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Home College Loans Private Student Loans Introduction to Private Student Loans

Introduction to Private Student Loans

Private student loans, also known as alternative student loans, are non-federal education loans. The interest rates, fees and other terms of private student loans are set by the lender, not the federal government. Private student loans are not guaranteed or subsidized by the federal government. Private student loans are made by banks, credit unions and other non-bank financial institutions. They are also made by state agencies (state private student loans), as well as colleges and universities (institutional private student loans).

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College Ave Student Loans

  • Competitive fixed and variable APRs starting at 1.24%1
  • Multiple repayment options including: full principal and interest, interest-only, deferred, and flat payment
  • Flexible payment terms ranging from 5, 8, 10, and 15 years2
  • Coverage up to 100% of your school-certified cost of attendance ($1,000 minimum)3
  • No origination, application and processing fees, no fees for early repayment
  • Apply online in 3 minutes and get an instant credit decision
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Get the money you need for school quickly and at a great price.

  • Low rates, free to apply, and no disbursement fees
  • 0.25% interest rate reduction when you make payments by automatic debit1
  • Borrow up to 100% of the school-certified cost of attendance (minimum $1,000)3
  • The most repayment choices - and help making sense of them
  • No penalty for early repayment

We get it. You want to pay as little interest as possible and have monthly payments you can afford. That's why the College Ave Student Loan Product has low rates and multiple repayment options to help you manage the total cost of the loan.

College Ave Student Loan Full Terms and Information

Sallie Mae Student Loans

  • Variable Rates: 1.25% APR - 11.15% APR (lowest rate shown includes the auto debit discount). Fixed rates also available.1
  • Choose from multiple repayment options, including no payments while in school1
  • The only undergraduate student loan that offers 4 months of Chegg® study help --a $100 value6
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Sallie Mae® Smart Option Student Loan® for Undergraduate Students

When grants, scholarships, and federal aid are not enough, choose the Smart Option Student Loan® for Undergraduate Students. You can apply for the money you need for college, and the flexibility you want.

  • Competitive variable rate starting from 1.25% APR to 11.15% APR (Competitive fixed rates also available. Lowest rate shown includes the auto debit discount.)1
  • No origination fee and no prepayment penalties2
  • Easy online application accessible on all devices
  • Get a 0.25 percentage point interest rate reduction while enrolled in and making monthly payments by automatic debit3
  • You can apply for the funds you need to cover all your school-certified expenses for the entire school year including tuition, fees, books, supplies, housing, meals, travel, and even a laptop whether you're studying online or on campus4
  • Applying with a cosigner may help you get a better rate
  • You may apply to release your cosigner from the loan after you graduate, make 12 on-time principal and interest payments and meet certain credit requirements5
Sallie Mae Student Loan Full Terms and Information

Discover® Student Loans

  • Cover up to 100% of your school-certified college costs including tuition, housing, books and more.1
  • Get a one-time cash reward for good grades.2
  • Variable rates: 1.24% - 11.37% APR3 (lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments)
  • Choose from in-school or deferred repayment options, and there is never a penalty for prepayment.
  • $0 fees for the life of your loan including no application, origination or late fees.
  • Apply now in 15 minutes or less.
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Discover® Student Loans

  • Discover Student Loans provides options for Associate or Bachelor's degree programs at eligible colleges and for Masters and Doctoral degree candidates at eligible graduate schools.
  • You can borrow up to 100% of your school-certified costs (including tuition, housing, books and more). Aggregate loan limits apply.
  • Apply today! Choice of great fixed or variable interest rates.
  • Count on $0 fees, including application, origination or late fees.
  • You have the option to make either interest-only or $25 fixed, monthly payments while in school and during the grace period to lower the overall loan cost. However, you can also choose to defer payments, meaning that monthly payments are not required until after the grace period or enrollment drops below half-time.
  • Get a one-time cash reward for each new Discover undergraduate and graduate student loan when you get at least a 3.0 GPA (or equivalent). Reward redemption period is limited. 2
  • 6-month grace period for undergraduate loans and 9-month grace period for graduate loans.
  • By adding a cosigner, you may improve your likelihood for loan approval and may lower your interest rate.
  • Applying online is quick and easy and our knowledgeable, US-based Student Loan Specialists are ready to help you anytime 24/7. Tools and information at DiscoverStudentLoans.com can help students and parents through each step of the process — from exploring financial aid to repaying student loans.
Discover Student Loan Full Terms and Information

CommonBond Student Loans

  • Competitive fixed & variable rates starting at 3.66%
  • Flexible 5, 10, or 15-year terms
  • Award-winning customer service every step of the way
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CommonBond Private Student Loan

Student loans pay for college or graduate school at thousands of schools across the country

Get the help you need to pay for school with CommonBond. We’ve got your back with competitive rates, award-winning service, borrower protections, and multiple repayment options. No hidden fees, no double-digit APRs here. And we offer resources to help you make the right personal finance choices.

We’re on a mission to make student loans more affordable, more transparent, and easier to manage. We provide choices and support every step of the way, and take pride in being a partner on your educational journey. And the best part? With CommonBond, you’ll always receive a competitive rate. No double-digit interest rates here.

Here’s what you get when you choose CommonBond:

  • Flexibility: Since everyone's financial situation is different, we provide flexibility — so you can make the best decision for yourself –
    • Borrow up to 100% of your school's cost of attendance.
    • Loan terms of 5, 10, and 15 years, each available at both fixed and variable rates.
    • Multiple repayment options, from paying as you go while in school (in exchange for a lower rate) to completely postponing payments until you graduate.
  • Service: Our award-winning Care Team is available by phone, email, and live chat to answer any questions you have. Breathe easy — our experts know what you're going through!
  • Simplicity: With our easy online application, you can get approved in minutes. There are no pre-payment penalties and no hassles. No kidding.
  • Resources: We provide expert content, helpful webinars, and easy-to-use tools to help you understand the impact of your choices — so you can make the right decisions.
  • Social Promise: Your loan makes a difference. For every loan we fund we also fund the education of a child in need. We're the first — and only — lender to make that promise.
CommonBond Private Student Loan Full Terms and Information

Private student loans represent about 8 percent of annual new student loan dollar volume, after peaking at about a quarter of annual volume in 2006-2007 and 2007-2008. Private student loans also represent about 14 percent of student loans outstanding.

Eligibility for Private Student Loans

Most private student loan programs base eligibility on the borrower’s credit scores, income and debt-to-income ratios.

Private student loans, unlike federal student loans, are subject to the defense of infancy. Accordingly, students who have not yet reached the age of majority for the student’s state of legal residence may not be able to qualify for a private student loan without a cosigner.

Most new private student loans are school certified. The lender will confirm with the college or university financial aid office that the student is enrolled and eligible to receive a private student loan. In addition, the financial aid administrator will tell the lender the maximum amount the student may borrow after subtracting all other aid from the college’s annual cost of attendance. The lender may further reduce the amount the student may borrow.

Private student loan borrowers are not required to file the Free Application for Federal Student Aid (FAFSA®). However, filing a FAFSA is recommended, to ensure that the student receives all of the federal financial aid funding for which he or she is eligible, including grants and other gift aid.

A Cosigner May Be Required

More than 90 percent of new private student loans require a creditworthy cosigner, such as a parent or other relative. Even if a borrower can qualify for a private student loan on his or her own, the borrower may wish to get a cosigner. Lenders not only base eligibility for private student loans on the higher of the borrower’s and cosigner’s credit scores, but also the loan’s interest rates and fees. Higher credit scores lead to a lower-cost loan.

Note, however, that a cosigner is a co-borrower, equally obligated to repay the debt. A cosigner is not merely enabling the borrower to obtain a loan, but is also accepting equal responsibility for repaying the debt. A cosigned loan will show up on the cosigner's credit reports and will be treated as though it were the cosigner’s own loan. This can affect the cosigner’s ability to obtain and refinance other debt, such as mortgages and other consumer credit. Late payments on a cosigned loan will damage the credit of both the borrower and cosigner. Many lenders will start seeking repayment from the cosigner after the first late payment.

Some lenders offer cosigner release options, where a cosigner may be removed from his or her obligation to repay the debt after the borrower makes the first 12, 24, 36 or 48 consecutive, on-time payments. However, the borrower must also satisfy credit criteria, such as having a high credit score and having a stable job with enough income to have been making the monthly loan payments. Depending on the lender, borrowers and cosigners may have difficulty qualifying for cosigner release.

Differences Between Federal and Private Student Loans

There are many differences between federal and private student loans. Some of the more noteworthy differences include differences in interest rates, credit underwriting and cosigner requirements, loan limits, eligible uses, and options to suspend or reduce loan payments.

Most private student loans offer variable interest rates, which may increase over the life of the loan. Federal student loans offer fixed rates, which yield more predictable loan payments. However, more than half of private student loan programs offer fixed interest rate options.

Since the interest rates on most private student loans are based on the credit scores of the borrower and cosigner, if any, the advantage of a federal student loan as compared with a private student loan may depend on the individual borrower. For example, interest rates for borrowers with excellent credit may be competitive with the interest rates on some federal student loans, such as the Parent PLUS Loan and Grad PLUS Loan.

Some private student loans offer borrowers a lower interest rate if they agree to make interest-only payments during the in-school and grace periods. This not only yields a lower-cost loan, but avoids interest capitalization, which can cause the loan balance to increase. However, not all borrowers can afford to make loan payments during the in-school and grace periods.

Like federal student loans, most private student loans offer an interest-rate reduction to borrowers who repay their loans using an automatic monthly transfer from a bank account. Federal student loans offer a 0.25% interest-rate reduction for automatic- debit (auto-debit) programs. The interest-rate reduction for private student loan programs varies by lender, but is typically either 0.25% or 0.50% for the programs that offer it.

Both federal and private student loans are eligible for the student loan interest deduction.

Private student loans generally offer higher annual and cumulative loan limits than federal student loans.

Unlike federal student loans, private student loans may be available for previous unpaid school charges, for students who are enrolled less than half-time, for (legal) bar study course , for residency and relocation expenses, for continuing education and for international students (with a creditworthy U.S. citizen or permanent resident as a cosigner).

Some private student loan programs offer death and disability discharges similar to the ones available for federal education loans. Private student loans are not eligible for public service loan forgiveness and other federal loan cancellation options. Forbearance on private student loans are generally limited to 12 months, unlike the 3-year limit on federal education loans.

A private student loan consolidation is like a traditional refinance, where a new loan pays off the balances on the previous loans. The new loan has a new interest rate based on the borrower’s current credit profile. In contrast, a federal consolidation loan has an interest rate that is based on the current interest rates of the previous loans.

Choosing a Private Student Loan

For most families, choosing the best student loan should focus on the cost of the loan. But few private student loan programs provide up-front pricing before the student applies for the loan, since the interest rates and fees are based on the credit scores of the borrower and cosigner, if any. Most students do not get the lowest advertised interest rate on a private student loan, since few students have 800+ credit scores. Instead, the student should apply to several private student loans to get personalized pricing.

Students and parents have a tendency to choose well-known lenders over less well-known lenders, even though regional and specialty lenders may offer lower interest rates.

So, families should shop around, trying to find the lowest-cost loans available to them. Generally, applying to several private student loans will not affect the credit scores of the borrower and cosigner by much. The credit reporting agencies now recognize when a prospective borrower is shopping around, not trying to get multiple loans.

Students and parents can search for private student loan programs on PrivateStudentLoans.com.

Borrow Smart

Before borrowing from either federal or private student loans, students should focus on the free money, such as scholarships and grants, as well as savings and family resources. Students should file the FAFSA to qualify for need-based grants and student employment. They should also search for scholarships using free scholarship matching services.

After students have exhausted eligibility for gift aid (i.e., scholarships and grants), the money that does not need to be repaid, they can consider using federal and private student loans to finance the remaining college costs. But borrow smart, limiting total student loan debt to affordable levels. Total student loan debt at graduation should be less than the student’s expected annual starting salary, and ideally, a lot less. If total student loan debt at graduation is less than the annual income, the borrower will be able to repay his or her loans in ten years or less.

Prospective borrowers should also borrow federal first, because federal student loans are less expensive, easier to get and have more flexible deferment and repayment terms. Private student loans should be used mainly when the student has exhausted his or her eligibility for federal student loans. Private student loans should supplement, not supplant, federal student loans, and should be used in moderation.

In 2011-2012, about a quarter of undergraduate private student loan borrowers did not borrow from the Direct Subsidized and Unsubsidized Loan Programs, and more than a quarter borrowed less than the maximum Direct Subsidized and Unsubsidized Loan limits for which they were eligible. Only about 15 percent of dependent students who borrowed from private student loan programs also had parents borrowing from the Parent PLUS Loan program.

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