Private student loans offer a way for students to fill in gaps of funding when other forms of financial aid, like grants and scholarships, don’t cover the entire cost of attendance.
What are private student loans?
You’re likely familiar with what student loans are but may not know what makes a private student loan different from a federal student loan.
Unlike federal student loans, which are funded by the government, these types of loans are financed through private companies and organizations, such as banks, lenders, and credit unions. Read more about the differences between federal and private student loans here.
The requirements for this type of loan are typically:
- Be enrolled in a participating school.
- Meet age and citizenship requirements.
- Must need the loan for educational expenses.
- You must meet income and credit criteria.
One of the biggest benefits of borrowing a private student loan is that they don’t have loan limits.
While federal student loans have annual and lifetime limits on how much you can borrow, these loans typically allow you to borrow up to your school’s total cost of attendance. That doesn’t mean you should go crazy with it – you should only borrow as much as you need, not as much as you might qualify for – but it is a great resource to bridge the gap if your financial aid package, including federal student loans, won’t cover all of your college costs.
How to Apply
Once you’ve found the lender for you, it’s time to apply!
Most lenders allow you to apply online and have a decision in just a few minutes. Some lenders have requirements for minimum credit scores or length of credit histories, so you may have to apply with a cosigner with a strong credit history.
From there, the lender will work with your school to arrange loan amounts and disbursal. Typically, loan funds will be sent to your school to take care of tuition and other costs. Any money that’s leftover will be sent to you to cover other school-related expenses.