Before you pack your bags for campus, you’ve got to send off your first tuition check. Federal student loans can help you pay for college, but they don’t always cover the full cost of attendance.
If you still have a gap in funding, private student loans can save the day.
But private lenders don’t give out these loans to just anybody. To get approved, you first have to meet certain requirements. Although specific criteria varies from lender to lender, these are the five most common factors private lenders consider before approving you for a loan.
1. You’re enrolled in an eligible school
Perhaps it goes without saying that you have to be a student to qualify for a student loan. But not every student automatically qualifies.
For one, most lenders require that you be enrolled at least half time at your school. Secondly, you have to attend an eligible school.
Most four-year colleges qualify, but two-year community colleges and trade schools aren’t always eligible for private student loans.
You might be able to find a private student loan designed specifically for community college or vocational students. Wells Fargo, for instance, both offer career training loans for students attending two-year programs or trade schools.
If you’re unsure whether your school qualifies, speak with the private lender about your options. You can also talk to your financial aid office for more information.
2. You meet age and citizenship requirements
A second requirement relates to your age and citizenship status. To take out private student loans, you must be 18 years or older. Plus, you must be a U.S. citizen or legal resident.
This citizenship requirement can be tricky for international students, but there’s a potential workaround. If you have a U.S. citizen or legal resident willing to cosign for you, then you might be eligible to take out private student loans as an international student.
3. You need the loan for educational expenses
Private student loans are intended to cover your costs of college, so you need to use them for educational expenses.
After you apply, the lender will communicate with your school’s financial aid office to verify your information. Then, the school must certify the amount you’re asking to borrow.
In other words, the school needs to confirm its cost of attendance, as well as communicate any other financial aid you’ve already received.
Once the school certifies your request, the lender will likely send the funds directly to your college. If there’s any money left over after covering your expenses, the school will refund that amount to you.
You can use this money to pay for books or other related expenses. But note that this refund is still a loan that you’ll have to pay back with interest.
If you can pay for these expenses another way — such as through savings, scholarships, or income from a part-time job — it might be better to send the refund back to your lender right away. That way, you’ll reduce the amount you borrow overall and have a lower student loan bill after graduation.
4. You meet credit and income criteria
If you want to take out a federal student loan, you don’t have to worry about your credit score. But if you’re worried about how to get approved for a student loan from a private lender, know that you’ll face stricter requirements.
In particular, private lenders look at three main factors:
- Your credit history
- Your income
- Your debt-to-income ratio
Not only do they make sure you don’t have a history of defaulting on debts, but they also consider your credit score.
So, do you have to have a good credit score to get a student loan? That all depends on the lender. Although lenders don’t typically advertise a specific minimum, most look for a score in the mid 600s or higher.
Below that level, you might not qualify for a loan at all. As your credit score moves up into the 700s and 800s, you might not only qualify but get lower interest rates, too.
Lenders also look for proof of steady income, along with a low ratio of pre-existing debts to your current salary. Basically, they want to make sure you’ll be able to pay back the loan after you get it.
5. You can apply with a creditworthy cosigner
If you’re a high school student, you might not have much of a credit history or income to speak of. But you don’t have to ask around about where to get a private student loan with bad credit. Instead, you can apply with a cosigner.
In fact, nearly 94 percent of undergraduate loans were issued with a cosigner during the 2015-2016 school year, according to data firm MeasureOne.
Your cosigner — usually a parent or close relative — will share responsibility for your debt, but it’s up to you to have a conversation about repayment.
If you’re paying back the loan, your cosigner doesn’t have to worry much. But if you can’t repay your debt, your cosigner will be just as much on the hook for the loan as you are.
That being said, some private lenders offer cosigner release after months of on-time repayment. CommonBond, for example, offers cosigner release after 24 consecutive months of repayment.
So if you’re making steady progress on your private student loans, your cosigner could eventually get their name cleared off the debt altogether.
Shop around for the best rates on private student loans
If you meet all the above requirements, you could be eligible for a private student loan. But before choosing a lender, make sure to shop around for the best interest rates.
Some lenders let you apply for a quick rate quote to see preliminary offers for a loan. The lower interest rate you get, the more money you’ll save in the long run.
You might also consider other factors, such as repayment options and customer reviews. Check out the Better Business Bureau or a related site for people’s firsthand experiences with lenders.
By doing your research, you can find the best lender for you and your family’s financial situation.
Want to supplement your private student loans with grants and scholarships? These scholarship search tools can help you find thousands of scholarship opportunities across the country.
Need a student loan?Here are our top student loan lenders of 2018!
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