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Tips on Taking Out Private Loans for College

ASB November 01, 2022 | 6 MIN read Personal

Resources and content provided by College Ave Student Loans

If you’re planning on going to college, you might need to take out private student loans to pay for it. In fact, many college students use private loans for college to fill in the gap to pay for their education.

If you’re planning on taking out private loans for college, there are some things you should know before applying.

When private loans for college make sense

Once you’ve filed your FAFSA, you will receive individual financial aid award letters from each school you’ve applied to with your specific financial aid package. The package usually includes a mix of scholarships, grants, and federal student loans.

In most cases, the school will highlight federal student loan options. Unfortunately, the financial aid package and federal student loans may not be enough to cover the total cost of attendance. You may need to find additional financing to pay for school. That’s where private student loans can be an essential resource.

Student on laptop

How to use private loans for college wisely

Private student loans can help you fill the gap and pay for college, but you should be careful before applying for a loan. By doing some research now, you can reduce your college expenses, save money, and make student loan repayment easier later on.

Who is eligible for a private student loan?

To qualify for private loans for college, you need to be 18 or older, and a US citizen or permanent resident. Additionally, you’ll need proof that you’re officially a college student. Most loan providers expect you to show them that you’re enrolled in college so that they’re not handing out money to just anyone.

Follow these five smart borrowing tips:

1. Apply for other forms of financial aid

To minimize how much money, you need to borrow to pay for college, make sure you exhaust other sources of financial aid before turning to private student loans. Complete and submit the Free Application for Federal Student Aid (FAFSA) as soon as possible to ensure you’re considered for grants, scholarships, and federal work-study programs.

If your selected school is one of the 400 institutions that accepts the CSS profile, it’s a good idea to submit that application, too. Completing the CSS profile will help you qualify for state and institutional aid beyond what the federal government offers.

You can also search for private scholarships — offered by companies or non-profit organizations — on FastWeb. You can even combine multiple scholarships to reduce your education costs.

2. Borrow the minimum that you need

If you decide that a private loan for college is right for you, borrow only what you need to pay for school. With private loans, you can usually borrow up to the total cost of attendance. However, borrowing less than the maximum can help you save money over time.

Consider ways to reduce your expenses so you don’t have to take out as many private loans for college, such as:

  • Rent your textbooks: Over the course of four years of college, textbooks cost over $5,000, on average. Rather than paying that much money for new books, reduce your expenses by renting textbooks or buying them used online.
  • Skip the meal plan: If you don’t use the college meal plan and instead do your own grocery shopping and meal preparation, you could save thousands over the length of your college career.
  • Move off-campus or commute: If possible, commute to school or move to an off-campus apartment with a roommate. You could find dramatically cheaper housing that is only a short distance away.

3. Pay attention to lenders’ fees and interest rates

Not all private student loan companies are created equal. Unlike federal loans, which have fixed interest rates for all borrowers, private student loan interest rates vary from lender to lender. And, some may charge application and origination fees.

College Ave offers private loans for college with both fixed and variable interest rates. Fixed rate loans stay the same for the length of your repayment. Variable rate loans tend to have lower interest rates than fixed rate loans at first, but the rate can increase or decrease over time. Plus, College Ave doesn’t charge application or origination fees for its loans.

4. Apply for a loan with a cosigner

Private student loan lenders look at your application to determine your creditworthiness. That means they look at your income and credit history to decide whether or not you have the ability to repay the loan. If approved, your credit history also impacts the interest rate offered to you.

As a college student, you likely don’t have an established credit history or sufficient income. You may not get approved for a private loan for college on your own. Or, if you do, you may only qualify for a loan with a high interest rate.

You can improve your chances of getting approved and securing a lower interest rate by adding a cosigner to your loan application. A cosigner is usually a parent or relative with good credit and regular income who guarantees the loan. If you fall behind on your payments, your cosigner is responsible for making them. Having a cosigner lessens the risk to the lender, helping you get a lower interest rate and save money.

5. Compare lender repayment options

When it comes to private loans for college, make sure you pay attention to the repayment terms. Each lender has their own requirements.

College Ave offers 5, 8, 10, and 15-year repayment terms and allows you to pick a repayment strategy that works for you and your budget:

  • Full principal and interest payment:b> With this approach, you start making full payments on your private loans for college right away. Because you make payments while in school, less interest accrues, helping you save money.
  • Interest-only payment: If you can’t afford to pay the full principal and interest payment, but can budget some money each month for payments, consider making interest-only payments. With this strategy, you pay the interest charges each month while you’re still in school.
  • Flat payment: You can make a flat payment of $25 each month to reduce the total cost of the loan. It’s the lowest in-school payment option that College Ave offers.
  • Deferred payment: If you don’t want to worry about making payments while in school, you can also defer payments until after you graduate. You’ll pay more in interest overall with this approach.

Applying for private student loans

Private loans for college can play an important role in financing your education. By researching your financial aid options, applying for scholarships, and comparing private student loan options, you can minimize your college costs, so you can better manage your finances after you graduate.

Decided that a private student loan is right for you? You can apply for a College Ave private loan for college online in as little as three minutes.