Private Educational Loans
Private educational loans, also known as alternative loans, are available to students who are not eligible for financial aid or who need additional funds to meet educational expenses; however, Federal Title IV funds may be more favorable than private loans. The student’s eligibility is determined by the cost of attendance minus other financial aid or the annual loan maximum amount as determined by the lender.
Because alternative loans are not guaranteed by the federal government, they must be insured privately. This extra cost is passed on to the borrower in the form of higher fees and interest rates. Additionally, the lender will evaluate your credit history as well as other factors to determine if they will lend to you. You may be denied by one lender and approved by another because of the different ways they interpret your information.
The Office of Financial Aid does not post or verbalize to students the names of private loan lenders. Students are encouraged to review the private loan comparison chart to verify the interest rate, repayment options, fees charged, and borrower benefits. Our office does not endorse any lenders, receive any incentives, or have any arrangements or agreements with any lenders.
Considerations Before Accepting a Private Loan
- If eligible, accept Federal Direct Student Loans first. They have fixed interest rates and various repayment options. The FAFSA must be filed to be considered for Federal Direct Student Loans.
- We encourage students to consider all financial options before applying for a private loan. Whenever possible, borrow only what is needed to pay for educational expenses and remember – you can always refuse awarded loan amounts or request lower awards.
- Questions to ask a potential lender:
- What is the interest rate? Is it fixed or variable?
- How is the interest rate calculated and capitalized?
- What fees are applied?
- Can principal and interest be deferred?
- Are there minimum enrollment requirements?
- Is a cosigner required?
- When does repayment begin?
Loan periods will be adjusted to reflect the current academic term or last term of enrollment within current academic year.
If you have questions concerning a specific private loan program, please contact the lender directly.
What Should I Look For in a Private Educational Loan?
The APR is the annual cost of your loan including the effect of any fees and charges in addition to interest. The APR is determined based on the terms of the loan. APRs will differ based on the terms and loan amount. Make sure you are comparing like loan amounts when comparing APRs to receive a true comparison. Note, if the rate is variable, the APR may be increased after consummation of the loan. Take these terms and APRs into consideration when borrowing an private educational loan.
Does the loan reward borrowers who make payments on-time? For example, after 48 consecutive on-time payments will you receive an interest rate reduction?
Does the loan have an annual or aggregate limit? Can you afford to borrow within these limits? It's a good idea to borrow from the same lender each year, so make sure the loan can cover your costs throughout your entire education. Lender for Federal Loans Does the lender of the loan also participate in the Federal Family Education Loan Program (FFELP)? It may be easier to borrow your Federal Stafford and private educational loans through the same lender. Some lenders can even combine the billing for these loans so you will only receive one monthly billing statement.
Do you need to know quickly if you qualify? Does the lender offer loan pre-approval over the phone or internet?
Does the loan require you to have a cosigner? Sometimes cosigners reduce the costs of the loan, but if you can't find a cosigner, you'll need to find an loan you may borrow on your own.
If you choose not to pay the interest on your loan while you are in school, the interest may be capitalized (added to your principal balance). When is the interest capitalized? Annually? At repayment? If the interest is capitalized annually the loan is more expensive than if it is capitalized only once at repayment.
Does repayment begin immediately or after you graduate or leave school? Make payments whenever you can afford to, but if you can't make regular payments while you're in school, you'll need to find a loan that doesn't require immediate repayment.
How long is the repayment period in which you repay the loan? If your educational costs require you to borrow large amounts, you may need a longer time to repay the loans
Lenders use credit scores to make fast and objective decisions on which applicants are likely to repay their loans on time. Credit scoring is calculated using many pieces of your past bill payment history (number and types of accounts, late payments, outstanding debt, and the age of your accounts). The way you have handled credit in the past is often a good indication of how you will manage credit in the future. Therefore, your credit score is like a snapshot of your level of credit risk at a particular point-in-time; when your credit information changes, so does your credit score. Give yourself the credit you deserve. Pay your bills on time, pay down any outstanding debt and avoid taking on new debt or applying for too many new credit cards.
Private Educational Loan Disclosure
Creditors that extend private education loans will provide disclosures at the point of application and loan approval and confirmation. Loan disclosures will contain important information from Section 128(e) of the Truth in Lending Act (15 U.S.C. 1638(e)) about loan terms, features, and must disclose information about federal student loan programs that may offer less costly alternatives. Each vendor provides loan disclosures specific to their loan program.
You may access disclosure information for loan programs included on our preferred vendor list at ELM SELECT
- click on the VIEW button to see more information
- click on the DETAILS tab to see the lender and servicer information to understand lender affiliations and disclosure information.
Prospective borrowers may qualify for loans or other assistance under the Title IV, HEA programs. Terms of Title IV, HEA program loans may be more favorable than the provisions of the private education loans.