How to Apply for a Private Student Loan: A Step-by-Step Guide


You’ve filed for your FAFSA, received federal financial aid, and got a few scholarships, but still can’t afford to pay all of your college expenses. This is where you may need to learn how to apply for a private student loan.

Students are taking out private student loans more than ever. According to MeasureOne data, the number of loan origination by private student lenders increased by more than 10% from 2019 to 2020 in their respective first quarters.

If borrowing is the route you are willing to take to fill the financial aid gap, knowing how to apply for a private student loan is important. Here are five steps to follow:

1. Look for private student loans
2. Plan your private student loan applications properly
3. Who is eligible for a private student loan?
4. Gather the necessary documents and information
5. Submit a formal private student loan application form

1. Look for private student loans

So what is the review difference between federal and private student loans? The former are issued by the government, while the latter are issued by independent financial institutions, such as banks, credit unions and online companies.

This means that the process for applying for a private loan is very different and relies heavily on your credit.

For federal loans, you complete the Free Application for Federal Student Assistance (FAFSA), but for private student loans, you must apply directly to the financial institution, sharing your financial information in the hope of being eligible.

How to get a private student loan

When it comes to finding the right private student loan lender, you will need to do some research. One easy option is to get quotes from the best private student loan lenders – we’ve reviewed these lenders before and found that they have competitive interest rates and terms.

You can also check with your school to see if they have a list of preferred lenders. Make sure you research the right loan for your level of study (diploma or undergraduate).

Regardless of how you build your list of potential lenders, you need to compare interest rates, payment terms, and fees to find the most profitable loan that’s right for your needs. The most reputable institutions will allow you to do this online with a quick pre-application (usually just a few minutes) that won’t affect your credit score. Once you’ve found your best deal, you should also be able to complete the full formal application online.

You should only apply once you know exactly how much to borrow, and only after you’ve chosen your college (we’ll talk about that later).

2. Plan your private student loan applications properly

Unlike completing the FAFSA for Federal Financial Aid, there is no deadline for applying for a private student loan. You can apply throughout the year, which is useful if you run into unforeseen costs during the semester.

That said, Student Loan Hero recommends submitting all formal requests that include credit checks (the kind of to do affect your credit score) within 30 days of each other. This should hopefully limit the impact on your credit report, as credit bureaus typically count multiple requests for the same type of loan as a single credit event, provided they are within the same time frame. .

When should I apply for a private student loan?

Don’t wait to apply for a private student loan a few days (or even weeks) before your tuition is due. The process can sometimes take longer than expected, so allow yourself plenty of time to get the money you need while keeping your costs and expenses under control.

Recommended timeline for College Ave student loan applications
Days before school Steps to follow
90 Estimate your financial need, find a co-signer
60 Go around several lenders to find the best overall loan, get a co-signer commitment
30 Apply for your favorite student loan
ten Look for confirmation that funds are scheduled for arrival, wait for your first loan statement, and (if applicable) prepare to make school loan payments

This schedule gives your school enough time to certify the loan amount, and it gives your lender enough time to disburse the funds before the tuition is due.

Do I have to apply for a student loan every year? Every semester?

If you need more than one student loan during your academic term, you will need to reapply. Each loan, regardless of the year or length of time it is used, is its own separate debt.

Before each new school year or semester that you need additional funding, you will need to repeat the process to determine the amount you need and then research the best loans available.

One way to avoid this potential problem is to apply for private student loans from a lender that offers multi-year loan approval, such as Citizen’s Bank. You’ll still have to meet credit requirements for additional years of borrowing, but you’ll have access to a more streamlined process when you ask for more funds.

3. Who is eligible for a private student loan?

Lenders will determine your eligibility for a private student loan based on your credit history and other factors. As a result, you could need a co-signer if …

  • Your credit history is limited
  • You have a low credit score
  • You don’t earn much income

Among undergraduates who took out a private student loan for the 2020-2021 academic year, an overwhelming 91% needed a co-signer to qualify, according to MeasureOne. Even at the graduate level, 63% of students needed a co-signer to take out private student loans.

When looking for a co-signer, try to find a family member or close friend who you know has a good credit history. This will increase your chances of getting approved for a loan and also increase your chances of getting a better interest rate and unlocking attractive loan terms.

It’s important to understand that having a co-signer doesn’t mean you don’t have to pay back – you’ll still have to pay everything back, plus interest. Also, remember that missing a payment can hurt not only your credit, but that of your co-signer as well.

4. Gather the necessary documents and information for a private student loan application

Whether you plan to apply on your own or with a co-signer, you will need to gather essential financial information. Having it on hand will help make the process easier.

Here is some information you and your co-signer should have on hand before you complete a private student loan application:

  • Social security numbers
  • Personal information, such as phone numbers, dates of birth, and home addresses
  • Job information, including a recent pay stub (within the last 60 days)
  • Gross annual income
  • A list of all assets and their values
  • Monthly rent or mortgage
  • A copy of your last tax returns

You will probably also need to have all the information about your school, such as:

How Much Should I Borrow in Private Student Loans?

Unlike federal student loans, private student loans typically allow you to cover up to the full amount of your school’s certified tuition fees. Of course, you want to try to minimize the amount you borrow because more debt means more interest costs.

Borrowing only what you can reasonably afford to repay, based on your projected postgraduate income and monthly budget, is a good rule of thumb to follow.

To get an idea of ​​the exact amount you need, take a look at your financial aid award letter. It should detail your attendance fees, as well as your offer of “gift aids” (such as grants) and federal loans, which should almost always be given priority over private loans.

Are there other private student loan application forms?

Another important document that will help you determine your borrowing need is the Self-certification form for private education loan applicant.

Image: University of Houston

The Department of Education made this private loan form mandatory in February 2010, to ensure student borrowers understand their loan options. You’ll need to complete it for each private student loan application – you can get it from your financial aid office.

5. Submit a formal private student loan application form

Each lender will have their own application process, but having the documents mentioned above will allow you to answer common questions quickly and accurately.

With a typical private student loan application …

  • You will start by filling in your personal information, as well as your co-signer information (if applicable).
  • The lender will likely ask for your financial information and documents that can verify it – this could range from a simple check stub to your tax return and more.
  • Completing your school information will include information about your graduation date, loan period, and loan amount.
  • Some lenders will also ask you to complete a personal reference section.
  • You’ll likely need to agree to the lender’s terms and conditions – including a credit check – by checking a box acknowledging that you’ve read the terms and want to continue with the application process.

Some lenders offer more or less immediate approval of private loan applications, while most of the others will probably let you know within a week or even a few days.

Remember, each lender has different interest rates and repayment terms, so be careful about accepting one private student loan over another.

And now that you know how to apply for a private student loan, check out our guide on best student loans available.

Here are our best lender guides for various types of borrowing:

Jordi Lippe-McGraw contributed to this report.