College | January 13, 2023 | Lisa Litant
What can you do if you’ve added up your college scholarships, federal student loans, and your savings—and you still need money to pay for your upcoming semester? Your next step may be to get a private student loan.
Here’s an overview of how private student loans work, from when you apply to how the money actually gets to your school.
Private student loans are offered by banks, credit unions, and other financial companies. There are a lot of loans out there, but don’t get overwhelmed.
Once you have some options, go online and compare what each lender has to offer. A spreadsheet can help you keep track of different loan features. Here are some things to note:
Consider a Sallie Mae® private student loan
Do you need a cosigner?
Private student loans are credit-based, which means the lender will check your credit rating and other info. If you’re just entering college, you may not have much credit history, so you may need a creditworthy cosigner.
Taking out a student loan, even with a cosigner, and making on-time payments can help you build your own credit history.
Next steps: After you’ve decided on a loan
1. Applying for a student loan
To make the application process as smooth—and stress-free—as possible, have this info ready before you start:
If you have a cosigner, they’ll have to fill out information, too—either at the same time as you or later—before the lender can decide whether you’re approved for the loan.
Get some help on figuring out how much money you should borrow.
2. Getting approved for credit
A lender wants to make sure you’ll be able to pay back your loan after you borrow the money. That’s why they consider whether you and/or your cosigner are “creditworthy.” The lender will evaluate your credit history to see how you’ve handled your finances in the past.
That’s why the first step a lender will take after you submit your application is to see if your (and your cosigner’s) credit history meets their guidelines.
3. Choosing your loan options
Now that you’re credit-approved, you may need to make some choices—like whether you want to make payments during school or defer them, and whether you’d prefer a fixed or variable interest rate.
It’ll be easier (and faster) if you read up on your choices beforehand; they should be described on the lender’s website.
The lender may ask you and your cosigner (if you have one) to accept the loan terms for your loan by phone or online. Make sure that you understand what you’re accepting—this is a legal document. If you have questions, ask the lender or someone you trust who has more financial knowledge.
4. Your school certifies your loan
The next step for your loan application may be getting it certified by your school. That means your college confirms that you’re enrolled and that you’re not asking for more than the cost of attendance (like money you want for a vacation). This will typically happen automatically between your school and the lender…there’s nothing for you to do.
5. The money is disbursed (sent) to your school
After your school certifies your loan, and after your right-to-cancel period expires, your lender and your school may work together to set the dates that funds will be disbursed (sent) to your school.
Interest begins to accrue (grow) on a loan as soon as the funds are disbursed. So, if your loan covers several semesters, your lender may disburse only the money needed for that semester. This can reduce the amount of interest that you’ll have.
If you do get a refund, remember it’s still borrowed money that you’ll eventually have to pay back—plus interest! If you don’t need it for college expenses, return the extra money to your lender to help lower your total loan cost.
If you have questions about your loan…
If you have questions about applying for a loan or any of the terms in your loan, ask your college’s financial aid office or call your loan provider for help.