Private Student Loan FAQ's
This is the second part of a series on things you need to know about Private Student Loans. In (Part 2) we answer some frequently asked questions.
You should never sign on the dotted line for any private student loan until you throughly understand what you're
getting into. Check out these frequently asked questions...
Must I Apply For Financial Aid Prior To Applying For a Private Student Loan?
The answer is,
“No!” However, as we have previously stated, you should use the private student loan as a last resource. Meaning
that you have exhausted all other financial aid sources and avenues.
Are Private Student Loans Backed By The U.S. Government?
No, these loans are not guaranteed
or backed by the U.S. Government.
What Paperwork Am I Required to Fill Out To Receive a Private Student Loan?
The lender will
provide you with a Truth-in-Lending Disclosure Statement and Promissory Note; before you receive a final approval
on a loan, you must sign and return this paperwork.
How Are Private Student Loans Disbursed?
Most lenders disburse funds by check or by (EFT)
electronic funds transfer.
For certified loans, funds are usually disbursed directly to the financial aid office at your school.
For loans not requiring certification by the school, funds are usually delivered by check directly to the
borrower or loan carrier.
When Do The Payments Start On a Private Student Loan?
Most private student loans have an
in-school deferment period, which means that as long as you are enrolled in school at least half time, you don’t
have to make payments on your loans. In addition, once you leave your program or graduate, some private student
loans have a grace period of anywhere between 30 days and several months.
What Are The Eligibility Requirements For a Private Student Loan?
For starters, to be
eligible for an educational loan you must be at least 18 years of age (19 in Nebraska, 21 in Puerto Rico &
Mississippi). Mississippi residents under the age of 21 may borrow with written consent from a parent or guardian.
And of course, good credit.
What If My Credit Score Is Low?
If your credit score is low, some lenders may require you to
bring a cosigner to the table. Most lenders require a borrower to have a strong credit score (good to excellent) in
addition to other criteria such as no negative credit history (such as missed payments), debt-to-income ratio
(amount of debt vs. your current income) and even proof of current employment and income. Others may still approve
your loan, however, your interest rate and fees will be much much higher than normal.
Do I Need a Co-Signer for a Private Student Loan?
For federal student loans, such as:
Stafford Loans and Perkins Loans, you don’t need a co-signer. However, with private student loans, you
may want to apply with a credit-worthy co-signer to increase your chances of approval and possibly improve the rate
and fees you are offered. Some lenders require you to apply with a co-signer regardless of your income or credit
How Much Will The Private Student Loan Cost Me?
To put it simply, your costs will be: (Any
fees + Accrued Interest) and of course you add the principal, (the amount you borrowed) to that total
amount. Private Student Loan
Brad Matheson is a professional Financial Consultant who specializes in helping businesses and individuals
resolve their debt issues. He believes that all debt problems can be solved with the right debt advice and aspires
to help Americans learn all of their debt options and exercise all of their rights. Says, Matheson, “Don't allow
the Student Loan Debt crisis or a Defaulted Student Loan to hinder or block your
career aspirations or stymie your financial dreams.”