How to Apply for Private Student Loans: A Step-by-Step Guide

 June 25, 2021
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Private Student Loan rates starting at 0.99% APR

0.99% to 11.98% 1
VARIABLE APR

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1.13% to 11.23% 2
VARIABLE APR

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0.99% to 11.44% 3
VARIABLE APR

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  • Variable APR

You filed your FAFSA, received some federal financial aid and scored a few scholarships — but you still can’t afford to pay for all your college expenses. This is where you might need to learn how to apply for private student loans.

Students are taking out private student loans more than ever. According to data from MeasureOne, the number of loan originations by private student lenders increased by over 10% from 2019 to 2020 in their respective first quarters.

If borrowing is the route you’re prepared to take to cover financial aid gaps, it’s important to know how to apply for private student loans. Here are five steps to take:

1. Research private student loans
2. Time your private student loan applications right
3. Who is eligible for a private student loan?
4. Gather necessary paperwork and information
5. Submit a formal private student loan application form

1. Research private student loans

So what’s the critical difference between federal and private student loans? The former are issued by the government, while the latter are issued by independent financial institutions, such as banks, credit unions and online companies.

This means the private loan application process is much different and is based largely on your credit.

For federal loans, you fill out the Free Application for Federal Student Aid (FAFSA), but for private student loans, you must apply directly with the financial institution, sharing your financial information in hopes of qualifying.

How to get a private student loan

When it comes to finding the right private student loan lender, you’ll need to do some shopping around. One easy option is to get quotes from top private student loan lenders — we’ve already vetted these lenders and found them to have competitive interest rates and terms.

Lender Private student loan option best suited for…
Best for parent borrowers Read More

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Best for speedy cosigner release Read More

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Best for comprehensive approval process Read More

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Best for unemployment protection during repayment Read More

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Best for loans without a cosigner Read More

Visit Ascent

You can also check with your school to see if they have a preferred lender list. Make sure you search for the correct loan for your education level (graduate or undergraduate).

Regardless of how you come up with your list of potential lenders, you should compare interest rates, payment terms and fees to find the most cost-effective loan that suits your needs. The most reputable institutions will let you do this online through a quick (usually just a few minutes long) preapplication that won’t affect your credit score. Once you find your best offer, you should be able to complete the full formal application online as well.

You should only apply once you know exactly how much you need to borrow, and only after you’ve chosen your college (more on that later).

2. Time your private student loan applications right

Unlike filling out the FAFSA for federal financial aid, there’s no deadline for a private student loan application. You can apply throughout the year, which is helpful if you experience any unforeseen costs partway through the semester.

With that said, Student Loan Hero recommends submitting all formal applications that include hard credit checks (the kind that do affect your credit score) within 30 days of each other. Doing this should hopefully limit the impact to your credit report, as credit agencies usually count several applications for the same type of loan as a single credit event, so long as they fall within the same time period.

When should I apply for private student loans?

Don’t wait to apply for a private student loan with just days (or even weeks) before tuition is due. The process can sometimes take longer than expected, so leave yourself plenty of time to get the money you need by staying on top of your costs and expenditures.

Recommended timetable for applications from College Ave Student Loans
Days before school Steps to take
90 Estimate your financial need, find a cosigner
60 Shop around with several lenders to find the best overall loan, get a cosigner commitment
30 Apply for your preferred student loan
10 Look out for confirmation that the funds are slated for arrival, wait for your first loan statement and (if applicable) prepare to make in-school loan payments

This timetable gives your school enough time to certify the loan amount, and it gives your lender enough time to disburse the funds before tuition comes due.

Do I have to apply every year for student loans? Every semester?

If you need multiple student loans during your college tenure, then you will need to reapply. Each loan, no matter what year or term it’s used for, is its own separate debt.

Before each new school year or semester in which you need additional funding, you’ll have to repeat the process of determining how much you require and then researching the best available loans.

One way to avoid this potential hassle is to apply for private student loans from a lender that offers multi-year loan approval, such as Citizens Bank. You’ll still have to meet credit requirements for additional years of borrowing, but you will have access to a more streamlined process when requesting more funds.

3. Who is eligible for a private student loan?

Lenders will determine your eligibility for a private student loan based on your credit history and other factors. As a result, you might need a cosigner if…

  • Your credit history is limited
  • You have a low credit score
  • You don’t earn much income

Among undergraduates who took out a private student loan for the 2020-2021 academic year, an overwhelming 91% needed a cosigner to qualify, according to MeasureOne. Even at the graduate level, 63% of students needed a cosigner to take out private student loans.

When seeking a cosigner, try to find someone in your family or a close friend who you know has a good credit history. This will increase your chances of approval for a loan and also make it more likely you’ll secure a better interest rate and unlock attractive loan terms.

It’s important to understand that having a cosigner doesn’t mean you’re off the hook for repayment: You’ll still have to pay everything back — in addition to interest. Also, remember that missing a payment could hurt not only your credit, but also your cosigner’s.

Learn More: Where to Find Student Loans Without Cosigner Requirements

4. Gather necessary paperwork and information for a private student loan application

Whether you plan to apply on your own or with a cosigner, you’ll need to gather some essential financial information. Having it available will help to make the process easier.

Here is some information you and your cosigner should have handy before filling out a private student loan application:

  • Social Security numbers
  • Personal information, such as telephone numbers, dates of birth and home addresses
  • Employment information, including a recent pay stub (within the last 60 days)
  • Gross annual incomes
  • A list of any assets and their values
  • Monthly rent or mortgage
  • A copy of your latest tax returns

You will likely also need to have all of your school information available, such as:

How much should I borrow in private student loans?

Unlike federal student loans, private student loans typically allow you to cover up to the total amount of your school’s certified cost of attendance. Of course, you want to try to minimize how much you borrow, since more debt means more interest costs.

Borrowing only what you can reasonably afford to repay, based on your projected postgraduate income and monthly budget, is a good rule of thumb to follow.

To get a sense of exactly how much you need, take a look at your financial aid award letter. It should detail your cost of attendance, as well as your offer of “gift aid” (such as grants) and federal loans, which should almost always be prioritized over private loans.

Are there other private student loan application forms?

Another important document that will help you to determine your borrowing need is the Private Education Loan Applicant Self-Certification form.

Image: University of Houston

 

The Department of Education made this private loan form a requirement in February 2010, as a means of ensuring that student borrowers understand their options for loans. You will need to fill it out for each private student loan application — you can get it from your financial aid office.

5. Submit a formal private student loan application form

Each lender will have its own application process, but having the paperwork mentioned above will ensure you can answer the common questions quickly and accurately.

With a typical private student loan application…

  • You’ll start off by filling out your personal information, as well as your cosigner’s info (if applicable).
  • The lender will likely ask for your financial information, and documents that can verify it — this could range from just a pay stub to your tax return and more.
  • Filling in your school information will include information about your graduation date, loan period and loan amount.
  • Some lenders will ask you to fill out a personal reference section as well.
  • You’ll likely have to agree to the lender’s terms and conditions — including a credit check — by ticking a box acknowledging that you have read the terms and would like to proceed with the application process.

Some lenders offer more or less immediate approval of private loan applications, while most others will likely let you know within a week, if not days.

Just remember that every lender has different interest rates and repayment terms, so proceed cautiously before accepting one private student loan over another.

And now that you know how to apply for a private student loan, check out our guide on the best education loans available.

Here are our top lender guides for various types of borrowing:

Borrower Programs Other degrees Personal situation Lender feature
Part-time students Community college Associate degree Applying without a cosigner Credit unions
International students Trade school Non-degree programs Bad or no credit Cosigner release
Adults returning to school Nursing school Economic hardship forbearance
Graduate students Medical school Hybrid interest rate
Parents Law school
Dental school
Business school

Jordi Lippe-McGraw contributed to this report.

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