Private student loans are offered by banks, credit unions, and online lenders to cover education costs that federal aid does not fully address. Unlike federal loans, private loans are credit-based, may require a cosigner, and typically lack the borrower protections of federal loans (income-driven repayment, forgiveness programs, deferment options).
10 steps across 1 sections
1. Steps Process
- Exhaust federal aid first. Before considering private loans:
- Complete the FAFSA and accept all eligible grants and scholarships
- Accept subsidized federal loans first, then unsubsidized
- Calculate the remaining gap between total cost of attendance and total aid
- Determine how much you need. Calculate the exact shortfall:
- Total cost of attendance (tuition, fees, room, board, books, transportation, personal expenses)
- Minus grants, scholarships, and federal loans
- Equals the amount to potentially borrow privately
- Borrow only what is absolutely necessary
- Check your credit and consider a cosigner. Private loan approval is credit-based:
Common Mistakes
- Not exhausting federal aid first
- Not comparing multiple lenders
- Choosing variable rates without understanding the risk
- Borrowing more than needed
- Not reading the fine print
Pro Tips
- Use prequalification tools
- Choose fixed rates for predictability
- Make interest payments while in school
- Ask about autopay discounts
- Look for cosigner release options