Topics: Student Loans
Private student loans, also known as alternative student loans, offer another financing option that can help cover college costs when your financial aid package fails to meet all of your needs. Private student loans can also be an option for parents who want to borrow to help their child achieve their higher education goals.
Below, we breakdown eligible expenses, what to look for in a lender, and how to apply for a private student loan.
What expenses can I pay with a private student loan?
Some of the most common expenses covered by student loans include:
- College fees
Can I use private student loans for off-campus living expenses?
Yes. You can use private student loans for living expenses related to living off campus, such as:
- Transportation (tolls, gas, subway, bus, etc.)
- Personal supplies (groceries, toiletries, medication)
- Dependent care
NOTE: Loan funds are meant for education-related expenses, like the ones identified in your school-determined cost of attendance.
How to compare private student loans (and lenders)
Every lender is different, but common things to look for include:
- Low or no fees. Most lenders today offer zero origination fees, but you’ll want to know if application fees or late fees may come into play.
- Choice of fixed or variable interest rates
- Interest rate discounts for having payments automatically deducted from a bank account
- Easy online application and account management
- Funding to cover the full cost of attendance, less other financial aid received
- Year-round application acceptance and processing
- Other lender specific program perks and benefits
Because each lender has a unique program and benefits. We recommend comparing lenders who work with your school to find your best fit.
Common private student loan eligibility requirements:
- Lender must offer loans at the student's school
- Student borrower and cosigner must be U.S. citizens or permanent residents
- Student borrower and cosigner must pass a credit check
- Student must be enrolled at least half-time
How to get a private student loan
Step 1. Choose a lender that works with your school. See your private student loan options.
Step 2. Apply online with the lender you choose. In most cases, once your application is submitted, you'll be notified of your pre-qualification within minutes.
Step 3. If necessary, obtain a cosigner and have that person complete their portion of the loan application and credit review.
Step 4. Upon approval, review and sign your documents. Once your application is approved, you'll need to sign a Self-Certification form and Promissory Note/Loan Contract.
Step 5. Your school certifies the loan. In this step, which is handled by your lender and the school you are attending, your enrollment and eligibility are verified. Your school will also determine if the loan amount you are seeking is truly the loan amount you need, based on other aid.
Step 6. Lender sends the loan funds to your school, and your school applies the funds to your account.
Step 7. Extra funds will be returned to you by your school (this is called a credit balance refund). These funds may be used for qualified education expenses. You should verify your school’s policy regarding credit balance refunds to determine when/how you can expect to receive them.