Private Loan Programs

There are many resources available online that you can utilize to find a private lender. For instance, by searching the term "private education loans," you will easily locate general consumer information concerning private loans as well as specific information from major lenders who provide private loans.

If you are not a U.S. citizen or permanent resident, you may have fewer private loan options unless you locate a cosigner who is a U.S. citizen or permanent resident and has a good credit history. Note that some private lenders will provide loans to international students without a cosigner.

What are the minimum and maximum loan limits, including annual and aggregate limits?

Most private lenders require school certification, or approval, which caps the annual loan amount at the cost of education (or your student expense budget) after other sources of financial aid are included, such as scholarships, grants, teaching assistantships, research assistantships, fellowships, other student loans, and Federal Work-Study. Some loan programs have minimum or maximum annual loan amounts in addition to maximums.

We suggest that you borrow only what you need even if you qualify for more.

Is the interest rate fixed or variable? If variable, what is the basis upon which it will vary? Does the rate change every quarter or every month or according to some other time period? 

Private loans typically have variable interest rates, with the rate pegged on an index such as LIBOR or PRIME. One method of securing a better interest rate is to agree to make loan payments while you are in school. You may begin repayment immediately or make interest-only payments during the in-school period.

While private lenders might advertise a low interest rate, these rates may only be available to the best credit customers. The actual interest rates and fees you pay on a private education loan are based on your credit score and the credit score of your cosigner, if any. It may be better to apply for a private student loan with a cosigner even if you qualify for the loan on your own because applying with a cosigner usually results in a slightly lower rate.

When does the interest begin accruing? Do you need to pay the interest as it accrues or can it be deferred or capitalized? If capitalized, how often is it capitalized? Is the interest rate the same for the in-school and grace period as it is when the loan enters repayment?

Interest ordinarily accrues from the date of the first disbursement and can be paid while enrolled or deferred and capitalized at the time of repayment.

Be aware of teaser interest rates that disappear when the variable rate indexes start increasing. Be aware how the rates might change over the life of the loan.

Are there any loan fees? What is the impact of any loan fees on the overall cost of the loan?

The fees charged by some lenders can significantly increase the cost of the loan. A loan with a relatively low interest rate but high fees could cost more than a loan with a somewhat higher interest rate and no fees. Some lenders do not charge fees but adjust the interest rate upwards to compensate. Typically an extra 1% in the interest rate costs more than a one-point increase in fees: in fact, a 1% higher interest rate may be the same as 3% to 4% in fees. 

What are my repayment options? How long is the loan term? Are there any consolidation options? Are there any borrower benefits?

Repayment options vary across lenders and may include options for standard, extended, and graduated repayment. Find out if there is an optional in-school deferment of the principal amount. Keep in mind that interest will continue to accrue, increasing the amount owed.

Some lenders offer financial incentives or borrower benefits to reduce the price of your loans. For example, there may be principal balance or interest rate reductions tied to repayment performance. Some repayment benefit plans are simple and others are complex. Make sure you understand the terms you must meet and the likelihood of receiving the benefit before choosing a private loan on that basis alone.

Loans with different repayment terms are challenging to compare. The annual percentage rate (APR) may not be a good tool for comparing loans. For example, a loan with a longer repayment term will have a lower APR even though the borrower will pay more interest over the life of the loan. 

Is the application process simple and straightforward? Is it possible to reach a knowledgeable representative to check your loan status? Is customer service available 24/7 or at minimum during hours convenient for you? Will the lender handle the origination of the loan as well as the repayment? If not, what organization(s) will? 

Some lenders only handle the up-front administration of the loan, including the origination and disbursement. It is common for large lenders to have online application and signature processes, including the required Promissory Notes.

If the lender will not service the loan during the in-school or repayment periods, make sure you know which organization will, its customer service hours, and how to contact representatives, especially if you want to speak to a representative in person.

Since you are about to enter what may be a long-term relationship, it is important that you complete your research and select a loan program with a demonstrated record of excellent customer service.

After you have selected a lender, you will submit a loan application. Be sure you understand the lender's application process, also known as origination, as well as the process by which you receive the funds, known as disbursement.

While Drexel does not have any preferred loan lenders, you can view some Historical Lenders our students have used in the past.