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. That’s where private student loans come in.
Students are taking out private student loans more than ever. According to data from MeasureOne, the number of loan originations increased by over 5 percent from 2016 to 2017. That’s not surprising, considering the cost of tuition continues to rise. If private student loans are 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’s a step-by-step guide.
1. Research private student loans
So what’s the critical difference between federal student loans and private student loans? The former is issued by the government, while the latter is issued by independent financial institutions or banks. This means the application process is much different.
For federal loans, you fill out the Free Application for Federal Student Aid (FAFSA). For private student loans, you must apply directly with the financial institution offering it.
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 the banks listed in our private student loan marketplace — we’ve already vetted these lenders, which include Citizens Bank, Sallie Mae, and Visit LendKey — and know they offer some of the best interest rates and terms to borrowers.
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. Most institutions will let you do this online through a pre-application that doesn’t require a hard credit pull. Once you find the best offer, you should be able to complete an official application online as well.
You should only apply once you know exactly how much you need to borrow and after you’ve chosen your college.
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 part way through the semester.
However, don’t apply for a private student loan with days or weeks before tuition is due. The process can sometimes take up to two months, so leave yourself plenty of time to get the money you need by staying on top of your costs and expenditures.
3. Find a cosigner if you need one
Lenders will determine your eligibility for a private student loan based on your credit history and other factors; you might need a cosigner if your credit history is limited, you have a low credit score, or you don’t earn much income. Of undergraduates who took out a private student loan, 90 percent need a cosigner to qualify, according to Edvisors. Even at the graduate level, 75 percent of students needed a cosigner to take out private student loans.
To find a cosigner, stick to 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. It’s important to understand that having a cosigner doesn’t mean you’re off the hook for repayment. You still have to pay everything back — in addition to interest — and missing a payment could hurt not only your credit, but also your cosigner’s.
4. Gather necessary paperwork and information for a private student loan application
Whether you plan to apply on your own or you have a cosigner, you will need to gather some essential financial information. Having it available will help to streamline the process later on. Here is everything 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.
- Gross annual incomes.
- A list of any assets and their values.
- Monthly rent or mortgage.
- A copy of your latest tax returns.
- Employment information, including a recent pay stub (within the last 60 days).
- Secure a personal reference.
You will likely also need to have all of the school information available, such as the name of the college, when you’ll be graduating, how much it will cost to attend, and how much you are requesting to borrow to cover those costs.
To get a sense of exactly how much you need to borrow, look at the response from filling out the FAFSA. It should reveal how much you will need to pay yearly. This can give you a clearer picture of where there are gaps in covering the cost of your education. You want to try to minimize the amount you borrow; you’ll have to pay more interest the more you take out.
Another important form you will need to fill out is the Private Education Loan Applicant Self-Certification form. On the application, it says, “The school is required on request to provide this form or the required information only for students admitted or enrolled at the school.”
This became a requirement in February 2010 by the Federal Reserve and the Department of Education. You will need to fill this form for each private student loan application; you can get it from your financial aid office or the Department of Education.
The exact requirements vary by lender, but this is a good starting spot to make sure you have everything in order before filling out the private student loan application.
5. Submit a formal private student loan application form
Each lender will have its own process, but having the paperwork mentioned above will ensure you can answer the common questions quickly and accurately.
- Typically, you’ll start off by filling out your personal information as well as your cosigner’s info.
- The lender will likely ask for your financial information, which could range from just a pay stub to your tax return.
- 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 on your private student loan application.
- You’ll likely have to agree to the lender’s terms and conditions, — including a credit check — by checking a box acknowledging that you have read the terms and would like to proceed with the application process.
Every lender has different interest rates, repayment terms, and application process, which is why it’s important to make sure you understand these thoroughly before accepting a private student loan.
Need a student loan?Here are our top student loan lenders of 2019!
|2 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7% variable Annual Percentage Rate (“APR”): 96 monthly payments of $179.28 while in the repayment period, for a total amount of payments of $17,211.20. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 5/22/2019. Variable interest rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
4 Important Disclosures for Discover.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.99% – 11.32%2||Undergraduate, Graduate, and Parents|
|4.50% – 11.35%*,3||Undergraduate and Graduate|
|4.84% – 13.49%4||Undergraduate and Graduate|
|4.25% – 11.30%5||Undergraduate and Graduate|
|4.50% – 9.47%6||Undergraduate and Graduate|
|3.74% – 9.72%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.32%8||Undergraduate, Graduate, and Parents|