What it is
Private student loans come from banks, credit unions, and online lenders — not the government. They can help fill a gap after federal aid, but they generally have fewer protections, credit-based rates, and often require a cosigner. The rule of thumb: use federal loans (and all gift aid) first, and private loans only as a last resort.
How it works
You apply directly to a lender, which checks credit (yours and often a cosigner's) to set your rate and terms. Rates may be fixed or variable, and unlike federal loans there's no standard income-driven repayment or federal forgiveness. Terms, fees, and hardship options vary widely by lender — read the fine print.
Who qualifies
Approval depends on creditworthiness. Most students need a creditworthy cosigner (often a parent) to qualify or get a good rate. There's no FAFSA requirement, but you should still file the FAFSA first to exhaust federal options.
Terms to know
- Fixed vs variable rateVariable rates can rise over time
- CosignerA creditworthy co-borrower who shares responsibility
- Cosigner releaseSome lenders let the cosigner off after on-time payments
- Deferment/forbearancePauses vary by lender — not guaranteed like federal
Tips to maximize it
- Exhaust federal aid firstGrants, then federal loans, then private only if needed
- Compare multiple lendersRates, fees, and terms differ a lot
- Prefer fixed rates for predictabilityVariable rates can climb
- Understand the cosigner riskThey're on the hook if you can't pay
- Borrow the minimumAnd know the total cost over the life of the loan
Common mistakes to avoid
- Taking private loans before maxing federalYou lose federal protections
- Not comparing lendersRates vary widely
- Overlooking variable-rate riskPayments can rise
- Ignoring the total repayment costFocus on more than the monthly payment
Frequently asked questions
- Are private loans as good as federal?Usually not — fewer protections, no federal forgiveness, credit-based rates.
- Do I need a cosigner?Often, yes — most students need one to qualify or get a good rate.
- Should I file the FAFSA if I'll use private loans?Yes — always exhaust federal aid first.
- Fixed or variable rate?Fixed is more predictable; variable can rise.
- Can private loans be forgiven?Generally no — federal forgiveness programs don't apply.
Key facts
- FromBanks, credit unions, online lenders
- RatesCredit-based; fixed or variable
- ProtectionsFewer than federal (no federal forgiveness/IDR)
- CosignerOften required
- RuleFederal first, private last
Where to learn more
Compare against federal options first: