Americans have borrowed more than $136 billion from private student lenders. Private student loans are a popular option because they can help fill the monetary gaps that federal student loans and financial aid do not.
If you think borrowing private loans is the right option for you, keep reading. We’ll tell you everything that you need to know about how to apply for private student loans.
Make Sure Private Student Loans Are Right for You
Experts recommend that students exhaust federal financial aid options before borrowing private student loans. After all, private student loans do not come with the potential loan forgiveness, strong borrower protection, and varied repayment plans that federal loans offer.
If you haven’t taken advantage of all your federal options, consider exhausting these resources before resorting to private student loans.
However, if you are in the position where you need a private student loan, follow these five steps to apply:
Step 1: Figure Out How Much You Need to Borrow
Unlike federal loans, private loans generally do not have a hard “limit” in regards to how much you can borrow. With some lenders, you can borrow up to $500,000, depending on the degree type. Because of their high borrowing limits, these loans will usually cover your entire cost of attendance.
While you can borrow a significant amount, that doesn’t mean you should. Only borrow what you need, and try to minimize that amount before even considering private student loans.
Remember, the more you borrow, the more debt you will be in. And, given the way private student loans accrue interest, the amount you pay back will likely be much larger than the amount you borrow.
To determine how much you need to borrow in private loans, calculate the sum of the following:
- Scholarships
- Grants
- Any out-of-pocket payments (whether made by you or your parents)
- Federal loans
After adding up the total, subtract it from the total cost of attendance. This will give you a sense of how much you will need to borrow in private student loans.
Scholarships
Grants
Out-of-Pocket Payments
Federal Loans
Total
Cost of Attendance
Remaining Amount to Cover in Private Student Loans
$5,000
$3,000
$4,000
$6,500
$18,500
$22,000
$3,500
Step 2: Check Your Eligibility
Private student loans are distributed by private institutions like banks. Because each entity is separate, eligibility requirements for private loans will not be the same across the board.
However, there are general eligibility requirements that all borrowers will have to meet:
- Be enrolled in a qualifying program. Private student loans are for students only, meaning you will have to be enrolled in an eligible university, trade school, college, etc.
- Be a U.S. Citizen, permanent resident, or an eligible international student. Generally, private student loan lenders require you to have a Social Security Number and an eligible citizenship status. (If you are an international student, don’t worry. There are other options if you don’t have an SSN.)
The latest rates from Sparrow’s partners
If you want to skip pre-qualification and apply directly with a lender, you can do so by clicking Apply below.
Step 3: Complete the Sparrow Form
The Sparrow prequalification form allows you to receive personalized private loan offers from 15+ premier student loan lenders. The form takes just a few minutes and will ask you information such as:
Personal Information
Address
Loan Information
Financial Information
School Information
First and last name
Email address
Phone number
Date of birth
Citizenship status
Social Security Number
Permanent address
Mailing address
Amount needed
When you need funds disbursed
Income
Housing expenses
Name of school
Degree(s)
Grade level
Expected graduation date
Step 4: Compare Loan Options
After submitting the Sparrow form, you’ll be able to see which private student loans you’re prequalified for. Then, it’s time to compare the loan offers side-by-side so you can select the best loan for you.
You’ll be able to compare aspects such as the interest rate, repayment term, and total cost of the loan(s). Make sure to consider the following:
Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is the yearly interest charged on the loan, including any additional fees like origination fees. The larger the annual percentage rate is, the more money you will have to pay. Therefore, it’s best to secure the lowest APR possible.–>
Interest Rate
An interest rate is the amount you will be charged to borrow the loan (not including any fees), expressed as a percentage of the principal amount you borrow. For example, if you borrow a loan of $20,000 with an interest rate of 12%, the interest that accumulates on the loan will be $2,400. Therefore, you will have to pay a grand total of $22,400. The larger the interest rate is, the more money you will have to pay. Therefore, Like APR, it’s best to secure the lowest interest rate possible.
Fixed vs. Variable Interest Rate
Fixed rates are set and will remain the same for the entirety of the loan. Variable rates, on the other hand, change based on the state of the economy.
Fixed rates tend to ease borrowers’ minds, given that you’ll never be subject to a higher interest rate, regardless of how the market changes. However, fixed rates can be higher than variable rates. While variable rates tend to be lower, they can be volatile depending on the market conditions.
Determine which you are more comfortable with, then opt for that type of interest rate.
Monthly Payment
Depending on the interest rate and repayment period you receive on each loan, your monthly payment may differ significantly. Therefore, compare the monthly payments you will have to make with each respective loan, and determine whether or not the amount will fit in your budget.
Repayment Terms
Repayment terms are basically the “contract” for private loans – it covers the interest rate of the loan, your specific repayment plan, any penalties you may be subject to, deferment and forbearance options, and more. Be sure to thoroughly understand each loan’s repayment terms so you know exactly what you are getting into.
Grace Period
A grace period is a period of time where borrowers do not have to make any student loan payments. Generally, borrowers have a grace period of six months after graduation. Determine if each student loan has a grace period, and gauge how useful it will be for your financial situation.
Cosigner Terms
Some private lenders may require you to have a cosigner to strengthen your credibility as a borrower. Think of it this way: lenders want to be confident you’ll return the money you borrowed safe and sound. So, if you don’t have a history of effectively managing debt (which is common for college-aged borrowers), you may need someone who does to cosign the loan alongside you.
Before accepting a loan offer and adding a cosigner, check if the lender offers the option for cosigner release. Some cosigners prefer to be released from loan after helping the borrower secure it, and without a cosigner release policy, they’ll be stuck with the loan until it’s paid off.
Forbearance
Forbearance is a period of time where you can stop making student loan payments due to financial hardship or other extenuating circumstances. Keep in mind that interest will still accrue during forbearance periods, however, it’s good to have as a back-up option if you need it.
Some private lenders offer forbearance options for borrowers, while others don’t. While you may never need to use it, it could be a safe option to have.
Total Cost
It’s important to calculate the total cost of the loan to see how much you’ll pay over time. This way, you can see how interest, fees, and other costs will affect the loan options, even when borrowing the same amount.
Lender Benefits
Some private lenders offer benefits like referral bonuses, free financial planning, airline miles, and other perks if you borrow with them. While lender benefits shouldn’t be the most important factor, they can be useful to consider when two loan options are virtually the same.
Step 5: Complete the Formal Application with the Lender You Choose
After identifying the private loan that best suits your needs, it’s time to submit a formal application with the lender.
Gather the following materials to make applying for the loan an easier process:
- Social Security Number
- Permanent address and/or school address
- School enrollment information
- Employment information
- Financial information (monthly mortgage payments, income, auto payments, etc.)
- Loan amount you are requesting, as well as information on financial aid
Student loan rates from our partners
Ascent
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 4/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require interest-only payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 4/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require interest-only payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
LendKey
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
Earnest
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Origination (Private Student Loan) Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.36% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 16.45% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Earnest Private Student Loans are made by One American Bank, Member FDIC, or FinWise Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Finwise Bank, 756 East Winchester, Suite 100, Murray, UT 84107
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank, FinWise Bank, and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
© 2024 Earnest LLC. All rights reserved.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Origination (Private Student Loan) Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.36% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 16.45% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Earnest Private Student Loans are made by One American Bank, Member FDIC, or FinWise Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Finwise Bank, 756 East Winchester, Suite 100, Murray, UT 84107
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank, FinWise Bank, and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
© 2024 Earnest LLC. All rights reserved.
College Ave
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
*The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 08/25/2022. Variable interest rates may increase after consummation.
This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 3/07/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
*The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 08/25/2022. Variable interest rates may increase after consummation.
This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 3/07/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
Closing Thoughts From the Nest
Searching for, choosing, and being approved for a private student loan can be a difficult and tedious process. However, Sparrow is here to help. Consider submitting a free form with us today to see which private student loans you pre-qualify for.