Private Student Loans

A Private Student Loan is a financing option for those who want to pursue higher education. These are like a substitute of Federal loans. Since 2011 they are offered with zero fees. To know more about Private Student Loan read this article.

Updated by Akshay Nair P R on 22nd June 2018

Private Student Loans

You might have heard of private loans; as they are heavily advertised. The interest rates and loan terms are set by financial institutions that control the loans.

More than 90% of Undergraduate and 75% of Graduate students loans are granted after there is a security of a creditworthy cosigner.

They can be considered supplementary to federal loans such as Stafford loans, Perkins loans, PLUS loans but it can never replace them.

Difference between Federal and Private Student Loans

Private Student Loan

Federal Student Loan

You have start repaying while you are still in College

You don't need to start repaying until you graduate, leave College

They are not subsidized, you have to pay for your interest

With the subsidized loan, the government will pay your interest while you are in college

Requires an established credit score 

You don't require to have a credit check for most student loan

You may need a cosigner

You won't need a cosigner to get a federal loan

Can be consolidated into a Direct Consolidation Loan

These loans cannot be consolidated into a Direct Consolidation Loan

You need to make sure that there is no prepayment penalty fee

There is no prepayment penalty fee

A good Option if

  • You have already completed FAFSA

  • Already borrowed the maximum subsidized and unsubsidized federal student loans

  • A good credit score

  • A cosigner with a good credit score

  • You want to borrow what you need

What can they be used for

  • Tuition 

  • Room and board

  • Books

  • Fees

  • Equipment and supplies

  • Transportation

  • Personal needs at school

  • Computer and electronics for school

Some Private Loans and their Interest rates


Fixed Interest Rates

Variable Interest Rates




Common Bond






Sallie Mae






Sun Trust



 How much to borrow

  • Only that much which you can afford to pay back

  • Think about how much you will earn in your future

  • The monthly payment should not be greater than 10-15% of your starting month's salary


These are just like Federal Loans just the difference that this is not provided by the federal state, as a result, some benefits might not be there. But the main reason that they are being popular is that unlike Federal loans if you have a good credit score. You can apply for it and you can get these loans much easier. Since these are not need-based as a result of that anyone can apply for this.


  1) How long does it take for a private loan to be disbursed?

After the loan is approved it would take 2 weeks to 2 months within which the lender sends the money to your college, and it typically takes 1-2 weeks for the remaining money to be refunded to you.

  2) Can you get a student loan if you have a bad credit?

If you have a low credit score you cannot get a private student loan. In that case, you should go for a federal loan.

  3) Can you default on a student loan?

Beyond a late payment fee, continuing to let your student loan bills stack up will eventually lead to larger repercussions. Namely, student loan default. Borrowers can default on a loan for any number of reasons. Some borrowers default because they're financially unable to make payments.

  4) How long does it take to default on a student loan?

Failure to repay a loan according to the terms agreed to in the promissory note. For most federal student loans, you will default if you have not made a payment in more than 270 days.

  5) What does it mean to default on a student loan?

If you haven't made a payment on your federal student loan for 270 days, and if you had not made any arrangements with your lender that do not obligate you to make those payments, like deferment or forbearance, you are probably in default