Private Loan Questions and Answers



  • General Questions
    What kind of financial aid options should I consider before private loans?
    You should always investigate free money options, like grants and scholarships, first. Then maximize your federal loan borrowing options before looking at private loans. Check out our Financial Planning section for more information.
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    Do I need to complete the FAFSA to qualify for private loans?
    You should fill out the FAFSA each year to qualify for grants and federal loans, but it is not specifically needed to qualify for private loans. Click here to visit the FAFSA home page.
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  • Eligibility Questions
    What is the minimum age to take out a private student loan?
    Most lenders will require you to be at least 18 years old (or the age of majority in your state) to apply for a private loan.
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    Do I need to be enrolled at least half-time?
    Most lenders will want you to prove that you are enrolled at least half-time or more to be eligible for a private loan. There are special private loans out there for continuing education and less than half-time students, but you will probably find higher interest rates and fees on those loans.
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    What is my school's cost of attendance?
    Cost of attendance is your school's estimate of how much money it will cost to attend for one year, including all reasonable expenses. You can likely find your school's cost of attendance published on their website or through your financial aid office.
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  • Private Loan Questions
    What will my interest rate be?
    Interest rates for private loans are usually based on an index (such as the Prime Rate or LIBOR) plus a margin. Your interest rate will likely be variable, which means it will change over time (usually the rate adjusts quarterly). Your exact interest rate will depend upon your credit history and that of your co-signer.
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    Are there any fees?
    You may be required to pay an origination fee, which will be added to the amount that you borrow. Origination fees will depend upon your credit history and that of your co-signer. Some lenders may have other types of fees, such as application or repayment fees.
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    Are there any pre-payment penalties?
    No, there are no pre-payment penalties if you decide to pay your loan off early.
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    What school expenses will the private loan cover?
    A private loan will cover most college expenses, but here are some examples:
    • Tuition & Fees
    • Books
    • Supplies
    • Laptop/Personal Computer
    • Living Expenses (rent, dorm costs, etc.)
    • Study Abroad
    • Food
    • Travel to/from School
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    Do I need to have a co-signer?
    Most students will need a co-signer to get approved for an alternative loan because they have little or no credit history and income. Obtaining a credit-worthy co-signer can help you improve the terms of your loan and increase the amount you can borrow. To learn more about obtaining a co-signer, check out our Understanding Credit section.
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    I'm confused, are private loans and alternative loans the same thing?
    Yes, "alternative loan" is another term for "private loan."
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    I'm a graduate student, are there any private graduate loans?
    Private loans are not just for undergraduates, they can be used by graduates, too. However, graduate students are eligible for higher Stafford loan amounts and Grad PLUS loans from the federal government. You should always maximize federal loan options first. Check out our Private Loans for Graduates section to learn more.
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    I'm a parent, can you help me compare private loans with other financial options?
    If you are helping your child pay for college, it's a smart idea to look at all of the financial options available to you and your family. For a comparison, check out our Parent Student Loans section.
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    What if I have bad credit and can't qualify for a private loan?
    Because private student loans are a credit based product, not everyone will be able to qualify. Obtaining a co-signer with good credit may improve your chance of getting approved. Make sure you check out all of the types of financial aid available to you in our Financial Planning section. You will also want to speak to your school's financial aid office.
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    What documentation will I need to provide?
    You and your co-signer may be asked to provide identification, enrollment or private income documentation during the loan application process.
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  • Repayment Questions
    When do I have to pay back my private student loan?
    Payments on your private student loan generally begin six months after graduation or after you drop below half-time enrollment.
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    What if I don't finish school?
    You will likely need to begin making payments on your alternative loans 6 months after you drop below half-time enrollment.
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    Is the interest on private student loans tax deductible?
    In many cases, interest on alternative loans is tax deductible. You can read about the student loan interest deduction on the IRS website by clicking here. Please consult your tax advisor for more information.
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