What Is the Private Student Loan Process?

If you’re like most college students these days, your federal loan money and scholarships probably aren’t going to be enough to cover your tuition. If your college savings pay for the difference, it may be time to apply for a private loan. But how does that process unfold?

What Is a Private Loan?

A private loan is just what it sounds like: a loan offered by a private institution rather than the US government. Federal student loans often have lower interest rates, but they also require you to attend school at least part-time and can only be used for tuition. Private loans, on the other hand, can be used for any education-related expense and don’t necessitate a certain amount of credit hours. It doesn’t really make sense for you to take out a loan and not go to school, but if you really wanted to, you could. That said, they aren’t as easy to get as federal student loans.


Because most banks need to ensure the money they’re loaning you will at some point get paid back, you’ll have to prove that you have a stable work history and a high credit score (no less than 700). It’s unlikely, if you’re like most rising college freshman, that you’ll have either of these things. So, you’ll need to source a co-signer. Usually, students use their parents, but it can be anyone that meets the requirements and is willing to work with you. Once you’ve found a co-signer, you can start shopping around for the best lender.

How Much Should You Get?

In order to start shopping for the best loan, you need to know how much you require. At this point, you’ll need to budget out all of your expenses. In addition to tuition, you have to include how much you’re going to spend on other incidentals like books, supplies and room and board. Then, subtract the amount of money you’re receiving from federal loans, grants or private scholarships. The number you’re left with is the amount of money you should ask for when you apply for loans. Trust us, you want to have as little private debt as possible, so make sure this number is as small as it can be. Whether you’re going to New York University or Adelphi University Online, if you need to secure a private student loan, you should take as little as you can.


Once you have the right number in mind, now’s the time to shop for a lender. Try and find the lowest fixed interest rate or the lender with the highest approval rating. Consider how good their customer service is, too. Odds are you’ll have a fairly long relationship with these people, so make sure it won’t be a frustrating one. Once you’ve picked a lender, set up a meeting with a loan officer and start the application process. If you’re approved, you should have your money fairly soon.

Gather Your Information

Once you’ve picked a lender, you should begin to gather all the pertinent information you’ll need for a loan application. This will include your social security number, driver’s license or state I.D., proof of residency or citizenship, your school’s contact information, your income (or your co-signers), any other money you’re receiving (scholarships or federal loans) and your expected monthly expenses. If you want the loan process to go smoothly, you’ll need all this information handy, so start getting it together now.