Private student loans (also called alternative loans) should only be considered after first applying for federal student aid, using the Free Application for Federal Student Aid (FAFSA). Private loans are offered by private lenders and eligibility depends on a credit score.
Comparing Federal and Private Loans
In determining which loan is best for your needs, it is important to research and compare loan interest rates and fees, repayment options, and eligibility requirements.
|Federal Student Loans||Private Student Loans|
|Repayment begins after you graduate, leave school or change your enrollment status to less than half-time.||Many private student loans require payments while you are still in school.|
|The interest rate is fixed and in many cases lower than private student loans. View current interest rates.||Private student loans can have a variable interest rate, some greater than 18%.|
|Students with greater financial need might qualify for additional financial aid assistance, including subsidized loans (in which the government pays interest).||Private student loans are not subsidized and eligibility for other Federal financial aid assistance cannot be determined without submitting a FAFSA.|
|No credit check required (except for Parent PLUS loans).||Private student loans may require an established credit record. The cost of a private student loan depends on your credit score.|
|No co-signer required.||You may need a co-signer to get the best possible deal.|
|Some interest is tax deductible.||Interest may not be tax deductible.|
|Loans can be consolidated into a Direct Consolidation Loan.||Private student loans cannot be consolidated with the federal loan consolidation program.|
|No prepayment penalty fee.||You need to make sure there are no prepayment penalty fees.|
When a Private Loan is a Good Option
A private loan may be an appropriate choice for you, if:
- You understand and have compared the terms of the Federal Parent PLUS loan and the terms of a private loan offered to you, and have determined that the private loan is a better choice for your family.
- You have applied for the maximum amount of all federal loans suggested to you and still have a difference between the cost of attendance and the total financial aid you have received.
- You are a dependent undergraduate student and your parents will not borrow (or have been denied) a Federal PLUS Loan.
- U.S. government regulations make you ineligible for a federal loan. You may still qualify for a private loan because such programs are not bound by the same federal restrictions. For example, if you are not making satisfactory academic progress, are in default on a federal loan, did not respond to verification requests, are enrolled for less than 6 credit hours, or are ineligible for federal loans for other reasons, you may be eligible for private loans instead.
- You owe a balance from a previous semester. You may be able to receive a private loan for an earlier loan period.
- You are an international student with limited borrowing alternatives.
- Please note: private student loans are only available to students whose cost of attendance has not already been met with other aid.
If you decided to take a private loan, you should know about the resources in place to help:
- Visit FastChoice to explore some of your private loan options.
- Lenders must provide a disclosure form during the application process, loan approval, and after the loan has been finalized. Disclosures provide the details of your loan.
- Your lender will also require the Private Education Loan Applicant Self-Certification Form. You can obtain the school information needed to complete the form by calling our office at 303-492-5091 or viewing your financial aid information in the student portal.
- Most lenders require the school to certify the loan. To avoid delays in processing, complete and return all required forms to your lender.
- Due to the Truth in Lending Act (TILA), bank lenders may not disburse funds for 10 or more business days in order to notify the borrower of their ability to rescind the loan. Please apply early enough to ensure your loan is processed before the bill due date to avoid late fees.