.com/scholarships/), powered by Scholarships 101, lets you search our database of more than 6.2 million scholarships (http://scholarships101.com/) valued at over $16 billion absolutely free.
Apply for low-cost federal student loans. You’ll need to complete the FAFSA (http://www.nextstudent.com/financial-aid/fafsa/) (Free Application for Federal Student Aid).
Ask your parents about a federal parent loan. Federal PLUS loans (http://www.nextstudent.com/federal-student-loans/plus-loans/) are available for the parents of dependent undergraduate students.
Apply for a private student loan only if you still have unmet need.
Find a creditworthy co-signer for your private student loan. Since private student loans are credit-based loans, applying with a creditworthy co-signer can increase your chances of being approved. You may also qualify for a lower rate and lower monthly payments.

Copyright © 2003-2018 ValueMD, LLC. All rights reserved.