Private Student Loans

Private student loans are typically taken out by students who have maxed out their federal student loan yearly borrowing limit when borrowing for undergrad. With graduate and professional degree programs, there is no cap on federal borrowing. Federal student loans should always be taken out before private student loans.

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Eligibility Requirements for Private Student Loans

Most borrowers will receive private student loans from a private lender. If you decide to take out a private student loan, an underwriter will look at your credit score, debt-to-income ratio, savings, and job history to determine your creditworthiness. Most borrowers need to be a US citizen or permanent resident or have a co-signer who is. Also, you must be of legal age to borrow. That varies by state.

There are a few things that are very important to understand about private loans. Some private lenders will require a co-signer if you have poor credit. In some situations, this will help you receive better terms if the co-signer has strong credit. But be wary and read the fine print. Similar to the borrower’s obligation to pay off the student loans, co-signers also assume responsibility for the loans. So, if the borrower is unable to pay, it falls to the co-signer to make required monthly payments.

Private student loans generally don’t have death and disability protections like federal student loans. Some will allow the loans to be discharged, but the balance would become taxable to the co-signer immediately. There are other private lenders who require loans to be paid immediately if a co-signer passes away. Make sure to read the fine print, as this varies by private lender.

Some educational institutions will offer private institutional student loans. These vary in amount, length of repayment, and interest rates. Be sure to review the private institutional loans offered with private student loan options provided by private lenders if you need this type of financing above what you receive federally.

Where to Apply for Private Student Loans?

Private student loans are offered by a number of large private lenders. We partner with a few you should consider if you decide to borrow private student loans. All provide similar services—we recommend you pick a lender with the most favorable terms.

How Much in Private Student Loans Should I Borrow?

We always recommend you first borrow whatever you can federally. If you have to borrow above what is offered federally or aren’t eligible for federal student loans, you should borrow the least amount of private student loans necessary.

How to Borrow for Medical School or Undergrad if I Can’t Receive US Federal Student Loans?

If you can’t borrow federally for medical school; dental school; or other pricey graduate/undergraduate programs you’ll need to find a private lender willing to work with you. If you have a US co-signer, you can go with one of the large private lenders mentioned above. If you don’t have a US co-signer, then you could look into banks in your home country (international students) or explore international student loan lenders such as Stilt, Prodigy Finance or MPOWER.

Talk to your school’s financial aid office if you can’t get enough federal student loans (or any at all) to pay for tuition. Your school may have scholarships, institutional loans, or other programs to help finance your education.

What Are Private Student Loan Interest Rates?

Private student loan interest rates are fixed or variable, and they are assigned to you when your student loan is originated. Rates can range from 3%-14%.

Private lending rates are based on the LIBOR or Secured Overnight Financing Rate (SOFR). However, unlike with federal student loans, private student loans require an underwriting process where the lender will review your credit score, income, job history, etc., to help determine your rate. The better you rank in those categories, the more favorable your student loan terms typically will be.

What Are Residency Relocation Loans?

Residency relocation loans are loans offered only to residents helping them cover post-graduation costs of moving, clinical exams, and board certifications. Applicants must provide proof of residency or internship to apply for these. Private banks and student loan lenders originate these loans.

Residency relocation loans tend to have higher interest rates than student loans and lower borrowing amounts similar to personal loans. These loans are issued with variable or fixed interest rates.

Should I Take out Residency Relocation Loans?

If you must take them out, then yes. Make sure to shop around and go with the lender that provides the best rates.

Should I Private Refinance my Student Loans?

Each borrower’s situation is different, and some will benefit greatly from a private refinance. If you borrowed private student loans to finance your education, it is likely a no-brainer to refinance when you graduate. The reason is, your credit, income, savings, are likely higher now, and private lenders are willing to take a risk on you and provide better terms than what you initially received.

It’s also a no-brainer to private refinance your private student loans ANYTIME you can receive a lower interest rate. There aren’t any fees associated with private refinancing your student loans, but your credit will take a slight hit.

Deciding to private refinance federal student loans is a tougher decision. When you private refinance federal student loans, you lose a number of federal protections, such as income-driven repayment, extended forbearances, death/disability discharge, federal loan forgiveness, etc. If you’re considering a private refinance with your federal student loans, consult one of our pros to make sure you’re on the right track.

Private student loans can be a necessary vehicle for undergrad and graduate students. Exhaust federal options and even what your school offers first, such as institutional loans, prior to obtaining private student loans. Private student loans often have higher interest rates, have stricter terms, and require a co-signer. So, if you need to borrow private student loans make sure you read up on the fine print to understand all that will be required when you move into repayment. If you’d like to learn more about repaying private student loans, here’s our guide.

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