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Finance 101

Private Student Loans Fill the College Funding Gap

Posted on July 15, 2015 by Kim Fein
After applying for financial aid and going through the federal loan process, many entering freshman find that they still need some financial assistance in order to meet their college budget goals. If that’s the case, applying for a private student loan may be the right choice for you. There are several different options available to you; just use the following tips to help guide you through the process.

Who can apply for a private loan?

Each financial institution will have its own specific requirements in order to consider an applicant for a private loan, but most will require that you are enrolled in a degree-seeking program at an accredited private or public higher-education institution. Banks and credit unions will determine eligibility for loans and interest rates based on the applicant’s credit score. For many entering freshmen, this is the hardest part of the process! Most beginning college students haven’t had time to establish a strong credit history, so finding a cosigner may be necessary. The bank will consider the cosigner’s credit score as well when applying for the loan, and that individual will assume financial responsibility for repayment in the event that you can’t pay the loan back. Most students choose a parent or a close relative when asking someone to cosign a loan.

How to apply for a private loan?

Once you have found a willing cosigner (if necessary), you will need to determine the amount of the loan you wish to apply for. You need to know how much in financial aid and scholarships you will be receiving, as well as an estimate of how much you will be spending on expenses other than tuition, such as: room and board, books, transportation, etc. Once you know how much you need to apply for, shop around! Look for the lowest interest rate you can find as this will affect how much you have to pay back over the course of the loan. The typical repayment schedule for a private student loan is 10-15 years, so even small variations in the interest rate can make a big difference over that amount of time.

Considering a credit union or community bank

While most of the national banks have private student loan options for entering freshman, you may want to consider a private student loan from your local Credit Union. Credit unions frequently offer lower interest rates than the big financial institutions, and you can get more personal customer service from them as well. Adoption of online lending programs means the process has never been easier! Credit unions also usually have a vested interest in supporting the local university community, and may offer additional benefits for entering students. Check out R.I.A.’s online student loan center for more information and to apply today!