Borrowers who are interested in obtaining private education loans may qualify for federal student loans and/or other assistance under Title IV of the Higher Education Act and should apply for such federal aid before applying for a private education loan. The terms and conditions of loans made, insured, or guaranteed under Title IV of the Higher Education Act may be more favorable than the provisions of private education loans.
Private education loans are not subsidized by the federal government. Eligibility for a private education loan is determined by the lender based on the creditworthiness of the student borrower and/or co-borrower. These loans are to be used for education-related expenses only and should supplement, not replace, federal student loans and federal aid programs. The amount of a private education loan is limited to the cost of attendance less any other aid received, including federal and state grants, loans, and scholarships.
- Are in the student’s name
- Require credit approval
- Have fixed and/or variable interest rates
- May be deferred
- Often allow a 6-month grace period before students begin repaying
- Must be accounted for in the student’s aid package
Before pursuing a private loan, we recommend that you compare its features to the Federal [parent] PLUS Loan (and state educational loans for residents of select states). Bear in mind that the PLUS Loan interest rate is fixed at 6.28% and there is a 4.228% loan origination fee deducted from the amount requested prior to disbursement.
GENERAL PRIVATE LOAN PROVISIONS
Borrowers: The loan is in the student’s name. However, for most loan programs, undergraduates will need a cosigner. Some loans have a cosigner release option after a certain number of consecutive on-time monthly payments, typically 24 to 48 months.
Eligibility Requirements: Applicant must be 18 years of age, a U.S. citizen or eligible non-citizen, enrolled at least half-time in a degree program, creditworthy or apply with a creditworthy cosigner.
Loan Amounts: The maximum amount students may borrow is the school’s cost of attendance less other financial aid. Lenders usually have a minimum loan amount of $1,000 or $2,000.
Interest Rate: Private loans have variable interest rates, although many offer fixed interest rates as well, which are based on an index such as LIBOR or PRIME plus an additional percentage depending on the applicant’s and cosigner’s credit score. For example, a loan program’s interest rates may range from Prime plus 1% to Prime plus 5%. The highest credit score would receive Prime plus 1% and the lowest approved credit score would receive Prime plus 5%.
Payment periods typically range from 5 to 15 years depending on the amount borrowed. Some loans allow a longer period. Repayment options generally include immediate repayment of principal and interest, interest-only payments during enrollment, or deferred principal and interest payments during enrollment.
For most private loan programs, students must annually complete an application for each academic year. The loan application may be completed online at the lender’s website.
CHOOSING A LENDER
You may borrow from any lender you choose. We recommend that you thoroughly investigate multiple student loan lenders as the loan terms and conditions may vary. The loan application is completed directly through the lender of your choice, most often on their website. Upon credit approval the lender will send your loan request to Hobart and William Smith Colleges for certification of eligibility.