What Are Private College Loans?
Private college loans are credit-based loans provided by banks, credit unions, and other non-federal private entities. Qualifying college students may use them to pay for college fees such as tuition, room and board, and textbooks or other course-related expenses. When students have exhausted all other resources in terms of scholarships, grants, and federal funding, a private college loan can help them afford their education. A private college loan is substantially more expensive than a federal loan, so it’s important that students look for the best interest rate, assessing whether it’s a fixed or variable rate or includes a cap. They should also be mindful of additional fees, borrowing limits, grace periods, annual percentage rates, and loan deferment options. Unlike a parent loan, the student or co-signer is financially responsible for the fees accrued in a private college loan.
How Can I Qualify for a Private College Loan?
Private college loans are among the easiest to apply for, as they can typically be done over the phone without completing a FAFSA form. The lender ultimately decides whether you qualify for a private college loan. There are several criteria that lenders require. For example, qualifying students must be enrolled at a lender-eligible college or university. They also must be a United States citizen or permanent resident.
The student needs to decide whether they want to apply via a co-signer or independently. Co-signers typically result in lower interest rates and better lender approval. If they have a co-signer, the co-signer must be credit-worthy. Otherwise, students must have a credit in the realm of 730 or higher. Most bank lenders require the student or co-signer to be customers.
Repaying a Private College Loan
There are several possible paths toward loan repayment. To incur the least amount of debt, students can choose an immediate payment plan in which they begin to pay off their loan’s principle and interest while still in school in lieu of small, monthly payments. They may opt to make interest-only payments while in school, which prevents interest from snow-balling and contributing to a higher loan balance. Finally, the student can choose to defer repayment entirely until after they graduate. The principle will have accumulated interest over the course of their education, which makes deferred repayment the most expensive route for paying off a loan.
The lender has the final word on how repayment is structured. Some only allow deferred payments in cases of financial duress during school. Others charge prepayment penalties to those who pay off their loans too early.
Types of Private College Loans
- cuStudentLoans: When federal loans don’t suffice, cuStudentLoans provides a private student loan to students who attend eligible schools and are part of an affiliated credit union. The student may borrow up to $120,000 in undergraduate debt or $160,000 in graduate debt.
- SallieMae: SallieMae offers a competitive private student loan program to students who are U.S. citizens or permanent residents and meet specified underwriting requirements. The awarded amount may cover your education in full.
- NASA Federal Credit Union: Students who are consistently enrolled in at least half-time status at a school that dispenses degrees upon completion may use this loan to cover any educational expenses to the maximum amount of $75,000.
- Chase Bank: Undergraduate, graduate, and graduate health professions students may apply for this loan if they or their cosigner are Chase bank customers. Qualifying applicants must attend a school participating in Chase’ student loan program.